VAT disagreggation?

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A client of mine, a fencing contractor installing commercial fencing, plans to set up a new Ltd doing property improvements.  Same address (home) separate phone no, mmore than likely same director/shareholder.  (could make wife director if that helps and it's still legal)   Close enough to vat disagreggation to warrant vat registration straight away?

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By Roland195
22nd Jan 2024 15:08

Will there be any discernable difference between the customers?

If one business supplies & installs fences for Developers or Commercial Properties and one does monoblocking/gardening you might have a chance at an argument assuming the other tests are met.

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Replying to Roland195:
RLI
By lionofludesch
22nd Jan 2024 15:19

Roland195 wrote:

Will there be any discernable difference between the customers?

If one business supplies & installs fences for Developers or Commercial Properties and one does monoblocking/gardening you might have a chance at an argument assuming the other tests are met.

If his customers are other businesses, likely he'd be better off registering.

What sort of work is done by the new business? How different is it to the fencing business? "Property improvements" is too vague.

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Replying to lionofludesch:
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By legerman
23rd Jan 2024 21:36

lionofludesch wrote:

Roland195 wrote:

Will there be any discernable difference between the customers?

If one business supplies & installs fences for Developers or Commercial Properties and one does monoblocking/gardening you might have a chance at an argument assuming the other tests are met.

If his customers are other businesses, likely he'd be better off registering.

What sort of work is done by the new business? How different is it to the fencing business? "Property improvements" is too vague.

Fencing is solely commercial, property improvements (might he be better calling it home improvements?) is domestic, see my other replies. I've seen your post about a business plan without the vat in the room, and I think that's a very good point.

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VAT
By Jason Croke
22nd Jan 2024 15:27

HMRC guidance/view on disaggregation, bear in mind it is guidance designed for HMRC, not for the business owner, so you need to read it as if you are HMRC attacking your client and then see whether your clients approach causes any concerns.

https://www.gov.uk/government/publications/statement-of-practice-4-1983/...

Using the wife as a Director of NewCo is still a "connected person" for disaggregation purposes.

The starting point is why a separate company is needed for this new venture? If the client base are different then that is good foundation, else why not just run it through the existing trade?

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Replying to Jason Croke:
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By legerman
23rd Jan 2024 21:19

Jason Croke wrote:

HMRC guidance/view on disaggregation, bear in mind it is guidance designed for HMRC, not for the business owner, so you need to read it as if you are HMRC attacking your client and then see whether your clients approach causes any concerns.

https://www.gov.uk/government/publications/statement-of-practice-4-1983/...

Using the wife as a Director of NewCo is still a "connected person" for disaggregation purposes.

The starting point is why a separate company is needed for this new venture? If the client base are different then that is good foundation, else why not just run it through the existing trade?

Totally different client base. Fencing Co is commercial fencing and VAT registered. Property improvements would be domestic, starting with building work initially then adding other things like electrical plumbing etc as the business grows and he can afford to take on extra staff.

Thanks for the guidance link, I will have a read.

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By FactChecker
22nd Jan 2024 15:58

Is this a 'ploy' for fencing contractor to avoid VAT registration of current business?
Basically what's the objective underlying the question?

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Replying to FactChecker:
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By legerman
23rd Jan 2024 21:23

FactChecker wrote:

Is this a 'ploy' for fencing contractor to avoid VAT registration of current business?
Basically what's the objective underlying the question?

Fencing Company is vat registered. Client approached me a couple of days ago to tell me of his plans and the vat question was my first thought. I haven't mentioned that he might/will have to go vat reg with the new company until I've double checked it myself.

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By Tax Dragon
22nd Jan 2024 16:19

If he had a company doing property improvements, what would you suggest if he said he was going to set up a new company to install fencing?

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Replying to Tax Dragon:
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By legerman
23rd Jan 2024 21:32

Tax Dragon wrote:

If he had a company doing property improvements, what would you suggest if he said he was going to set up a new company to install fencing?

If it was domestic fencing - either way - my answer would be an immediate no, but your point is a good one, but are the two related enough to class as vat disagreggation? If it's a yes then vat registration from the beginning. If there's a possibility that there isn't a close enough connection then I've saved the client the vat on labour until the threshold is reached, thus making him more competitive as he grows the business.

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RLI
By lionofludesch
22nd Jan 2024 18:33

If you can put together a decent business plan to support the fella's reasons for a second company, without referring to VAT, you've a chance.

But I don't think you can. Not charging VAT appears to be the major factor.

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paddle steamer
By DJKL
22nd Jan 2024 22:04

Cannot imagine two sets of tools, two sets of material stocks and two different forms of business transport.

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Replying to DJKL:
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By Roland195
23rd Jan 2024 10:17

Usually the undoing of these sort of set ups right enough. Even if they start out doing it, they never manage to keep it going.

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Replying to DJKL:
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By legerman
24th Jan 2024 10:29

DJKL wrote:

Cannot imagine two sets of tools, two sets of material stocks and two different forms of business transport.

Totally different tools and fencing doesn't carry stock.. Vehicle could be, currently registered under the fencing.

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By legerman
25th Jan 2024 10:16

Thank you for all the replies. Although a genuine separate business, there is a management and financial link and also a slight organisational link. Special thanks to Jason for the link to the document, as that really helped, but all input was appreciated.

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