VAT Registration after Incorporation

Posted by Anonymous PM | on Tue, 09/03/2010 - 09:07 603 3 comments | report

Turnover of an existing sole trader business is currently below the VAT threshold (always has been) - however he believes it will increase in coming months and exceed the trailing £68,000.

Before that happens he wants to incorporate into a new limited company - does the £68,000 start at zero on incorporation or as the company is buying the sole trader business do we have to take include the revenue from the previous sole trader months

Thanks

Comments

Going concern

Phil Rees | Tue, 09/03/2010 - 12:46 | Permalink

You have to include the revenue from the previous sole trader.

Thanks

Anonymous | Tue, 09/03/2010 - 14:12 | Permalink

Thought as much - thanks

The answer to a previous question suggested otherwise - as an effective way to delay registration. Whilst not the intention here it would have been an interesting by product of incorporation

References?

spidersong | Tue, 09/03/2010 - 15:04 | Permalink

Phil ,

Do you have any references for that as HMRC seem to think that it's otherwise?

From V1-28 Registration - Section10.2.1

"If the transferor is not a taxable person at the time of the transfer the transferee shall not be deemed to have carried on the business prior to the transfer."

A taxable person is a person registered or required to be registered, so if the sole prop is properly unregistered this would suggest that the clock resumes at nil.

The section is in line with Sec 49 of the VAT Act which says specifically that a transfer by a taxable person will be deemed to have continued both before and after, but the provisions of Sec 5 (1) of the special provisions order just allow that a TOGC is neither a supply of goods or services whether the person's registered or not so the actual sale wouldn't put someone over the threshold. viz this from VTOGC0000 – Transfer of a going concern "If the seller is not a taxable person, the supply of the assets can still be treated as a TOGC regardless of whether the purchaser is a taxable person or not, provided that all the other conditions for a TOGC are met"

There are anti avoidance rules to do with the transfer of opted or new buildings, and HMRC could try disaggregation rules which allow that although different entities, a single business may be carried on by succesors in business if the intention of the split/change in entity etc. was to avoid registration. Of course in many cases incorporation is part of the normal lifecycle of a business and not an avoidance tactic and so it can be difficult to prove.