Messy VAT situation... not sure what to do

[SmithsCo]

Hey everyone,

As the thread subject states, we're in a bit of a mess with the VAT side of things.

So we started our ltd company back in March 2020. We wanted to start selling on Amazon.co.uk primarily. Now, things did not go according to plan and due to some technicalities we were not able to register as a company. This happened over a period of about 6 months. So we ended up signing up using a different account as a sole trader with the account in my husband's name (since he's been self-employed for a few years now). Now it gets complicated and confusing... because even though the account was registered in his name, all documents were in his name, we were using his UTR number etc, it was basically the ltd company trading. I hope this makes sense.

We exceeded the VAT registration threshold less than a month ago (i.e. went from under £60k to over £95k in a month). Logically, for VAT purposes, it would be my husband who would need to register for VAT, send the VAT return etc, not the ltd company (since it was him who earned the £95k on Amazon). BUT we want to register the ltd company for VAT because this is how it's supposed to be. It's the ltd company doing everything basically, the sole trader bit is kind of the middleman/facilitator, e.g. the ltd company trades on Amazon using my husband's sole trader business.

I don't know where we're standing legally, but we need to get this sorted because it's messy and we really need to have everything in its proper order.

Can the VAT number be transferred? Is there a legal way / document to allow the ltd company to trade through the sole trader OR to give the sole trader full power to trade in the name of the ltd company? Because at the end of the way, we want the ltd company to have made £95k during the past year and have filled VAT returns etc, not my husband).

For the record, we will try to switch the legal entity of our Amazon account from sole trader to ltd company (which will clear a lot of things up) BUT this will not happen for a while yet. And we'll also be seeking an accountant to ask for advice in the very near future, but I wanted to get an idea of what to expect etc.

Any ideas?

Thanks!

 

[BubbaWY]

Im not qualified to give you a definitive answer but to your credit you have identified the problem. A call to HMRC will probably help. Some people fear speaking to them, but from experience they really are extremely helpful and should be able to point you in the right direction. And finally, yes, get an accountant on board asap.

 

[Lisa Thomas]

You are going to need to get this sorted with HMRC's help and fast.

As BubbaWY says, get an accountant to try to unravel it for you, but isn't going to be cheap and accountants are up to their eyes in it at the moment with the year end so expect a delay.

I'd be happy to recommend an accountant if you DM me.

 

[lesvatadvice]

The tidiest was is to register the sole trader, having determined the correct date. You can then do a TOGC (transfer of a going concern) to the limited company. HMRC are slow at processing applications just now. And you will need to provide clear explanation. Expect penalties, which can be mitigated and/or suspended.
Happy to walk you through this.

 

[DWS]

You can not make the Limited Co have the 95k made in the last year because it was your husbands if you was using his UTR.
Can you not just get Amazon to switch to the Ltd Company now? That way you can just register the Ltd for a new VAT registration and use that from now on.
You should have appointed an accountant before you set up the Company.

 

[MyAccountantOnline]

You cant re-write history; your husband has been trading and as he has exceeded the VAT threshold he needs to register for VAT.

Going forward you can certainly transfer the business to a limited company.

I'd get some proper specific professional advice from an accountant before you do anything though to make sure it is the best option. Its not as bad as you may think and most accountants dealing with small businesses will have seen much worse!

 

[DontAsk]

it was basically the ltd company trading. I hope this makes sense.

It doesn't work like that. You either have a Ltd or you are a sole trader.

When was the limited actually registered? Why didn't you switch then?

Did you open a new bank account for the sole trader business? Many banks take a dim view of using personal accounts for this. You will certainly need a new one for the limited.

Has your husband actually filed a tax return for sole trading yet? If not, HMRC don't know about it.

I winder if you can just enter all the transactions from the date of Ltd registration (or from the start of this tax year) into your accounting package for the Ltd? There's no law against your husband buying stock personally and claiming expenses from the Ltd. Putting the income from sales through his own account may be a bit more problematic. As always, the devil is in the detail.

 

[ecommerce84]

Take up @lesvatadvice on their offer of guiding you through.

It might cost you a few £’s but you’ll sleep well knowing everything is as it should be.

 

[Ivel]

Actually, that might be a good thing, Your husband was trading, he reached the VAT threshold. He can sell the business to the Ltd company / good luck with transferring that in Amazon, last time a client did it it took 4 months/. The company will register for VAT as it is taking over a business trading over the threshold. I wouldn't worry about penalties, You have to register within 30 days of the end of the month when you went over the threshold, so if you went over 85k in December 2021, you have to register by 30 January 2022.

 

[SmithsCo]

Thanks everyone for your replies -- much appreciated.
Definitely my bad for not appointing an accountant as this wouldn't have happened. :|

Happy to get this sorted by a professional and I've actually received a few recs from some of the forum members on here. I'll sleep better at night knowing all is as it should be! )

As I said, I just wanted to get some input and see where we're standing. I was going to get advice from an accountant anyway as the situation has become messy and an accountant should deal with this side of things.

I winder if you can just enter all the transactions from the date of Ltd registration (or from the start of this tax year) into your accounting package for the Ltd? There's no law against your husband buying stock personally and claiming expenses from the Ltd. Putting the income from sales through his own account may be a bit more problematic. As always, the devil is in the detail.

@DontAsk -- would you mind clarifying this? I'm not sure I understand it very clearly. Thanks!

 

[DontAsk]

@DontAsk -- would you mind clarifying this? I'm not sure I understand it very clearly. Thanks!

So the advice is worth what you paid for it

Basically I am saying create an accounting trail for the Ltd company from the date of registration, but I have no idea if its feasible. Back date the transfer from the sole trader to the Ltd and register the Ltd for VAT. It depends how much HMRC already know about the sole trader business.

 

[SmithsCo]

So the advice is worth what you paid for it

Basically I am saying create an accounting trail for the Ltd company from the date of registration, but I have no idea if its feasible. Back date the transfer from the sole trader to the Ltd and register the Ltd for VAT. It depends how much HMRC already know about the sole trader business.

Right, noted. Thanks again for clarifying. I'll have a word with an accountant that was recommended to me on here, hopefully he can unravel it for us.

All the best everyone! ?

 

[Lisa Thomas]

Good luck.