Hello,
I have a partnership client who are VAT registered. Their business is running a nursery which is nearly run down but they rent out a building which is registered for VAT and hence cannot deregister for VAT. The partnership is a husband and wife team. The husband now wishes to work as a sole trader basis providing garden maintenance services and as most clients will be domestic would prefer not to be VAT registered (turnover is expected to be below the threshold). Is is possible for him to trade as a sole trader independently from his VAT registered partnership or would the similarity in business cause any issues? I have tried calling the VAT helpline but they are constantly busy (just spent the last hour redialling!).
Thanks for any advice on this.
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Garden
Hi - Sorry, I should have stated, it is a nursery as in the gardening sense.
Thanks
Opting to tax may not be a bar to deregistration
Just a point about your statement that the partnership cannot deregister because "they rent out a building that is registered for VAT". I assume you mean they have opted to tax on the building? If so, that does not necessarily debar them from deregistering. If you are worried about the VAT liability that arises on taxable assets at the time of deregistration, bear in mind that in the case of opted buildings, you only have a liability if you claimed input tax on the original acquisition of the building.
Merely opting to tax at some later date does not create a liability on the deemed disposal at the time of deregistration. See HMRC Notice 700/11 (April 2010 is latest edition) paras 6.2 and 6.3. The option does not disappear of course; if the clients go over the threshold again in future the option kicks back in and any grant of the building becomes taxable.