Hi I hope someone can help me. I have a client who is a sole trader supplying horse livery services (VAT exempt right over land HMRC Reference:Notice 701/15 10.3 ) and who also buys and sells horses (kept in a separate yard). The livery income and horse sales income are both below the VAT theshold but combined they are over. I am unclear as to whether she should register for VAT or apply for an exemption or do nothing. My take on it is that since each business is below VAT threshold and one is VAT exempt she does not have to register even though she is a single taxable entity. Any advice gratefully accepted
If both businesses are not inter-dependent and there is eveidence that not split (from what you are saying there is, but I would add they both should also operate seperate bank accounts) to avoid regsitering for VAT, should be ok.
I not certain you're right bud, assuming that we are talking about "two" businesses run by one sole trader then it's one economic entity. The op doesn't mention e.g that one is a ltd co.
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
Good spot "sole trader " Thats true cause its you as the sole trader, who is registered for VAT, not the trading names.
Hi Jo. Best to make them both limited companies, set up two seperate business accounts and have paperwork in order to prove both businesses are not inter-dependent, ie: minimal inter-company activity.
Many tx for your replies Dalbir and Tony. I understand about the sole trader " single taxable entity" bit even though she is running two businesses. My quandary is that the livery business is VAT exempt according to the HMRC VAT guidance notes 701/15 section 10.2&3:- "If you allow an owner exclusive use of stabling (that is you allocate all or an identifiable part of the stabling for the sole use of his animals) this is either an exempt supply of a right over land or standard-rated if you exercise the option to tax see Notice 742 Land and property" She is not using the option to tax so the livery business is an exempt supply according to my interpretation. The horse sales business is VATable at standard rate but is below the VAT threshold. My understanding is that you must register for VAT when the turnover of VAT taxable goods and services supplied is more than £73000 but the livery business is not VAT taxable as it is exempt, and the horse sales turnover is less than £73000. So my take is that she doesnt have to register for VAT even though she is a sole trader and not ltd co. or ptnrship and her total sales (VAT taxable and VAT exempt) are greater than £73000. I cant see whats wrong with this according to HMRC guidelines but I dont want to land her with a big retrospective bill fron the VAT man.
This is an extract from the guidance, which clearly states exempt is not relevant
Calculating your VAT taxable turnover
Your VAT taxable turnover includes the value of any goods or services you supply within the UK, unless they are exempt from VAT. This means you must also include any supplies you make that would be zero-rated for VAT.
When calculating your VAT taxable turnover you will of course include your sales, but for VAT purposes, you should also include the value of certain other types of supply:
goods or services that you exchange or barter - see the link below
supplies of certain services that you receive from suppliers in other countries that you have to 'reverse charge' - see the links below
where you use your own labour to construct certain building or civil engineering works for your own business use with an open market value of £100,000 or more - see the link below
You must not attempt to avoid registration by artificially separating business activities to reduce your turnover. See the section in this guide on artificial separation.
HTH
Bill
Edit: Just realised I have just repeated Tony's link
-- Edited by Wella on Friday 22nd of July 2011 11:50:27 AM
