VAT Clarification

[Porky]

Company A is a retailer selling 100% biscuits with a specific branding, doing ok. At VAT threshold and really does not want to be charging VAT because a) it would make product too expensive or b) if absorbed make it unviable. So just trades under the threshold.

Company B sells biscuits but these have a different branding and sells some other bits but bulk of sales 95% are the same biscuits just different brand.

Now I would say that's Tax avoidance, personally I couldn't care less, not my war but an interesting observation. Director mixes it up, adds wife and kids to Company B as directors.

Interested in views on this; in the grand scale of things it doesn't feel like some biggie, would HMRC really give a stuff, would they want to bother? My only thought was what happens when Company B gets to the the threshold does he start Company C lol and if government lower the threshold then his master plan is scuppered anyhow.

 

[Ziggy2024]

This falls under VAT disaggregation. Broadly speaking HMRC could view them as a single entity for VAT purposes. If there is a commercial reason for the split, not just to avoid VAT, then the companies could argue against this.

The question about HMRC caring, yes they will care but realistically unless the company is reported to them they may not ever pick up on it. If they did investigate (& win) it is likely that several years will have passed meaning the VAT due along with the interest and penalties becomes eye watering. This can then lead to business failure and HMRC don't get the money anyway!

 

[Paul Kelly ICHYB]

What type of biscuits are they? If plain, no VAT!

Looks like another business blinded by VAT - any business that claims 'the business will close' when they approach VAT is very poor at planning and has no real want to grow their business to something successful (and I know a lot of them exist!).