I have just taken on a Ltd Company that has been trading for 18 months, below the VAT threshold. The directors have, in the past 3 months, set up 2 other Ltd Companies (similar names, eg, ABC Ltd, ABC (Wales) Ltd and ABC (England) Ltd ) in 2 other towns in the region. All 3 companies are high street shops that sell the same type of product. The directors believe that since none of the businesses are above the VAT threshold, there is no need to register for VAT. However, I am concerned that HMRC may well treat these companies as one entity for the purpose of VAT. This is the first time I have had to deal with this situation, so any advice/guidance would be greatly appreciated.
Paragraphs 5 & 6 seem relevant as the businesses are under common management, and one person has controlling influence on all the businesses.
HMRC will not automatically assume an artificial separation but will look for the intent behind the separation, which from what you have described is to avoid VAT registration
Based on the description, I take the view that the client is at risk of HMRC action under the disaggregation provisions.
If the shops are selling goods, then there would be input tax to claim if the business were to register for VAT. I wonder if the cost of registering would be less than the risk of not doing so?
