Registration for VAT - time taken

[brian.mc]

They actually have a related business rule. So, say you have a business with T/O of £40,000, and your wife has one totally separate, with different premises etc with T/O of £30,000, VATMan will call them related businesses and add the combined turnovers to get £70,000 and say both will have to register. Not fair but then what is?

[TraceyHand]

Brian,
Where have you got that information from because none of our accountants have mentioned this to us and we've been running 2 businesses (one each) for several years now?

[completerookie]

not that clear cut
take a look at http://www.taxationweb.co.uk/articles/article.php?id=88
some cases are won by the vat/tax man, others by the businesses

and when the tax/vat man wins, then he decides to go back six years and you end up with the bill.

[TraceyHand]

interesting article. Thanks for that, Kevin.

Not sure my H and I need to worry though!
He has a bike shop and I run a maternity retail business from rented office space elsewhere!
They'd be hard pushed to use the fact that we just happen to be married to make me liable to register for VAT
LOL

[chris ashdown]

nah, can't get away with it, got to register whether its in my interest or not.

in actual fact, because I cannot offer "vat free sales", I may appear to be 17.5% more expensive than competitors.

Sorry I dont understand this

You are not registered for VAT so you can charge whatever you like for your products. What you cannot do is Say VAT Free or apply zero rate on the invoice

You can claim back the vat you have been charged by your suppliers over the past few months when you fill in your first vat form

Therefore if you would charge £117.50 inc vat for a product when you are registered. You can now happily offer the goods at either £117.50 or £100 or whatever you want but cannot sell at £117.50 inc vat or £100 plus vat

If you are selling to trade you may well have to charge the £100 as they expect to be able to recover the vat

If you are mainly selling to the public, you can up your price to £117.50 as they would have to pay that anyway so you dip in untill you get your registration


Might well be wrong but sure someone will tell me soon if its rubbish (lee)

[brian.mc]

Brian,
Where have you got that information from because none of our accountants have mentioned this to us and we've been running 2 businesses (one each) for several years now?

Every time VATMan sends out a Quarterly VAT Return for completion, he includes VAT Notes with it, informing us of changes to VAT Regs, and also any cases where VAT disputes have been decided by the courts. It was in one of these, several years ago-can't remember exactly when.

I've looked at the link in Kevin's post, and I think you're probably ok in your circumstances, as the 2 businesses are totally different. But you can see how easy it can be to get caught up in this trap.

[Stereo Steve]

It's a grey area and accountants will advise you differently. Essentially, if they decide to investigate, it will be a judgement made by them. Factors might include the nature of the business (are they both retail etc). Also, who benefits from the business and are there any cross-economies of scale?

I know of a test case where a property developer had seperate ltd companies for development, purchasing, rental, refurb and maintenence (spelling?). He gone stung big time as they decided it was all one business.

Best you can do is seek advice and go with it. I would have thought a husband and wife running different businesses would be fine.

If you are doing it to save tax, they will probably see through it though.

As far as I can see, more experienced accountants will advise you to be very careful in this area.

[leehack]

Might well be wrong but sure someone will tell me soon if its rubbish (lee)

I've only ever pulled up one of your statements before, you speak pretty much from the book on most things and almost always 100% correct AFAIK. You pull me up more than i do you, but then i've always needed moderating.

As you say, if you are not vat registered, there should be no mention of vat on anything to do with your business at all. What you charge has sod all to do with the vatman until you are registered. What is a good idea is to have your prices now setup as they will be, once you are vat registered. So if something is £100 now, it will be £117.50 with vat, so charge £117.50 now and pocket the extra (pretend vat element) until you have to pay it. Once you have to pay it, then you are just back to the same profit as you have now.

If putting your prices up, is going to crucify your business and send it onto the park bench with newspaper quilts, then i would suggest getting out now before the laborious vat registration starts. Pointless delaying the inevitable IMO, although i can understand the need to resist for as long as possible.

[chris ashdown]

I know of a test case where a property developer had seperate ltd companies for development, purchasing, rental, refurb and maintenence (spelling?). He gone stung big time as they decided it was all one business.

.

I heard of a simular one where the owner brought major equipment iin his own company and then hired it out at a profit to another of his companies so that if the company renting whent bottoms up he still had the equipment. vat said they were one and the same

[completerookie]

I have a realy good friend that has just gone through a liquidation of his company - not that unusual until you get to the bit where

• his own pension company owned the premises he worked from
• the pension company didn't get thier rent
• so his pension company forced the liquidation for non-payment
• in order to get payment, the pension co. had to send the bailiffs in(to his own company) demanding goods

it got really interesting when a the bailiffs arrived asking to see "Mr X" - and when challenged about who is bringing this action, the bailiff replied "Mr X - thats strange, thats your name - never came across that coincidence before !"

Mr X told the bailiffs that he can't have anything because the machinery in the premises was owned by the MD ( strangely enough called Mr X)

exit stage left with bailiff scratching his head wondering just how many more coincidences could possible happen

net result - the company told him to sod off so he went through with the enforced liquidation of his own company then had the cheek to pay his missus and himself redundancy because the company went belly up.

took him five years of planning to get all his ducks lined up in a row.

twist in the tail, one of the ducks lined up was a new phoenix company who then took over the assets and premises of the liquidated company - all customers were informed at all times (about a pension company forcing them) and 90% went on to trade with the new company.

only one bad bit, the bailiffs wanted cash to serve notice and he had to pay that out of his own pocket

This all happened over nov, dec last year and he's now turning over more than he ever did with the same company.