We have a company A Ltd that is 100% owned by one Director
B Ltd is owned on a 50/50 basis by the Director above and another Director.
Both entities are registered in the UK. Both are VAT registered and there are expected to be 'arms length' management charges throughout the year between them.
Will the two entities at some stage be forced into a VAT group?
I was in a little bit in a quandry about the question of common control. Can it be considered that A & B are subject to common control as B is 50% owned by another Director?
Replies (8)
Please login or register to join the discussion.
What are you talking about?
Two companies that are under the control of the same persons can elect to be treated as a VAT group. They cannot be forced into it. It is not mandatory.
As Portia says
VAT groups are voluntary, I think you are getting yourself muddled with something else (an associated company issue perhaps?)
Enlighten me :)
That was my thought also, just wanted to check there was no technicality where HMRC could force you into it as it could be used a way to defer VAT payments between entities in theory. I don't think that is entirely out of the realms of possibility. That was the reason for my check.
What benefit would HMRC gain from forcing a VAT group? I suspect I'm missing something :)
VAT Group? Or disaggregation.
You may have in mind the disaggregation rules, where HMRC can treat a number of businesses as a single taxable person. But, in your case, there is no loss of VAT, so HMRC would not take action against you.
@ Les
Talking about disaggregation, have you ever come across HMRC arguing that, for example, soletrader A and company B are acting in partnership, and jointly should have been registered from date X, as a means of attacking disaggregation retrospectively. I saw it suggested, but have had no experience myself.
Disaggregation
Yes I have. It is more common to see multiple limited companies, or multiple partnerships subject to a disagg Notice. The partnership issue is slightly different of course; have HMRC ruled that a partnership exists?