transferring VRN on incorporation or sole trader

Transferring VRN on incorporation of sole trader and cash accounting

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Client is sole trader and the business is to be incorporated. The sole trader operates cash accounting and at the date of transfer of the business to LTD there will be a book of debtors and creditors in existence. When these debtors and creditors are settled, hw does the VAT on those transactions get treated given that a VAT number would transfer to the Ltd Company and it would then be declaring its own VAT transactions from the date of transfer? 

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By lionofludesch
05th Apr 2024 10:56

You don't have to transfer the VRN. You can if you want and, if you do, you take over the sole trader's entire VAT history.

Think carefully whether this is right for you.

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By Paul Crowley
05th Apr 2024 11:29

I prefer not to, for obvious reasons.
At one point it was considered a risk, as in HMRC VAT are now on a last chance to enquire. But that risk is likely trivial given current HMRC inability to cope with ordinary things

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By Truthsayer
05th Apr 2024 12:22

I have always considered it best to not transfer the VAT number on incorporation, and to get a new one. That avoids complications like this.

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By lionofludesch
05th Apr 2024 14:02

Truthsayer wrote:

I have always considered it best to not transfer the VAT number on incorporation, and to get a new one. That avoids complications like this.

It shouldn't be complicated. VAT should be accounted for by the old business irrespective of when it's payable. What I suspect is happening here is that this is cash accounting and the closing balance on the accounts is the balance on the VAT return, ignoring future VAT payable or repayable on debtors and creditors.

But for what it's worth, I'd probably keep the VAT number if I was taking over my own business but get a new one if I was taking over someone else's. It's the trade off between possible unknown debts and the inconvenience of not having a VRN for aeons.

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By Paul Crowley
05th Apr 2024 12:37

I do not really see the problem.
Is the full assets and liabilities are transferred then the only problem is if the old sole trader bank account is used for transferred items.
There is no cessation for VAT purposes. There is no double accounting.

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