Hypothetical Business Rates Question

[13 DJP]

So, hypothetically:

MD of Ltd company in Unit A qualifying for small Business Rates, opens second Ltd company in Unit B which should also qualify for small business rates.

Both companies totally separate entities, but loosely tied.

Any problems, in doing this or do the council say "no, you`re MD of both companies, therefore we put both together and you no longer qualify for small business rates.

Yes we have tried ringing and asking the council and they genuinely do not have a clue as to what day of the week it is, let alone be able to answer the above question. Their actual official advice is, they cannot say unless we have already done it, so do it, they will then come down and decide!!!!

[KevinCamaroSS]

No problem provided they are two different companies, they are separate legal entities.

[Chrisgr31]

I am aware that some Councils will look at the Directors of companies and if they are common may argue they are not separate entities.

I have not looked in to the small business exemption in great detail as I dont have any clients that qualify.

[KevinCamaroSS]

Chrisgr31 said:

I am aware that some Councils will look at the Directors of companies and if they are common may argue they are not separate entities.

I have not looked in to the small business exemption in great detail as I dont have any clients that qualify.

A limited company is a separate legal entity to the directors, therefore two limited companies are two separate legal entities, no ifs, no buts. Any council trying to argue otherwise has no legal basis to their argument and would lose in any court of law.

[Toaster Pilot]

KevinCamaroSS said:

Chrisgr31 said:

I am aware that some Councils will look at the Directors of companies and if they are common may argue they are not separate entities.

I have not looked in to the small business exemption in great detail as I dont have any clients that qualify.

A limited company is a separate legal entity to the directors, therefore two limited companies are two separate legal entities, no ifs, no buts. Any council trying to argue otherwise has no legal basis to their argument and would lose in any court of law.

Don't HMRC lump together companies with common control for corp tax thresholds etc?

Possibly where this logic comes from...

[Eric Mc]

Indeed HMRC does, although it's not so important now that Corporation Tax is the same no matter how big or small a company is.

HMRC can also be wary of separate companies sharing similar directors when it comes to VAT matters.

[13 DJP]

Cheers for the replies chaps.

Definitely no tax or Vat issues going on, nor any dodginess.

Just an opportunity to acquire an additional business loosely related and re-locate it next door.

But the rates issue would be a make or break decision and can't just chance it as the council are suggesting

[anonymous-user]

KevinCamaroSS said:

A limited company is a separate legal entity to the directors, therefore two limited companies are two separate legal entities, no ifs, no buts. Any council trying to argue otherwise has no legal basis to their argument and would lose in any court of law.

Not sure I share your certainty here.

On the principle (ie. not directed at the OP), I would expect there to be room, were the facts to support it, for a local authority to argue what is actually one business, had effectively been split into two to take advantage of small business relief where it's not entitled to.

As has been mentioned above, HMRC are entitled to take similar views on tax matters under their remit. Lifting the corporate veil is another example where courts can effectively move aside the status and protections of limited companies as legal entities.

Overall courts tend to decipher what things are in reality, as opposed to what they may be presented as by one party or the other.

The OP ought to take some paid, insured advice from a rates specialist.

[anonymous-user]

KevinCamaroSS said:

A limited company is a separate legal entity to the directors, therefore two limited companies are two separate legal entities, no ifs, no buts. Any council trying to argue otherwise has no legal basis to their argument and would lose in any court of law.

Not sure I share your certainty here.

On the principle (ie. not directed at the OP), I would expect there to be room, were the facts to support it, for a local authority to argue what is actually one business, had effectively been split into two to take advantage of small business relief where it's not entitled to.

As has been mentioned above, HMRC are entitled to take similar views on tax matters under their remit. Lifting the corporate veil is another example where courts can effectively move aside the status and protections of limited companies as legal entities.

Overall courts tend to decipher what things are in reality, as opposed to what they may be presented as by one party or the other.

The OP ought to take some paid, insured advice from a rates specialist.

[soxboy]

janesmith1950 said:

The OP ought to take some paid, insured advice from a rates specialist.

The problem is there isn't a definitive answer and the reply from the council is as about as clear as you will get. It very much depends on how relaxed otherwise the billing department at the local council are. If Company A is doing something totally different to Company B and it can be demonstrated that there is no link between the companies other than the directors then it shouldn't in theory be an issue, however if there is no difference to the 'man on the street' then it's a different matter.

[surveyor]

soxboy said:

janesmith1950 said:

The OP ought to take some paid, insured advice from a rates specialist.

The problem is there isn't a definitive answer and the reply from the council is as about as clear as you will get. It very much depends on how relaxed otherwise the billing department at the local council are. If Company A is doing something totally different to Company B and it can be demonstrated that there is no link between the companies other than the directors then it shouldn't in theory be an issue, however if there is no difference to the 'man on the street' then it's a different matter.

I find it hard to believe that there is no definitive answer here. There is enough legislation around rating to sink a battleship, and I would be very surprised if there is not some black and white (and possibly defective) anti-avoidance protection in the legislation. I'm almost interested enough to check - but that is a slippery slope...

[soxboy]

surveyor said:

soxboy said:

janesmith1950 said:

The OP ought to take some paid, insured advice from a rates specialist.

The problem is there isn't a definitive answer and the reply from the council is as about as clear as you will get. It very much depends on how relaxed otherwise the billing department at the local council are. If Company A is doing something totally different to Company B and it can be demonstrated that there is no link between the companies other than the directors then it shouldn't in theory be an issue, however if there is no difference to the 'man on the street' then it's a different matter.

I find it hard to believe that there is no definitive answer here. There is enough legislation around rating to sink a battleship, and I would be very surprised if there is not some black and white (and possibly defective) anti-avoidance protection in the legislation. I'm almost interested enough to check - but that is a slippery slope...

There is indeed more than enough legislation around rating to sink a battleship, however this issue relates to billing and the attitudes of the relevant billing authority. I stand to be corrected but I am not aware of any legislation (or case law as yet) where it has been established what the exact definitions and parameters are for a company to be defined as separate. I would be interested to know too.

[iguana]

I know a fella that wanted the unit next door to his for extra space, but the business rates issue would gave clobbered him, he did research & spoke to landlord & knocked through a doorway = now classed as 1 unit, council came & inspected & no probs as still under the exemption size.

[Chrisgr31]

soxboy said:

surveyor said:

soxboy said:

janesmith1950 said:

The OP ought to take some paid, insured advice from a rates specialist.

The problem is there isn't a definitive answer and the reply from the council is as about as clear as you will get. It very much depends on how relaxed otherwise the billing department at the local council are. If Company A is doing something totally different to Company B and it can be demonstrated that there is no link between the companies other than the directors then it shouldn't in theory be an issue, however if there is no difference to the 'man on the street' then it's a different matter.

I find it hard to believe that there is no definitive answer here. There is enough legislation around rating to sink a battleship, and I would be very surprised if there is not some black and white (and possibly defective) anti-avoidance protection in the legislation. I'm almost interested enough to check - but that is a slippery slope...

There is indeed more than enough legislation around rating to sink a battleship, however this issue relates to billing and the attitudes of the relevant billing authority. I stand to be corrected but I am not aware of any legislation (or case law as yet) where it has been established what the exact definitions and parameters are for a company to be defined as separate. I would be interested to know too.

Indeed there is lots and lots of rating legislation and case law, that hasnt prevent 2 cases being heard by the Supreme Court one of which turned over one of Dennings great decisions!

There's a reason I gave a wishy washy answer to the OP and that's because the answer is not clear. Cases on this might have been heard at magistrate court but that's not binding. They are unlikely to go further because of the cost.

Next time I see the experts in this field I will ask the question but I dont expect a clear answer. There is a lot of fraud around small business relief I understand.

[surveyor]

I’ve suddenly had to research this in the concept of a wholly owned subsidiary.

The legislation seems to have no anti avoidance language at all.

http://www.legislation.gov.uk/uksi/2012/148/made

[Chrisgr31]

surveyor said:

I’ve suddenly had to research this in the concept of a wholly owned subsidiary.

The legislation seems to have no anti avoidance language at all.

http://www.legislation.gov.uk/uksi/2012/148/made

Whats the definition of "ratepayer"?

[surveyor]

Yeah I spotted that... I suppose I should check it.

LGFA 1988

43.—(l) A person (the ratepayer) shall as regards a hereditament be subject to a non-domestic rate in respect of a chargeable financial year if the following conditions are fulfilled in respect of any day in the year— (a) on the day the ratepayer is in occupation of all or part of the hereditament, and (b) the hereditament is shown for the day in a local non-domestic rating list in force for the year. (2) In such a case the ratepayer shall be liable to pay an amount calculated by— (a) finding the chargeable amount for each chargeable day, and (b) aggregating the amounts found under paragraph (a) above. (3) A chargeable day is one which falls within the financial year and in respect of which the conditions mentioned in subsection (1) above are fulfilled. (4) Subject to subsection (5) below, the chargeable amount

Still no nasties. Surely am missing something.

Edited by surveyor on Tuesday 21st November 22:29