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vat on incorporation

I'm sure I've heard somewhere (perhaps at PTP Training?) ...

Didn't find your answer?

... that whilst incorporation of a sole trader's turnover needs to be considered for the 12 month rolling VAT threshold of a company, incorporation of a partnership does not - the sales figure resets.

I just can't find it online anywhere.

I have a sole trader who will breach the threshold probably around October time. We want to delay registration, so I was going to advise to transfer to a partnership now, then incorporation in October. I just can't find anything to back that up.

Am I right? Am I wrong? Does anyone have a relevant link?

Thanks

Replies (15)

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By Cloudcounter
26th Jun 2020 12:38

I don't think that the status of the business being incorporated matters, so the rules would be the same for sole trader or partnership.

My understanding is that the previous turnover of the previously unincorporated business only needs to be taken into account if that business is registered for VAT or is liable to be registered for VAT at the time of the transfer.

No doubt one of our Vat experts will be along soon to clarify

Thanks (1)
Replying to Cloudcounter:
Routemaster image
By tom123
26th Jun 2020 12:50

watching

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Replying to tom123:
ALISK
By atleastisoundknowledgable...
26th Jun 2020 12:53

ICU

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Replying to Cloudcounter:
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By Paul Crowley
26th Jun 2020 13:29

My understanding as well

which is different to a lot of previous opinion that Co stood in shoes of prior business owner

TOGC was originally meant to help business owners, but now inappropriately used by HMRC as a trip wire

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chips_at_mattersey
By Les Howard
26th Jun 2020 14:28

Any change of legal entity before liability to registration arises re-sets the turnover to zero. (That includes sole trader to partnership.)
But repeated changes as you suggest bring the client into disaggregation territory.
(VAT Act 1994, Sch 1, para 2 refers)

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Replying to leshoward:
ALISK
By atleastisoundknowledgable...
26th Jun 2020 14:36

Thanks Les. I was convinced that s/t - ltd didn't reset the income. I guess that even I'm wrong sometimes (or as Mrs ALISK would say, usually wrong)

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Replying to atleastisoundknowledgable...:
Routemaster image
By tom123
26th Jun 2020 15:09

The thing is, intuitively, it feels like it probably shouldn't as that is two bites of the cherry..

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Replying to atleastisoundknowledgable...:
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By Paul Crowley
26th Jun 2020 19:41

That opinion was circulating going way back, even at CPD events by respected lecturers

Remember how Rent a room was professed to be brilliant solution for home working?

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Replying to Paul Crowley:
ALISK
By atleastisoundknowledgable...
26th Jun 2020 20:38

Paul Crowley wrote:

... even at CPD events by respected lecturers ...

That’ll be where I picked it up. Always a sucker for anything said at CPD.

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Replying to atleastisoundknowledgable...:
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By Paul Crowley
26th Jun 2020 21:49

Same here
Trouble is when opinions or guidance changes, it is still stuck there

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Replying to Paul Crowley:
ALISK
By atleastisoundknowledgable...
26th Jun 2020 21:56

True, so true.

Thanks (1)
blue sheep
By NH
27th Jun 2020 06:38

the problem we usually have is that we find out too late when the threshold has already been breached, luckily you caught this one in time

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Replying to NH:
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By Paul Crowley
27th Jun 2020 16:43

I struggle to understand why clients fail to understand the concept of a rolling balance.
I have numerous times suggested 'shall I phone you every month and ask how much turnover in 12 months ending today'

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Replying to Paul Crowley:
RLI
By lionofludesch
27th Jun 2020 17:54

Paul Crowley wrote:

I struggle to understand why clients fail to understand the concept of a rolling balance.
I have numerous times suggested 'shall I phone you every month and ask how much turnover in 12 months ending today'

True - but what's worse are the clients who think that registration depends on the turnover in their accounts and they can swan in in January and just start paying VAT from then on.

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Replying to lionofludesch:
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By Paul Crowley
27th Jun 2020 18:42

I have one close to limit.
Yes comes in late January for accounts ending prior January. He was who I was thinking of.
Ticking bomb

But warned each year, explained each year

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