Setting up a second business, same products?

[dafcjim]

Hello, looking for some advice on this one if I can please...

I am looking at setting up a sister company (my first one is six years old, vat registered etc).

I'm selling items online via sale sites and instead of having to pay vat on my first business, looking to sell wholesale to my sister company which is not vat registered.

Mainly as I can not reclaim vat on these items being they are second hand and don't apply to the global scheme as well as selling overstock etc.

This is mainly so I am not making a Loss on these items, but also there will be other wholesale items that my first business does not sell.

I just want to make sure this is OK to do, will it need to be a different trading address or can it be the same?

Thanks
James

 

[DontAsk]

Have aread of https://www.gov.uk/hmrc-internal-manuals/vat-single-entity-and-disaggregation-manual

 

[Newchodge]

I would suggest that if you are doing this in an attempt to avoid paying VAT it is, by definition, against the VAT rules.

 

[WaveJumper]

The link above is the one to read, but sounds like artificial separation to me

 

[Mark T Jones]

It's pretty much exactly what the artificial separation rules are set up to prevent

 

[Tables Force]

I just want to make sure this is OK to do?

NO, it's not ok to do this.

 

[FreddyG]

I just want to make sure this is OK to do,

You are not even in the ballpark of OK. This kind of setup is a direct contravention of the Fraud Act of 2006. HMRC will charge all VAT retrospectively, bring criminal charges, seek to disqualify you from having or running a business for up to 15 years, and may even press for a prison sentence.

HMRC runs programmes that automatically flag-up instances of the same addresses, same directors, similar names and a few other characteristics to catch cases of artificial separation. Please do not even dream of doing this!

 

[MyAccountantOnline]

Have aread of https://www.gov.uk/hmrc-internal-manuals/vat-single-entity-and-disaggregation-manual

Good advice.

Do also discuss it with your accountant.

Based on what you've said it's artificial separation to evade VAT but we dont have all the relevant facts.