Flat Rate or standard VAT?

[JustinP1]

Quick one chaps - but mainly for Eric I think!

Currently have a Ltd Co on the Flat Rate VAT scheme. We provide a particular service, and do a certain amount of manufacture for that service, thus the Flat Rate Scheme saves us a reasonable amount of cash and a lot of admin.

I'm looking at an opportunity which is essentially getting items manufactured in the Far East, importing them, and selling them in the UK.

The business will be run under a different name, and will be a totally different enterprise. As such, I would likely be setting up a new Ltd Co. We'd have a large VAT liability from day one, including VAT on the shipping and of course VAT through customs. As such, this second Ltd Co would be much better being VAT registered in the standard way.


Am I right in thinking I can own a company on the Flat Rate scheme and operate another separately on standard VAT? Are there any accounting pitfalls in doing this?

Thanks in advance...!

[Eric Mc]

You do need to be careful. HMRC can apply disaggregation rules when there are numerous trading entities being used, all working under separate VAT regimes. You would need to ensure that none of the trading activity of the new business had any commercial connections with the other.