Can I have 2 Ltd companies, one Vat reg one Not ?

Can I have 2 Ltd companies, one Vat reg one Not ?

Author
Discussion

rswift

Original Poster:

1,179 posts

175 months

Wednesday 17th May 2017
quotequote all
As per the title.

I have a LTD company, and have been VAT registered for ages, due to the turnover being over the threshold. Most of my clients are corporate, or business so the VAT isn't an issue.

As part of the business, I am doing something related, but not identical, but mainly to non-VAT registered customers. It is project based, so unlikely to hit the threshold.

So can I simply start 2 companies, or is this viewed as tax avoidance, Is there any reason (aside from admin costs) I could't start a LTD company for a specific 2/3 month project. Then wind it up, and start again as when and if needed. ?

My main LTD company would carry on in parallel throughtout.


plasticpig

12,932 posts

225 months

Wednesday 17th May 2017
quotequote all
HMRC take a dim view of this sort of thing. If HMRC considers the companies are commonly controlled then HMRC will expect both companies to be VAT registered.


Eric Mc

121,990 posts

265 months

Wednesday 17th May 2017
quotequote all
They use the term "disaggregation" for this type of set up and they do not like it at all.


rswift

Original Poster:

1,179 posts

175 months

Wednesday 17th May 2017
quotequote all
I thought as much.....

Thank you for the clarification.

VEX

5,256 posts

246 months

Wednesday 17th May 2017
quotequote all
There is an electrician that I know that 'claims' to do this (but other things he's said dont stack up so why would this)

I challenged him about HMRC not liking it, and he said that they came to him about it, but his reply was, 'which would you prefer, us doing the work, my electricians on PAYE, so pay thier tax, all jobs done and documented, signed off, invoiced. Or us loosing the work because of VAT, and a not registered, non-VAT, non-certified, non-paye, non resident does it.'

Could be BS, could not, I'll leave you to make up your own mind.

As a side, could you not set up with an empoyee the non-VAT one and create it as a seperate enterty with different owner/directors? one for Eric I think and maybe privately.

V.

Eric Mc

121,990 posts

265 months

Thursday 18th May 2017
quotequote all
If the two companies had no connection whatsoever, then of course disaggregation would not apply. Merely putting someone else's name on the paperwork is not enough though.

Companies House now asks for full disclosure of Persons of Significant Control, so whether a person's name appears on the official forms or not is irrelevant.

jonamv8

3,146 posts

166 months

Thursday 18th May 2017
quotequote all
dodgy ground if the companies do similar things

Bristol spark

4,382 posts

183 months

Friday 19th May 2017
quotequote all
I enquired this with my accountant with having a vat registered company for commercial work, and a non registered company for domestic work.

I believe the issue was to do with the fact the vat registered company would own all the equipment, van etc.

If was 2 completely separate entities it may be possible.


However i have thought, can i have two non vat registered companies, one for domestic, one for commercial? To enable twice the turnover.

akirk

5,389 posts

114 months

Friday 19th May 2017
quotequote all
companies need to be more than just owned in common, they have to be linked in what they offer... there is no issue in one person owning two companies, one vat registered and one not, if they are totally different, e.g. a plumbing business and teaching the piano in the evenings... just because you own both and the plumbing business is vat registered doesn't require the piano teaching business to register for vat

LarJammer

2,237 posts

210 months

Friday 19th May 2017
quotequote all
My accountant told me it needs to be very clear they are seperate companies - different phone nos, bank accounts, websites or the vat man come knocking.

akirk

5,389 posts

114 months

Sunday 21st May 2017
quotequote all
LarJammer said:
My accountant told me it needs to be very clear they are seperate companies - different phone nos, bank accounts, websites or the vat man come knocking.
some differences yes (bank account and website would be obvious ones) but can have some things in common, e.g. location, and therefore potentially phone no. the more clarity there is on separation, the easier it is...

Edited by akirk on Tuesday 23 May 12:08

leemanning

557 posts

152 months

Tuesday 23rd May 2017
quotequote all
I don't know this, but could you own one and the wife own the other?

Obviously there are the usual spouse issues with business ownership, but could that be a way to do it?

Doofus

25,805 posts

173 months

Tuesday 23rd May 2017
quotequote all
leemanning said:
I don't know this, but could you own one and the wife own the other?

Obviously there are the usual spouse issues with business ownership, but could that be a way to do it?
I think this is one of the things the PSC regs are there to address.

akirk

5,389 posts

114 months

Tuesday 23rd May 2017
quotequote all
you need to ask the question - would it make sense to your clients if the services / products for both businesses were offered by one business...
if so, then HMRC are likely to take a starting point that you are trying to avoid VAT...

If you can show clearly as above that generally one business wouldn't offer plumbing services and piano lessons - then you should have no issue...

The more subtle the separation, the more you have to demonstrate why they are separated...

Terminator X

15,054 posts

204 months

Tuesday 23rd May 2017
quotequote all
rswift said:
As per the title.

I have a LTD company, and have been VAT registered for ages, due to the turnover being over the threshold. Most of my clients are corporate, or business so the VAT isn't an issue.

As part of the business, I am doing something related, but not identical, but mainly to non-VAT registered customers. It is project based, so unlikely to hit the threshold.

So can I simply start 2 companies, or is this viewed as tax avoidance, Is there any reason (aside from admin costs) I could't start a LTD company for a specific 2/3 month project. Then wind it up, and start again as when and if needed. ?

My main LTD company would carry on in parallel throughtout.
When I started my company it was an absolute ballache setting everything up. I wouldn't want to go through that pain every few months!

TX.