VAT on accommodation

[Polly]

Hi, hope someone can enlighten me...

I have a serviced apartment business trading as a Limited Company and have just completed my first year of trading and stayed under the VAT threshold. I have recently taken on an additional apartment and anticipate heading towards the threshold quick quickly.

I understand (just by hear-say from other providers) that the following applies to serviced accommodation, but cannot find any official information on this... any ideas:-

17.5% for the first 28 days then 3.5% thereafter

Is it possible to operate more than one Company to avoid VAT Registration or is this frowned upon or not legal?

Polly

 

[Simonhatfield]

Hi Polly

I am not an expert, but the little I know about VAT is the answer in short is no.

The two business' would be essentially the same and as such the VAT man would view them as one.

Best to speak to an accountant really who will be able to clarify based on your exact position what you can and can't do, there are plenty on here...

Hope this helps...

Simon

 

[Kent Accountant]

You need to look at leaflet 709/3 and speak to your accountant. Your accountant should also be able to explain to you the rules on disaggregation where a trader tries to separate two similar VAT supplies to avoid registration

 

[Jaydee]

Polly, yes after a long-stay guest has been with you for 28 days, you only charge VAT on 20% of your accommodation income - and as 17.5% of 20% = 3.5% then another way of looking at this is as if you are only charging 3.5% VAT.

This rule only applies to the accommodation element - not food etc

 

[Kent Accountant]

Technically the 20% is a minimum. It could be more under certain circumstances

 

[Polly]

Thanks for all you advice - much appreciated. Particularly thanks for the link to the VAT website page - I couldnt find anything on it when I searched.

Thanks

Polly

 

[TaxesClear Ltd]

Hi Polly

It is not possible to set up more than 1 company to avoid VAT registration.

Compulsory registration is required within 30 days of exceeding threshold which presently is £64K pa. Failure to register in time incurs a penalty.

There are schemes available for small businesses to reduce VAT rate, such as flat rate VAT etc.


Hope this helps

Dennis

 

[PSA]

Hi Polly

It is not possible to set up more than 1 company to avoid VAT registration.

Compulsory registration is required within 30 days of exceeding threshold which presently is £64K pa. Failure to register in time incurs a penalty.

There are schemes available for small businesses to reduce VAT rate, such as flat rate VAT etc.


Hope this helps

Dennis

Hi, does that apply if it's separate legal entities such as partnerships with different partners?

Cheers,
David

 

[Kent Accountant]

Dennis's answer was correct but only so far as it went. If the reason is solely to avoid/evade VAT it doesn't work. However if the two businesses are unconnected it may be possible for the turnover not to be aggregated for VAT. You would need to consult an accountant