- Original Poster
- #1
I have a limited company now for around 10 years and been registered for VAT all that time. Thanks to Covid and by extension the Chinese government, I am now going to be de-registering for VAT as my turnover has dipped below the threshold this year. I don't know if we will be under next year or not, so I think it's a reasonable thing to do at this point. If we go over again next year and HMRC say we should not have de-registered at all in the first place I will argue that I expected us to remain under the threshold and was justified in de-registering. So, my first question to everyone is what they think of this approach and if I risk problems later down the line with HMRC....
Second question pertains to opening a second company. I didn't want to open a second ltd company before as I didn't want to appear to be trying to avoid VAT. Now that VAT is not an issue I am considering doing this for the following reason: I have a lump sum of £25k in that business account which is from sales and a 15k bounceback loan. However, in Q1 we invested in a new mobile app, which was expensive and ate into our profit margin. I am now in a position whereby I have taken out as much dividends as this years profits will allow but have excess cash in the account which is not tax effective for me to take out.
Even next year I can't really pay this as a dividend because I need sales income next year to create profits and thus create a profit margin from which dividends can become available. So, what if I create a second company and run all sales income though that, allowing me to take my income in dividends in line with the business profits. Meanwhile, the other company with the 25k in it (by the way, this does not include money already set aside for all VAT and corporation tax owed, so there will be no arrears) pays me my wages next year as well as some suppliers and runs at a loss next year while continuing to pay off the bounceback loan.
I guess running the same business through one limited company isn't allowed regardless of VAT situation? Or is there some clever loophole that would allow me to do this? I hope I've explained well and not too long winded...
Second question pertains to opening a second company. I didn't want to open a second ltd company before as I didn't want to appear to be trying to avoid VAT. Now that VAT is not an issue I am considering doing this for the following reason: I have a lump sum of £25k in that business account which is from sales and a 15k bounceback loan. However, in Q1 we invested in a new mobile app, which was expensive and ate into our profit margin. I am now in a position whereby I have taken out as much dividends as this years profits will allow but have excess cash in the account which is not tax effective for me to take out.
Even next year I can't really pay this as a dividend because I need sales income next year to create profits and thus create a profit margin from which dividends can become available. So, what if I create a second company and run all sales income though that, allowing me to take my income in dividends in line with the business profits. Meanwhile, the other company with the 25k in it (by the way, this does not include money already set aside for all VAT and corporation tax owed, so there will be no arrears) pays me my wages next year as well as some suppliers and runs at a loss next year while continuing to pay off the bounceback loan.
I guess running the same business through one limited company isn't allowed regardless of VAT situation? Or is there some clever loophole that would allow me to do this? I hope I've explained well and not too long winded...
