two companies - VAT reasons

[Twolfe]

Hi

I work as a sole trader, soon to be VAT registered.
I also have another company, also sole trader, it's not doing anything at the moment, I just have a registered office address, domain name, phone number etc.

80% of my clients are VAT registered.

What I'd like to know is, can I invoice my clients that are VAT registered through my main business but my non-VAT registered clients though my other business which won't be VAT registered?

Thanks

 

[graemepirie]

As far as I know, if you're a sole trader then it's you that's registered, not the business. So anything you do will attract VAT.

 

[Mattonella Tile Studio]

Even if you weren't a sole trader you would be pushed to justify that you hadn't artificially separated the businesses. One of the things HMRC consider is whether you are supplying VAT registered customers through VAT registered business, and non VAT through non registered.

 

[elaine@cheapaccounting]

Hi

I work as a sole trader, soon to be VAT registered.
I also have another company, also sole trader, it's not doing anything at the moment, I just have a registered office address, domain name, phone number etc.

80% of my clients are VAT registered.

What I'd like to know is, can I invoice my clients that are VAT registered through my main business but my non-VAT registered clients though my other business which won't be VAT registered?

Thanks

Sorry can you clarify something:


Are both businesses sole trader? You said one was a company also a sole trader - confused? :|

 

[Twolfe]

Thanks for the quick replies.

Yes, both businesses are sole trader.

 

[elaine@cheapaccounting]

then you are the one who registers for vat and sales from both businesses which need to have vat added to them if they are vatable supplies.

 

[MikeH]

I stand to be corrected but it sounds like you are referring to sole trader businesses, not limited companies. Any way you may need to look into disaggregation.

Read this
And this

Hope that helps.

 

[Twolfe]

Thanks again for the info. This has made me a little unsure of whether I should register for VAT.

I am within the threshold at the moment, the number one reason for registering was for increased credibility but it this will effects my non-VAT customers as well as making extra work for me in terms of book keeping I may have to reconsider.

Has anyone got any feedback on this? It's a graphic design company, home run, turning over around £55,000pa

 

[elaine@cheapaccounting]

Now you have confused me - is this the turnover for one or both businesses?

 

[elaine@cheapaccounting]

From HMRC web site:

If you are in business, you must register for VAT if your turnover for the previous 12 months is above £67,000. This is known as the VAT registration threshold. It changes regularly, so you should regularly check your turnover against the current threshold.
You must also register for VAT if:

• you think your turnover may go over the threshold in the next 30 days
• you take over a VAT registered business as a going concern
• you are selling goods into the UK from another country in the EU and exceed the 'distance selling threshold' - see the section below on registration and international trading
• you acquire goods from other countries in the EU totalling more than £67,000 in a year - see the section below on registration and international trading

And

Do not avoid registering for VAT by artificially separating business activities

If you run more than one business the sales in all those businesses must normally be added together to determine whether or not you must register for VAT.
However, if you are involved in the running of several separate legal entities, you may not need to combine the sales of those businesses to find whether you need to be VAT registered.
If HMRC decides that you artificially separate one business into smaller parts to avoid registering for VAT, it can decide that the entire business is a single taxable person and therefore must be registered for VAT.
Situations that HMRC may consider a single taxable person for VAT purposes include:

• Separate entities selling to registered and unregistered customers. The VAT registered business sells only to VAT registered customers and the business not registered for VAT sells to customers who are not registered for VAT.
• The same equipment or premises being used by different entities on a regular basis. The premises and/or equipment are owned by one of the parties, who charges rent to the others. This situation may occur in businesses such as launderettes and takeaway food operations.
• Splitting up what is usually a single sale. This is common in industries such the bed and breakfast trade, where one business supplies the bed and another the breakfast.

If you deliberately avoid registering for VAT, you may be liable to a penalty. For serious offences, the matter will be investigated and you may be prosecuted.



All here, have a read:



http://www.hmrc.gov.uk/vat/reg-how-to.htm



And BTW the 12 months is a rolling 12 months not your financial year or April to April.

 

[Twolfe]

Now you have confused me - is this the turnover for one or both businesses?

Sorry if I haven't made it very clear.

I have just one active business as a graphic design consultancy.

The other company I mentioned isn't trading, although I have registered the name and have a registered address, I was going to use this second company for work that I outsource, but so far haven't needed to outsource anything.

I have researched the advantages and disadvantages of registering for VAT, but I still can't make my mind up (as I said I'm under the threshold).

If anyone else here has been in a similar situation of wondering whether to register for VAT for increasing your credibility, I'd be interested to hear your advice.

 

[elaine@cheapaccounting]

OK I see now. Thanks

You will need to combine the 2 for vat registration purposes as IMO these business could be deemed an artificial split.

I wrote this about registering in a previous post:

The issue at the point of registration is can you pass the VAT onto your customers?


If your customers are vat registered then this is simply a matter of informing them that you are now vat registered, adding the vat to their sales and of course showing this on their invoice. Your customer will be able to claim the vat back so the net effect of this is nil.


If your customers are not vat registered then they will not be able to claim the vat back and the vat has to be absorbed either by them through a price increase or by you through a reduction in your profit.


The vat will also need to be shown on the invoice but as they cannot claim it back effectively they have to pay the increased price.


This could mean that your price is no longer competitive in the market and you may have to absorb some / all of the VAT into your profit margin.


http://www.ukbusinessforums.co.uk/forums/showthread.php?t=81610