Accounting types

[kanes]

Friendly those IR guys, can anyone answer this

If I set up a holding company with divisions (really separate companies but due to legalities it's better setting them up as divisions of one company) if one division was to break the £56k barrier, would I have to register the holding company, and as such, the rest of the 'divisions' for VAT?

Sorry to ask but the usual bloke has gone on holiday for a bit

[stevieb]

Yep you would have to register the holding company for VAT IIRC i have just setup a holding company for my 3 business.

[kanes]

cheers for the reply, will wait to get confirmation when he gets back or if anyone in the mean time can confirm?

it's a bloody ripoff though, it's basically a tax on small business owners with all these new laws and schemes, just to shaft them even harder to squeeze more money for the wonderfully titled "redistribution of the wealth" that Blair fuels, i'd like to know who it's being 'redistributed' to exactly......

[stevieb]

Im not that bother about VAT accounting as 90% of my services/turnover is zero rated because of the industry i am in. Hence its boosts my profits a little at the end of the year

[PetrolTed]

In a similar vein, what's the best way of managing subsidiary activities? If I wanted to separate my activities into separate entities to achieve

- compartmentalised risk
- potential to sell off part of a business as a more identifiable unit

Would it be simpler to set up separate limited companies or to have a holding company of some sort?

[davidd]

PetrolTed said:

In a similar vein, what's the best way of managing subsidiary activities? If I wanted to separate my activities into separate entities to achieve - compartmentalised risk - potential to sell off part of a business as a more identifiable unit Would it be simpler to set up separate limited companies or to have a holding company of some sort?

Ted

We did this in the past and set up completely seperate companies, and then said on all business stationary that they were all part of the same group, also the parent company owned shares in all the other companies (some were set up with third parties).

In each case disposal was simply a case of the parent company selling its stake to the other shareholders (I say simple, there was lots of blood on the carpet a couple of times).

It would have been more complex if it had been divisions of the same company.

Likewise when we did the MBO of what became Igentics Ltd, (for all you e-business and systems integration needs come to www.igentics.com ) because we bought what was a division there were lots of grey areas like which customers we ours and which belonged to other parts of the business, which debt was ours etc, etc.

I suppose there is an argument that you could use divisions and make sure they are exactly that, clear divisions, that would make life a bit easier.

Do you have a business link advisor or anything?

D.

[Ali_D]

PetrolTed said:

In a similar vein, what's the best way of managing subsidiary activities? If I wanted to separate my activities into separate entities to achieve - compartmentalised risk - potential to sell off part of a business as a more identifiable unit Would it be simpler to set up separate limited companies or to have a holding company of some sort?

To compartmentalise (nice word by the way ) risk you'll need seperate companies as you've suggested so your only decision is whether to own these companies personally or via a holding company. From an admin point of view as you'll qualify as a small group you won't have to prepare and file consolidated accounts so there's nothing too tricky to prepare. You'll also be able to transfer assets around the group fairly easily. If you go for seperate companies then for tax purposes they will be treated effectively as a group anyway (due to common ownership etc) so they isn't much difference tax wise (sure eric will correct this if it not quite right - its a long time since I did any tax work!).

However if each company is very small you may find that the costs associated with running them will be prohibitive and outweigh any risk benefits you recieve.

Best thing to do is talk to your accountants as they'll know your business details and will be able to advise you appropriately. If you feel you can't talk to your accountants about this then get some new ones!!

[PetrolTed]

Useful advice, thanks. Was just interested in the concept really. I'll talk to my accountant if and when.

DavidD's point about determining ownership of clients etc is a very valid point which I'd need to give more thought to...

[kanes]

Thanks, I'm in a similar position as Ted it seems, the new legislation is certainly an odd situation from a 100% owner's perspective

For now I'm going to stick them as individual businesses rather than divisions of 1 holding company, luckily all businesses operate with very little expenditure but should provide some excess VAT free 'company expenses'

[eliminator]

Ted and Kane

When you talk to your accountant about whether to have one company with divisions or seperate companies ask him how the new transfer pricing legislation will affect that decision. Are you going to be able to avoid theis (extensive) administration burden because you meet the definition of "small" or "medium sized" company? If not then you may want to look again at divisions of one company.