V.A.T issue

[savvyshopper]

Hey all...

New to this site but some great info on here. I am hoping you can help me out.

Basically I moved my retail premises to a secondary location a year ago with a rent that is 70% cheaper and no V.A.T payable on the rent as the landlord isnt registered. I currently do turn over more than the £73,000 V.A.T limit, but this is through two retail channels, the internet and also the store. My dilema is that I am thinking about de-regitering for V.A.T, as between the two retail channels I only turn over £85,000. The store accounts for £71,000 of this and online the other £14,000 and this figure is growing. I am thinking about splitting the net sale and the retail sales into two businesses. I currently pay approx £8k a year in V.A.T (crazy I know for the turnover), hence my dilema.

Basically want some advice from people who have maybe done the same thing, how they found it, the legal aspect of this and generally peoples thoughts and advice on the whole things.

Thanks all in advance

[saxondale]

well, seen as youve just posted your name, company name and intention to artificially seperate your businesses to defraud HMRC .............. I would expect a knock on your door anytime soon.

[savvyshopper]

Thanks for the advice, I am not trying to defraud anyone I have been in business for many years and have done everything by the book every step of the way. Many companies split their businesses up. They can genuinely be two separate entities. I am looking at ideas for my business to survive and hopefully help it thrive.

[saxondale]

Thanks for the advice, I am not trying to defraud anyone I have been in business for many years and have done everything by the book every step of the way. Many companies split their businesses up. They can genuinely be two separate entities. I am looking at ideas for my business to survive and hopefully help it thrive.


we`ll wait for the accountants to tell you why your wrong. Good luck with your venture.

[kulture]

This is called artificial separation, HMRC do not permit this. If you had two completely separate businesses, say one retail and another a cleaning service, then you can do it. Two retail businesses, even split web and not, then this is not separate enough for VAT purposes.

[bbbbb]

Speak to your accountant about this. Disaggregation can sometimes be achieved but it is normally a problem if discovered by HMRC. Read this article (http://www.taxationweb.co.uk/tax-articles/vat-excise-duties/will-splitting-my-business-save-vat.html)

[CabinLIving]

I would expect a knock on your door anytime soon.

More likely hmrc will wait five years or so then investigate and whack you with a huge fine including interest.

Be very careful unless they're businesses doing completely different things.

[fwd333]

what software to people use

[GreenLea]

Very risky idea imo and illegal I would not do under any circumstances!

[Truemanbrown]

The scenario that you have outlined would to get through the VAT 'disaggregation rules'.

These rules were brought in to prevent exactly what you are planning to do - split a business in two to avoid VAT registration.

Can you successfully split a business in two? The answer is yes. To successfully split the business you would have to show that each business is run totally separate from the other. That means:-


each business maintaining separate accounting records and bank accounts;
if the business is run from the same building that there are separate charges for the use of the property (i.e. rent, rates and utilities);
there should be separate telephone numbers. If there is only one phone then the account holder should charge the other company for use of the phone;
will the businesses use each other's staff. There should be cross charges for the use of each other's staff.
This will cause you a lot of hassle just to save paying VAT. And if you do not get the arrangement right you will end up paying VAT anyway.

I would advise you not to do it!!!