My wife has a salon, which is run from leased premises, and offers hairdressing services, as well as retail products.
We are exploring the possibility of forming a second company to separate the retail side of the business from the services side. I understand there are implications regarding artificial separation of a company in order to minimise turnover, and effectively avoid paying any VAT. Would the same implications apply if both companies were registered for VAT?
For example, could the services side of the business be registered under the flat rate scheme (13%), and have the retail side registered at the standard 20% rate. That way, all the products purchased, as well as the rent etc would be recoverable at the 20% rate, whereas VAT for the services would be covered under the flat rate.