Running 2 businesses or 1 for VAT

[prinsreintje]

Hi,
I voluntarily registered for VAT with hmrc for my b2b startup as l reckoned all my clients are all vat registered too so benefits outweigh downsides.
Since then l created a new product that l will sell b2c instead, using a different brand name, seperate website, bank account etc. So for this l don't want to be vat registered until l really have to (the 85k threshold).

I have read up on hmrc deciding if a business is honestly separate or that they will count both your businesses as 1 and will require 20% vat on all sales of both businesses.

The products are completely separate but arguably also very similar. Again, 1 will only be b2c and the other b2b so that is a considerabledifference. I will be using the same premises and some of the same equipment, but also some separate equipment. I will refrain from sharing staff or resources. Does anyone have experience with this and does this sound separate enough?
Am I going down the right route or should l merge it all in 1 business at this stage already to avoid complications? Neither businesses are generating 85k p/a yet (not even together) but obviously l am hoping this will change in the near future. However particularly for the b2c sales it is really beneficial to not having to add 20% for the taxman.

Thanks for your advise!

 

[Mark T Jones]

Given the 'greyness' of this, you really need dedicated, professional advice from someone in full possession of the facts.

The fact that the 'difference' is B2B vs B2C would lean towards artificial separation in my mind, but it's not definitive.

2 points to consider

The 'cost' difference isn't 20%, - you can reclaim on purchases/manufacturing

The threshold is £90K

 

[ash799]

Hi
Is the new product distincitvley different to your B2B stock?
I would assume if the difference is just B2C B2B, then i dont think HMRC would look at it as a different business.
As Mr Jones has recomended professional advice in this scenario is a must

 

[Daybooks]

You only want to separate because the new product is sold to consumers not business. If it were being sold to business would you be so keen on this “artificial” separation.

You haven’t convinced me but then I am not HMRC.

 

[Paul Kelly ICHYB]

1. What is/are the products?
2. Wouldn't your B2B customers want to buy the B2C product?

3. l reckoned all my clients are all vat registered too so benefits outweigh downsides.

   What are the assumptions you make to justify this?
4. Pricing & costs will impact your actions

 

[Mister B]

The above aside, how large do you plan to take the business? And over what timescale?

If you're planning on exceeding the threshold in the next year or so, you should factor this in now.

No point in building a business on a pricing strategy that will need to change in the near future-due to the compulsory requirement to register for VAT.

If you don't anticipate breaking the threshold. then fine, but as others have said seek professional advice.

 

[DontAsk]

However particularly for the b2c sales it is really beneficial to not having to add 20% for the taxman.

As is often pointed out it is not 20%. Account for the input VAT AND the output VAT as well as desired margin, when deciding where to set your prices. Somewhere between 10 and 20% more expensive to consumers for VAT registered is more likely.

In practice, if you think the business will grow to exceed the threshold it would be foolish to set your b2c prices any lower than the VAT inclusive price would be. When the time comes you will save from the input VAT as opposed to having to suddenly hike your prices. If you have a niche product that will stand such price hikes then your strategy may be different.

Running b2b and b2c from the same business will save you accounting fees and may allow you to negotiate better prices for volume purchases from suppliers, etc., ...

 

[MyAccountantOnline]

Hi,
I voluntarily registered for VAT with hmrc for my b2b startup as l reckoned all my clients are all vat registered too so benefits outweigh downsides.
Since then l created a new product that l will sell b2c instead, using a different brand name, seperate website, bank account etc. So for this l don't want to be vat registered until l really have to (the 85k threshold).

I have read up on hmrc deciding if a business is honestly separate or that they will count both your businesses as 1 and will require 20% vat on all sales of both businesses.

The products are completely separate but arguably also very similar. Again, 1 will only be b2c and the other b2b so that is a considerabledifference. I will be using the same premises and some of the same equipment, but also some separate equipment. I will refrain from sharing staff or resources. Does anyone have experience with this and does this sound separate enough?
Am I going down the right route or should l merge it all in 1 business at this stage already to avoid complications? Neither businesses are generating 85k p/a yet (not even together) but obviously l am hoping this will change in the near future. However particularly for the b2c sales it is really beneficial to not having to add 20% for the taxman.

Thanks for your advise!

It's difficult based solely on the above but I think you'd struggle to sucessful contest that the two businesses aren't one for VAT purposes.

It's something you need to take proper professional advice on - it really is one for your accountant.

If you haven't yet read it HMRC's internal manual is worth a read https://www.gov.uk/hmrc-internal-manuals/vat-single-entity-and-disaggregation-manual/vatdsag05000

 

[David Griffiths]

All of the responses seem to be concentrating on the product, However, unless I've missed it, the status of the "businesses" is not clear and could well be very relevant. My first thought was that the OP actually has two separate businesses as a sole trader - there is no mention of there being one or more companies. If both business are in fact run as a sole trade, then the discussion is over. It's the individual that would be registered for VAT, and all taxable supplies would be subject to VAT, even if using a different trading name, website, bank account.

For me that point needs to be clarified before any other matter comes into consideration because it is fundamental to the issue.

 

[prinsreintje]

Thanks very much to each of you taking the time to respond and share your thoughts.

After absorbing some of the comments here I discussed the subject with an accountant and gave it some more thought.
For now l decided to make things easier and continue as 1 company and 2 trading names.
Main reason is the extra work involved and then still running the risk that hmrc are not going to play ball.
Since they are civil servants representing the government more than the people they would never just say "yeah that's fine go ahead".

Thanks again

 

[David Griffiths]

"Since they are civil servants representing the government more than the people they would never just say "yeah that's fine go ahead"."

Some people would say that would be representing the people as a whole by ensuring that tax is paid in accordance with the law. Just because it's a decision that you don't like doesn't make it wrong.

 

[prinsreintje]

"Since they are civil servants representing the government more than the people they would never just say "yeah that's fine go ahead"."

Some people would say that would be representing the people as a whole by ensuring that tax is paid in accordance with the law. Just because it's a decision that you don't like doesn't make it wrong.

And you think all hmrc staff have a law degree and their actions are based on legal frameworks and an attitude to make things as easy as possible instead of as difficult as possible? Dream on, you obviously never deal with them.

They make decisions that l or 'people' don't like allnthe time, that are wrong and take a shitload of your time away from you having to appeal, do their work for them to prove them they are wrong before they finally say sorry and admit you were right all along. They don't care cause they get paid their salaries anyway but the business owner takes the damage as for us time = money.

Funny that even on a business forum you get people this gullible and acting smart.

 

[Mark T Jones]

And you think all hmrc staff have a law degree and their actions are based on legal frameworks and an attitude to make things as easy as possible instead of as difficult as possible? Dream on, you obviously never deal with them.

They make decisions that l or 'people' don't like allnthe time, that are wrong and take a shitload of your time away from you having to appeal, do their work for them to prove them they are wrong before they finally say sorry and admit you were right all along. They don't care cause they get paid their salaries anyway but the business owner takes the damage as for us time = money.

Funny that even on a business forum you get people this gullible and acting smart.

As one of my early mentors should have said 'welcome to the real world'

By which he really meant 'get over yourself and get on with it'

Ranting about HMRC is pointless and a bit tedious. It's pretty clear that you were hoping to 'flex' the rules on artificial separation- in this case a flex too far.

Welcome to the real world

 

[prinsreintje]

As one of my early mentors should have said 'welcome to the real world'

By which he really meant 'get over yourself and get on with it'

Ranting about HMRC is pointless and a bit tedious. It's pretty clear that you were hoping to 'flex' the rules on artificial separation- in this case a flex too far.

Welcome to the real world

Your comment doesn't make any sense but that is likely down to a lack of intellect, which is not your fault- we can't blame you for something that you haven't got.

A 'welcome to the real world' comment would be appropriate if the poster would show signs of being gullible, inexperienced or naive, for example stating "Surely hmrc would approve it without too much trouble", while not able to recognise any potential issues. As you can see l made comments quite the opposite, showing signs that l know too well how 'the real world' (in this instance hmrc) work and go about things. So your post merely shows you're a simple man trying to be a bit of a smart-ass. Obviously you were triggered by my negative remarks about hmrc personnel.

 

[Newchodge]

And you think all hmrc staff have a law degree and their actions are based on legal frameworks and an attitude to make things as easy as possible instead of as difficult as possible? Dream on, you obviously never deal with them.

They make decisions that l or 'people' don't like allnthe time, that are wrong and take a shitload of your time away from you having to appeal, do their work for them to prove them they are wrong before they finally say sorry and admit you were right all along. They don't care cause they get paid their salaries anyway but the business owner takes the damage as for us time = money.

Funny that even on a business forum you get people this gullible and acting smart.

That is a fairly extreme view, which you are entitled to hold. However please be aware that contributors are expected to treat each other with respect.

 

[David Griffiths]

That is a fairly extreme view, which you are entitled to hold. However please be aware that contributors are expected to treat each other with respect.

He's already suggested that I have never dealt with HMRC, which is complete nonsense, and then of "being gullible and acting smart." I don't bother to reply to people like that but he seems to want to insult everybody who doesn't agree with his view.

 

[FreddyG]

I will be using the same premises and some of the same equipment, but also some separate equipment.

Ouch! That smells all wrong! Same premises? Same equipment? Same product? It smells like the same business!

I have three businesses, one VAT registered the other two are not, but there is no way on Planet Earth for one to use the resources of the others. It would be physically impossible. I would strongly suggest running that scenario past a really respected and powerful accountancy partnership: the sort that is going to be respected by HMRC as being squeaky clean.

 

[Vatkinguk]

Thanks, but I think we'll stick with the actual accountants on this thread...

We respect your decision. The offer is closed.

 

[JEREMY HAWKE]

Thanks, but I think we'll stick with the actual accountants on this thread...

No No They are the VAT kings what ever the F££k the that is

and they guarantee you back 50% without even looking at your firm
This year the VAT kings
Next year the The VAT inspection kings

 

[Vatkinguk]

No No They are the VAT kings what ever the F££k the that is

and they guarantee you back 50% without even looking at your firm
This year the VAT kings
Next year the The VAT inspection kings

We note your comments. Our model is by far the best out there. That being said, we are not a very old and established company, yet we are currently representing a professional sports club in the High Court against HMRC and, we are on the verge of winning.
We were never going to lose and we told them this from the start, but they proceeded and are now on the precipice of collapse and falling foul of the HC judges order(s).
When this case is won then you will lokk back at your comment and realise how absurd they are.

 

[Mark T Jones]

We note your comments. Our model is by far the best out there. That being said, we are not a very old and established company, yet we are currently representing a professional sports club in the High Court against HMRC and, we are on the verge of winning.
We were never going to lose and we told them this from the start, but they proceeded and are now on the precipice of collapse and falling foul of the HC judges order(s).
When this case is won then you will lokk back at your comment and realise how absurd they are.

There is only one thing more dodgy than your posts on here - that's your website.

Usually I'd just watch it self-destruct, but the tragedy here is that you are clearly targeting the uninformed and desperate- who may just be desperate enough to fall for it.

 

[FreddyG]

We note your comments. Our model is by far the best out there. That being said, we are not a very old and established company, yet we are currently representing a professional sports club in the High Court against HMRC and, we are on the verge of winning.
We were never going to lose and we told them this from the start, but they proceeded and are now on the precipice of collapse and falling foul of the HC judges order(s).
When this case is won then you will lokk back at your comment and realise how absurd they are.

I may be new here, but IMHO this is a business forum and a certain level-headedness is what makes people respect one another in business.

This is particularly true when it comes to choosing an accountant. We have been using two accountancy practices for 25 and 40 years respectively and both began as one or two-man part-time operations, one working from his dining table in the evenings. Both are now large international accountancy partnerships. I have never seen either one of them or any of the partners, senior or junior, make any comment that could be an indicator of immodesty.

 

[Vatkinguk]

There is only one thing more dodgy than your posts on here - that's your website.

Usually I'd just watch it self-destruct, but the tragedy here is that you are clearly targeting the uninformed and desperate- who may just be desperate enough to fall for it.

The website is just a hub.
It operates as a minimal centre of data collection so that any infiltration will not compromise any signed up users data as there wont be any, hence the use of whatsapp and the (up till now at least) encrypted service.
As for desperate and uninformed being “targeted”
You couldnt have been more on point, we do indeed SPECIFICALLY oursue these cases, but when we know that these poor souls are indeed desperate (and we saw this all day in the High Court) then we help them for free.

I may be new here, but IMHO this is a business forum and a certain level-headedness is what makes people respect one another in business.

This is particularly true when it comes to choosing an accountant. We have been using two accountancy practices for 25 and 40 years respectively and both began as one or two-man part-time operations, one working from his dining table in the evenings. Both are now large international accountancy partnerships. I have never seen either one of them or any of the partners, senior or junior, make any comment that could be an indicator of immodesty.

we are not accountants, anyone who would gauge the abilities of anyone else on their own view of anothers “immodesty” is indeed, entitled to that opinion.
However, from our perspective, when we watch how HMRC behave with their aggressive approach, inability to engage constructively, listen to our warnings and proceed regardless of their position so weak its embarassing, then the immodesty displayed by them is far more severe.
To that end, every cloud has a silver lining and our subsequent claim in response to their antics will level the playing field, once we have cut their grass.
Immodesty!
BAH Humbug!

 

[FreddyG]

Oh dear! I seem to have joined Mumsnet by mistake. I only joined two days ago and already toys are flying out of the pram and in all directions!

 

[Vatkinguk]

Your comment has been noted and reported.

 

[Mark T Jones]

The website is just a hub.
It operates as a minimal centre of data collection so that any infiltration will not compromise any signed up users data as there wont be any, hence the use of whatsapp and the (up till now at least) encrypted service.
As for desperate and uninformed being “targeted”
You couldnt have been more on point, we do indeed SPECIFICALLY oursue these cases, but when we know that these poor souls are indeed desperate (and we saw this all day in the High Court) then we help them for free.

we are not accountants, anyone who would gauge the abilities of anyone else on their own view of anothers “immodesty” is indeed, entitled to that opinion.
However, from our perspective, when we watch how HMRC behave with their aggressive approach, inability to engage constructively, listen to our warnings and proceed regardless of their position so weak its embarassing, then the immodesty displayed by them is far more severe.
To that end, every cloud has a silver lining and our subsequent claim in response to their antics will level the playing field, once we have cut their grass.
Immodesty!
BAH Humbug!

In common parlance, data harvesting.

The fact is that only the gullible or desperate will be fooled.

If you want to be taken seriously, then I'd suggest you try to prevent yourself as professional

Stop spamming
Show legally required company details
Moderate/qualify your absurd claims
Provide credentials, accreditations and case studies

 

[FreddyG]

I forwarded this thread to our admin office where some parts were read out loud and caused considerable hilarity!

 

[Vatkinguk]

In common parlance, data harvesting.

The fact is that only the gullible or desperate will be fooled.

If you want to be taken seriously, then I'd suggest you try to prevent yourself as professional

Stop spamming
Show legally required company details
Moderate/qualify your absurd claims
Provide credentials, accreditations and case studies

Aye, you will see.
Mark my words.

 

[Mark T Jones]

Aye, you will see.
Mark my words.

OK, you've definitely lost me there.

Best of luck with your spammy nonsense

 

[JEREMY HAWKE]

I have to give credit to this poster
Believe in the company and tremendous self belief.

An average solicitor could win these cases and they do

It fecking funny though!

 

[Vatkinguk]

I have to give credit to this poster
Believe in the company and tremendous self belief.

An average solicitor could win these cases and they do

It fecking funny though!

Really!

Y’know its a real pity that yhose who should know better dont know enough.

The Bills of Exchange Act 1882 Sect. 3.1

Now, if you dismiss this and scoff at this then you deserve to be where you are.

However ifvyou are any good you will read yhis very very carefuly.
If your tiny birdshit mind can get past itself and dawn breaks then you will sign up to my website and enjoy your life from ghat moment on.
Either way, you hav our blessing.
So. Dont forget now 3.1
Here endeth the lesson.

 

[Mark T Jones]

I have to give credit to this poster
Believe in the company and tremendous self belief.

An average solicitor could win these cases and they do

It fecking funny though!

All good forum fun, as long as nobody falls for it

Though no professional so would offer guarantees of success

 

[JEREMY HAWKE]

Really!

Y’know its a real pity that yhose who should know better dont know enough.

The Bills of Exchange Act 1882 Sect. 3.1

Now, if you dismiss this and scoff at this then you deserve to be where you are.

However ifvyou are any good you will read yhis very very carefuly.
If your tiny birdshit mind can get past itself and dawn breaks then you will sign up to my website and enjoy your life from ghat moment on.
Either way, you hav our blessing.
So. Dont forget now 3.1
Here endeth the lesson.

HMRC v Singh
In Leeds

Resulted in a sizable win for Singh being represented by a newly qualified Solicitor

Part of the compensation claim awarded to Mr Singn and his representatives were legal cost at Central London rates and not the smaller legal cost claimed by Mr Singhs team

 

[FreddyG]

Break out the popcorn! This place is seriously entertaining. I am so glad I joined!

If your tiny birdshit mind can get past itself and dawn breaks then you will sign up to my website and enjoy your life from ghat moment on.

Comedy Central, right there!

Some enterprising person with a film production company should be making a sitcom about this bloke!