VAT disaggregation for cleaning Co

VAT disaggregation for cleaning Co

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My client co have a lot of permanent staff and vehicles etc. Now they have suggested starting a cleaning agency whereby the staff are self employed and the income for my client is just commission. This would be set up as a partnership with a different name, address, different customers etc.

I know that the parties involved are closely bound by financial, economical and possibley organisational links but apart from that is this feasible?

Thanks in advance for any contributions.

Roger

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By theaardvark
13th Feb 2006 11:31

It will work, but with reservations.
For VAT purposes, a partnership is a separate legal entity to any of its partners. It is therefore possible to have a 2 different businesses operating, one as a sole prop and one as a partnership, and both or one be unregistered.

However, you need to ensure that the businesses are kept sufficiently separate that HMRC cannot argue that there has only ever been one entity.

Even then, you run the risk of a disaggregation ruling in which HMRC force the 2 entities to be treated as one. However, such a ruling would not be retrospective.

Hope that helps.

Paul Taylor
VATease - VAT Advice

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