New business and VAT
Discussion
Hi,
quick question.
Wife has a business as a sole trader, not vat registered.
Can she set up another business, register it as vat registered (below threshold). Buy equipment and claim back vat and rent the services of that equipment to the other business.
Original business is a Dog walking field (7 acres) plus dog training.
New business would be a mowing service, tractor and topper purchase.
quick question.
Wife has a business as a sole trader, not vat registered.
Can she set up another business, register it as vat registered (below threshold). Buy equipment and claim back vat and rent the services of that equipment to the other business.
Original business is a Dog walking field (7 acres) plus dog training.
New business would be a mowing service, tractor and topper purchase.
Eric Mc said:
One word - “disaggregation”. Look up HMRC’s definition
Thanks Eric, after looking it up. It states it's splitting a business to avoid hitting the threshold.We won't ever hit the threshold, we are though trying to reclaim vat back on the tractor.
The mowing service will make money eventually as there are some other fields to be cut but the main customer will be our field.
https://www.gov.uk/government/publications/stateme... may be of interest.
I'd say it sounds like you are artificially separating them. Even if not to avoid the registration threshold, you are doing it to avoid VAT which would usually be paid if they were not separated.
I'd you still don't agree, it would be worth asking HMRC directly. They are usually very helpful and they you will have a definitive answer should it be questioned in the future.
I'd say it sounds like you are artificially separating them. Even if not to avoid the registration threshold, you are doing it to avoid VAT which would usually be paid if they were not separated.
I'd you still don't agree, it would be worth asking HMRC directly. They are usually very helpful and they you will have a definitive answer should it be questioned in the future.
wheelerc said:
https://www.gov.uk/government/publications/stateme... may be of interest.
I'd say it sounds like you are artificially separating them. Even if not to avoid the registration threshold, you are doing it to avoid VAT which would usually be paid if they were not separated.
I'd you still don't agree, it would be worth asking HMRC directly. They are usually very helpful and they you will have a definitive answer should it be questioned in the future.
I probably agree, this is the reason for doing it. However my argument is, yes the dog field will be the main client but there will be others and all businesses have to start somewhere. If we can say get 5 clients on board within the first year proving it's not solely for the dog field would that be sufficient to appease HMRC.I'd say it sounds like you are artificially separating them. Even if not to avoid the registration threshold, you are doing it to avoid VAT which would usually be paid if they were not separated.
I'd you still don't agree, it would be worth asking HMRC directly. They are usually very helpful and they you will have a definitive answer should it be questioned in the future.
I'm not trying to argue I'm right, far from it. Just trying to see if there is anyway I can legitimately set up a separate business.
Bob-iylho said:
Thanks Eric, after looking it up. It states it's splitting a business to avoid hitting the threshold.
We won't ever hit the threshold, we are though trying to reclaim vat back on the tractor.
The mowing service will make money eventually as there are some other fields to be cut but the main customer will be our field.
Even if you did this, and you really should follow the advice on here not to, your Mowing Service (MS) is VAT registered ... your Dog Walking Service (DWS) is not.We won't ever hit the threshold, we are though trying to reclaim vat back on the tractor.
The mowing service will make money eventually as there are some other fields to be cut but the main customer will be our field.
The Mowing business will need to charge ALL customers VAT for their services ... including your DWS .. and since DWS is not VAT registered they will not be able to reclaim the VAT charged by MS ......
There's a wider question about whether the second business is really a business at all, if it's not it can't register for VAT.
There's a risk that you reclaim the VAT, never make any money and then HMRC say it isn't a business and leave it to you to prove it is.
You also have all the arms-length complications that go with the two businesses having a relationship between each other to consider as well.
There's a risk that you reclaim the VAT, never make any money and then HMRC say it isn't a business and leave it to you to prove it is.
You also have all the arms-length complications that go with the two businesses having a relationship between each other to consider as well.
Gassing Station | Business | Top of Page | What's New | My Stuff