I have a client who's business is going from strength to strength. Problem for her is she has domestic and commercial clients, one of which wont mind when she hits VAT threshold and has to register, and the other WILL!!! (either that or she will have to take a hit of 20% per domestic client, which she in no way wants to do).
NOW, my question is IF she were to split the business into two, each one servicing their respective clients, She can use VAT on commercial and not on domestic.... yes? :/ As it is the business that will be registered not 'her'.
And if it REALLY takes off for her and she has to go limited could she use the LTD company as the umbrella and then have the two businesses under it?? Or go Ltd with commercial and stay sole with Domestic??
Cant have 2 sole trader businesses under her name. As HMRC will just treat them as one and say should be VAT registered.
If goes limited then had holding company and 2 sub companies then HMRC will treat it as artificial separation and tax as one.
Could possibly have ltd company for VAT business and sole trader for nonVAT business. This would be the only option that would probably work. Though would need to be totally separate business ie separate books, separate insurance cover, etc. As would need to justify reason for splitting out other than just to avoid VAT on the domestic work.
I think you have to be very careful. It is clear that the only reason for separating the businesses is to avoid/evade vat and this would fall foul of HMRC disaggregation rules.
Try selling the client on the idea that they will be able to reclaim VAT which will slightly offset the hit that they are going to take on the domestic client.
kind regards,
Shaun.
__________________
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.
What type of business is it Gary? There may be a compromise, for example if it is domestic and commercial cleaning, your client could chose to go on Flat Rate Scheme and pay over 12% (11%) in first year...
Rob, your guess is quite right... it is a cleaning business, and the flat rat scheme may well be the answer...
Will have to see if HMRC will let us, here goes! ;)
