A builder has asked me if it is legitimate to form, for example 3 companies, and only register one for VAT.
Is it then legitimate for him to win a contract, and then depending on it's size charge VAT for the larger jobs and put them through the VAT registered company, or do a small job and not charge VAT, and put it through the non-registerd VAT companies.
For example, put a bathroom renovation through the company without VAT, and do a build houses through the company with VAT.
It's VAT avoidance and they'll do a lot more than frown!
There are circumstances where the businesses are in no way related that you can have multiple businesses some VAT registered and some not. However, there needs to be clear seperation of the businesses even though they are under common control.
In this instance it's simply a measure to win business where VAT is pricing him out of the market.
You also see this where businesses try to split the business into two so that neither breaches the VAT threshold but the reality is (tand the way that HMRC would look at it is) that it's really just one busines and they want their VAT whether or not you charged it.
Sorry, you need to tell him that his idea's a complete non starter.
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Agree with Shaun if they were distinct businesses then could possiblly do it but given they are under common control and the only point of establishing them is to put VAT sales through one and non VAT sales through another as a way to avoid having to add VAT to certain sales (assume private customers who cant reclaim the VAT and therefore effectively have a bil 20%) then HMRC would just see this as disintegration and treat the two business as one.
