Sandwich shop and VAT

[derren]

Sorry I know we talked about this before but I wanted to clarify a few things as a client is about to buy a second sandwich shop and he needs a bit of advice.

He already owns a sandwich shop as a sole trader which is below the VAT threshold. He now wants to buy a second, but I have some queries regarding VAT.

1) Buying the second will put him over the VAT threshold on combined sales. Even through they are seperate business's, I am correct in assuming that he will have to register for VAT as they assess VAT on the individual not the business's?

2) If he has to register then I have read in previous threads that the rules are quite complex - ie he will not pay VAT on everything. Therefore he needs a till to record what is vatable and what is not. Is the following correct?

a) Mostly "cold" sandwiches make up the bulk of his sales so I can assume these are zero vated.
b) Coffee, crisps, sweets, cakes, ice creams are standard rated
c) Hot rolls such as hot pork rolls are ??????

Anything else I should consider?

Thanks

Derren
DH-Solutions

[gillyfleur]

1. Yes, he will have to register for VAT as being a sole trader he is the business irrespective of how many shops he has

2. Yes he needs a till that will keep sales records for VAT purposes

Cold sandwiches = 0%

Hot or toasted sandwiches = 15% - although there is currently some debate with HMRC regarding this within Subway I gather. Currently it's 1 - 0 to HMRC but up for appeal

Hot and cold drinks, sweets, crisps, biscuits etc mainly 15%

Hot pork rolls = 15% - hot is the operative word

It is one of the main tests HMRC will conduct on such a business should they visit

[Jaydee]

He already owns a sandwich shop as a sole trader which is below the VAT threshold. He now wants to buy a second, but I have some queries regarding VAT.

If VAT registration would prove costly, as there would be no artificial dis-aggregation of the businesses given their locations, he could consider purchasing the second through a separate legal entity, such as a limited company?

[David Griffiths]

Biscuits = 0%
but
Chocolate biscuits = confectionery = 15%
and
Cakes = 0%
even
Chocolate covered cakes = 0%

Needless to say, the boundaries are often far from clear - this link (http://www.hmrc.gov.uk/manuals/vfoodmanual/vfood6180.htm) might help (or totally confuse!)

Food sold hot is normally standard rated, but food which just happens to be hot because it's freshly cooked, such as bread straight from the oven remains zero. Some shops time their baking to have pies hot out of the oven at lunchtime but if they do anything at all to keep them warm, they are standard rated.

[derren]

Cheers guys I guess its as I thought then - with a few other factors thrown in to confuse thing.

I thought about the going down the company route but the extra red tape will not be worth it for him and considering as I said 90% are cold sandwiches are zero rated the problem of cost which was what he was worrying about should not be to much a factor.

Thanks

Derren
DH-Solutions

[gillyfleur]

...and whilst the seperate legal entity could be an option you do have to be a bit careful as if HMRC were to visit you may find they deem it to be an associated business - especially if both the sole trader and the ltd co were under the VAT threshold and had the same director/owner and were both being run from his home address for example, and it could end up costing him in the long run.

[Williams lester]

Have you worked through the figures yet? I have a deli/sandwich shop as a client, they find they get a refund every quarter for the VAT they pay out on rent/advertising/equipment etc.

[derren]

Have you worked through the figures yet? I have a deli/sandwich shop as a client, they find they get a refund every quarter for the VAT they pay out on rent/advertising/equipment etc.

Thanks that something that I have not considered. I have wrote to him today to explain that the VAT is not a problem since 90% will be zero rated, but a refund would be a nice suprise.

Derren
DH-Solutions
Hereford

[David Griffiths]

Have you worked through the figures yet? I have a deli/sandwich shop as a client, they find they get a refund every quarter for the VAT they pay out on rent/advertising/equipment etc.

And accountancy fees! :D