VAT threshold
Author
Discussion

Poseidon

Original Poster:

228 posts

164 months

Thursday 20th June 2019
quotequote all
Can someone please confirm my thinking is correct here;

Current business turnover for the last 12 months: £79,000

Other income: £4,500

If I register the business as a Ltd company that should separate the two incomes meaning that I'll have an extra £4,500 growth in the business (before I need to register for VAT) and also means I won't have to pay VAT on the £4,500 of self employed income.

Is this correct? I asked my accountant about it last week but they were under the impression that I would still need to pay VAT on the self employed income when the business went Ltd.


Eric Mc

125,758 posts

295 months

Thursday 20th June 2019
quotequote all
Separating streams of incomes between different trading entities (limited company, sole tradership, partnership etc) CAN ensure that some or all of the entities never exceed the VAT registration threshold (currently £85,000 but likely to go down in the future, not up).

HOWEVER, if there is any link whatsoever between the trading activities HMRC will argue that the trader is trying to "disaggregate" (i.e. break up) their business activities just so they can keep out of VAT - and that is not allowed.

You have to be very careful if you do intend to keep the activities segregated

Poseidon

Original Poster:

228 posts

164 months

Thursday 20th June 2019
quotequote all
Eric Mc said:
Separating streams of incomes between different trading entities (limited company, sole tradership, partnership etc) CAN ensure that some or all of the entities never exceed the VAT registration threshold (currently £85,000 but likely to go down in the future, not up).

HOWEVER, if there is any link whatsoever between the trading activities HMRC will argue that the trader is trying to "disaggregate" (i.e. break up) their business activities just so they can keep out of VAT - and that is not allowed.

You have to be very careful if you do intend to keep the activities segregated
Thanks Eric.

They are totally separate and there is no way someone could argue that they are linked.

Still can’t understand where the accountant was coming from, she is supposedly their ‘VAT expert’ too.

Eric Mc

125,758 posts

295 months

Thursday 20th June 2019
quotequote all
Define "totally separate".

Poseidon

Original Poster:

228 posts

164 months

Friday 21st June 2019
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The business is an e-commerce store and the other income is courier contract work.

Eric Mc

125,758 posts

295 months

Friday 21st June 2019
quotequote all
So - both on-line trading activities?

Insurancejon

4,098 posts

276 months

Saturday 22nd June 2019
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Reads as one is web based and the other is driving a van to me

khushy

3,984 posts

249 months

Monday 24th June 2019
quotequote all
if you are the only employee - then both are your business and income streams = one entity I would guess

Poseidon

Original Poster:

228 posts

164 months

Monday 24th June 2019
quotequote all
Insurancejon said:
Reads as one is web based and the other is driving a van to me
That is correct.

Vincecj

498 posts

153 months

Monday 24th June 2019
quotequote all
Set up two limited companies?