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Separate trades - VAT position?

will HMRC deem this to be acceptable?

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Client has a sole trade business providing parental education. Looking to incorporate this business due to level of profits. It isn't VAT Registered as turnover is below the threshold and likely to remain so. 


They have been offered the chance to buy a similar business, in a different region. If bought through the existing company, then combined turnover would be above threshold and therefore VAT due on all sales. 


Considering setting up a separate company to run this new division and ring fence the finance required to buy it, to protect the existing business. 

Will HMRC accept this? Or would you say they will try to treat it as the same trade and combine them for VAT purposes?

both companies will be owned entirely by the same shareholder


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By Portia Nina Levin
13th Nov 2016 10:38

Unless there are economic, commercial AND organisational links, HMRC cannot successfully issue a disaggregation notice.

All they can do argue that the there is in reality one business being carried on by the two companies as effective partners. The fact that the second business has been purchased helps negate that argument to a certain extent.

There is not a definitive answer though.

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