VAT threshold - Sole trader to Ltd Company

VAT threshold - Sole trader to Ltd Company

Didn't find your answer?

Hi All, 

Quick question, I am currently processing the books of a Sole Trader who has turned over £70k in the first 8 months of trade.This Sole trader will no doubt go above the £81k threshold in any 12 month period in the coming months.  

After speaking to the client and for professional reasons he now wants to become Ltd. 

With this in mind, am I correct in assuming that the VAT threshold will start again and go down to £0, this being because the business is now a separate legal entity?

This to me seems to me seems like an easy way to avoid VAT. 

Thanks, 

Joe 

Replies (8)

Please login or register to join the discussion.

avatar
By User deleted
09th Feb 2015 12:03

No

You are not correct

Thanks (1)
RLI
By lionofludesch
09th Feb 2015 12:05

Connected

They're connected.

Agree with BKD.

Thanks (1)
avatar
By User deleted
09th Feb 2015 12:10

I need to expand

Strictly speaking, the new company will start again from zero (because the transferor is not VAT-registered). However, I am aware that there are anti-avoidance rules which may catch this - unfortunately guidance on such rules is hidden from public view and I'm not inclined to go searching at the moment.

Thanks (1)
Out of my mind
By runningmate
09th Feb 2015 12:19

Not sure

I can see that where a 'person' who is registered for VAT transfers a business to another 'person' then the new owner has to register pronto, see s49 & Sch 1 VATA 1994.

I cannot find where the legislation requires a 'person' who purchases a business from another 'person' who is NOT registered (& not liable to be registered) for VAT to take into account the turnover of the predecessor business.

Perhaps wiser heads will enlighten me!

RM

Thanks (1)
avatar
By areyoujoe
09th Feb 2015 12:21

That what I thought

Thanks both, I thought as much. 

I just called the revenue to double check, they said that that they are treated as separate entities and that the balance would revert to 0. 

I took a name and documented the just in case. 

 

 

 

Thanks (2)
Replying to Matrix:
Out of my mind
By runningmate
10th Feb 2015 20:39

HMRC correct then

areyoujoe wrote:

I just called the revenue to double check, they said that that they are treated as separate entities and that the balance would revert to 0. 

So it appears in these circumstances (the previous business having been neither VAT registered nor liable to be registered) the advice from HMRC was correct.

RM

Thanks (0)
chips_at_mattersey
By Les Howard
10th Feb 2015 19:24

VAT Registration and TOGC

You might wish to check my blog post on this very subject at https://www.accountingweb.co.uk/blog-post/togc-and-vat-registration

Thanks (1)
avatar
By cparker87
10th Feb 2015 21:09

So...
What are the avoidance provisions that would prevent me transferring business every 6 months?

Thanks (0)