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VAT on separate businesses

VAT on separate businesses

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Company A is VAT registered. Company B is not VAT registered. A new company (Company C) has been formed, with the sole director of Company A and the sole director of Company B being its only directors. Shareholdings are split 50/50 between these directors. The premises of Company A will be used in part for Company C's business, but there will be separate invoicing, separate bank accounts, separate marketing material etc. The turnover of the new Company C will not reach the VAT threshold for some considerable time. Question 1 - will Company C have to be VAT registered, in view of the VAT status of Company A? Question 2 - if the combined turnover of Company B and Company C exceed the VAT threshold, will Company B have to register for VAT, even if its own sales are still below the VAT threshold?

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By tom123
30th Oct 2016 17:50

What are the trades of these various companies?

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By ColinNibbs
31st Oct 2016 12:22

Trades are car hire for Company A, car repairs for Company B, and car sales for Company C.

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By Duggimon
31st Oct 2016 08:54

It depends on whether the split of activities between these companies is or could be deemed to be artificial and solely or largely for the purpose of avoiding VAT registration.

So it all hinges on what they actually do.

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Replying to Duggimon:
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By ColinNibbs
31st Oct 2016 12:24

Split of activities does not appear to me to be artificial, but how to show it is kosher to HMRC?

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Hallerud at Easter
By DJKL
31st Oct 2016 13:00

ColinNibbs wrote:

Split of activities does not appear to me to be artificial, but how to show it is kosher to HMRC?

I think car sales and repairs, both being traditional "garage" activities, and if possibly sharing (partly) premises and presumably staff and equipment might be an issue.

The car hire I do slightly see as distinct activity even if (car sales) uses say a dealership to procure good pricing for the hire cars.

Are the hire cars to be sourced via the dealership; in effect how close is the working/trading relationship amongst the various entities.

Edited- Have tidied above as had confused my letters and my trades

Should also have asked, the two directors, are they connected (family etc)?

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By ColinNibbs
31st Oct 2016 18:02

To clarify, the directors are not connected. They are just business colleagues whose premises are near each other. The only sharing of facilities for Company C will be part of the forecourt of Company A.

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chips_at_mattersey
By Les Howard
31st Oct 2016 19:25

I am not sure of the benefits of your arrangements.
It is unusual for a car sales business not to be registered. And if the repairs business is doing work for the other companies, it simply prevents input tax claim on parts and equipment.
Your proposal, even if you can get HMRC to accept it is not artificial, seems to provide little substantial saving. Perhaps you should create a single business, and save the multiple bank accounts, etc.

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