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PRO MemberPermalink Reply by Brian www.mibservices.co.uk on July 1, 2012 at 16:17

Chris, I looked into this too, to separate my domestic and commercial customers. My accountant advised me Mr Taxman would view this as a deliberate tax avoidance tactic and would come down hard on it. You could look at going ltd on both the companies, I think that MAY be legal, but I would check with HMRC first and foremost

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Permalink Reply by Richard King on July 1, 2012 at 16:41

My accountant said the same Chris.
It's a tough One we are a maintaince company and there was no way vat could be added to our bills so the choice was swallow vat our selfs or loose a staff member and one third of our customer base to keep us under vat limit. The latter was the cheaper option for us. :-(

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PRO MemberPermalink Reply by Nick @ NM Garden Services Ltd on July 1, 2012 at 16:47

I think that it would be difficult to do so unless you had two ltd companies and probably with a different director/secretary for each.

I work mostly with domestic customers and when I registered for VAT some years ago only one customer refused to pay it.

Nick.

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PRO MemberPermalink Reply by Gary RK on July 1, 2012 at 17:12

As a sole prop. running a business you can not do this. YOU are the business, details of ALL your income(s) must go on your SA100 forms (ie it asks for income from all sources). Any attempt to run mutliple business 'operated' by a single individual to avoid the VAT threshold would be seen as tax evasion.

It may be possible if a limited company, but if you are the sole director, HMRC would be looking to see how similar the businesses are ..and whether they should still be treated as one 'entity'.

VAT is almost impossible to avoid if your t/o is in excess of the threshold. Also, if you know you are likely to exceed it in a trading tax year you must register and not wait.

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PRO MemberPermalink Reply by Gary RK on July 1, 2012 at 18:02

Stuart, I'n not to up on family business tax... I know there were attempts to clarify this whole area some while ago which did not happen.

I think in reality, HMRC is aware of 'income shifting' by using these routes are thus will focus on any such arrangement. Both 'partners I guess would have to be 'operational' and not just a sleeping partner to satisfy HMRC.

If it could happen, you would need to produce independant accounts, have customer's invoiced and subsequent payments to the correct 'partner', two lots of PL insurance etc etc..

I think if the answer were simple, many would be using such  'opportunities'.....

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PRO MemberPermalink Reply by Graeme @ BGS on July 1, 2012 at 19:37

Chris,

Anything is possible, just ask Jimmy Carr's accountant.

Yes you can do it - you need balls of steel and a very understanding accountant.

Have a peek at :

http://www.landscapejuicenetwork.com/group/keyobjectivesprivategrou...

and

http://www.landscapejuicenetwork.com/group/keyobjectivesprivategrou...

However, my gut feeling is that the HMRC will be chasing after all the easy targets so you need to weight up the pros and cons

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PRO MemberPermalink Reply by Chris Auld on July 1, 2012 at 20:41

Thanks for the replies guys, sounds like a lot of hassle, maybe i'll just have to live with it.

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PRO MemberPermalink Reply by Chris Auld on July 1, 2012 at 20:41

Thanks Graeme, very informative stuff.

Graeme @ BGS said:

Chris,

Anything is possible, just ask Jimmy Carr's accountant.

Yes you can do it - you need balls of steel and a very understanding accountant.

Have a peek at :

http://www.landscapejuicenetwork.com/group/keyobjectivesprivategrou...

and

http://www.landscapejuicenetwork.com/group/keyobjectivesprivategrou...

However, my gut feeling is that the HMRC will be chasing after all the easy targets so you need to weight up the pros and cons

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Permalink Reply by Lawn lover on July 2, 2012 at 7:55

Chris, I know a lawn franchise were the wife sells the franchise.s as her business and her husband does lawn treatments as his business. 

On another note I also know a successful business man (owns his own helicopter) that as none VAT company's) as well as VAT registered company's.

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Permalink Reply by Tim Wettone on July 2, 2012 at 11:04

Have a look at section 13 of this link to HMRC's rules - http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebAp...

Many people stifle the growth of their business by trying to stay under the VAT threshold, whereas it may make better economic sense to accept the imposition of VAT and work harder at developing the business into a more profitable outfit.

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Permalink Reply by Colin Hunt on July 2, 2012 at 12:58

We thought of splitting the company 20 years ago, but were advised against it by our accountant because of the 'same owners, same employees, same tools rules etc'.  We are Gardeners, not jugglers!

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Permalink Reply by Svend Rumbold on July 2, 2012 at 17:15

Simply splitting the business to avoid VAT is not a good idea.  However, there are a couple of things to think about:

- If you do a lot of landscaping, you can reduce your turnover by asking clients to order/buy certain materials themselves. Obviously this won't suit everyone, but many people will be quite happy to open an account with a local builders merchant and buy sand, aggregate, paving etc if you give them a "shopping list". I've worked with builders who do this very successfully.

- You could split the business and make at least one part a "partnership" or "Ltd Co" with different owner-directors (a family member or trusted long-term member of staff who works in only that part of the business,  say) - that probably would be OK with HMRC, I think.  Obviously you would be sacrificing some control and ownership, though (but that's why it would be OK!).

On the whole, though, I agree with Tim Wettone that you may be better just trying to grow even more despite the VAT costs.

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