VAT requirement of forming a second company

VAT requirement of forming a second company

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I think this is correct, but could do with your opinions.

My client is sole shareholder of company A. She forms a new company (company B) which operates a totally separate trade (no issues regarding artificially separating trades for VAT and there is no real benefit of creating a VAT Group).

My questions is, if company A is VAT registered and owns all the shares of company B, does company B have to register for VAT (company B has turnover of £10k)?

Replies (5)

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chips_at_mattersey
By Les Howard
07th Apr 2016 11:59

VAT registration

Company B is a separate legal entity, and its liability to register for VAT is determined independently of company A. But you may wish to consider the option of Group Registration, since the 'control requirements' appear to be met.

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By Joe Soap
07th Apr 2016 16:52

it may have changed but.....

some years ago HMRC had the right to require entities under common ownership to have a group registration. This meant that if you had two businesses both under the VAT threshold but with a total turnover above it you could be made to register as a group.

BUT importantly the requirement could not be backdated.

So if you had two entities with different registered offices or addresses - ideally in different tax districts - you were probably OK, at least for a while.

 

So as leshoward says you can register Co B if you want to - either voluntarily or as part of a group, or you can try and keep Co B clear of VAT

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Portia profile image
By Portia Nina Levin
07th Apr 2016 17:05

And much b*llocks doth appear.

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By Joe Soap
11th Apr 2016 12:23

once again......

...al that Portia does is make a snide useless comment.

And what particular point are you making Portia?

Are you saying that my experience (which I state is some years ago) was not as described?

On what grounds are you making this allegation?

and your malign comments would probably carry rather more credibility if you could manage to avoid the (admittedly rather mild) obscenities.

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Portia profile image
By Portia Nina Levin
11th Apr 2016 12:54

Where do I start?

HMRC have NEVER had the right to require entities under common ownership to have a group registration.

Where corporate bodies (including LLPs) are under common ownership they may form a VAT group, if they wish.

What HMRC can do is serve a disaggregation notice on two or more persons to treat them as a single taxable person.

They can only do that though where they are satisfied that the activities carried on by the persons concerned are all part of a single activity which would be required to be VAT registered if they were carried on by a single taxable person.

Your second paragraph does not apply in relation to group VAT registrations, but does apply in relation to disaggregation notices.

However, having got so much incorrect, based on your recollection, rendered the information provided.

Your third paragraph is complete b*llocks.

Your fourth paragraph is correct, but, being in agreement with the information already provided by Les, is, of course, superfluous.

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