VAT - Same Trade / 2 different entities

Fingersan

Good afternoon everyone.

Here is a good Friday afternoon question for you:

I have just had a lengthy phone call from a client, who is a builder. He has a VAT registered Ltd Co and is struggling for work at the moment. He is getting a lot of requests from private individuals for work but gets turned down because of VAT.

He wants to start up as a sole trader and do the work that the company could do, but not charge VAT as he is a separate legal entity.

I suggested to him that this is effectively tax avoidance and that the Revenue would not be overly impressed, but I would look into it.

I did suggest deregistration for the company, but he was not too keen on this. The company only turned over £27,000 in last 12 months! However, he has put a tender in for a job that could push him over the registration limit if he gets it, but won't know before Christmas!

Could I ask your thoughts on the matter before I consult Abbey Tax.

All the best.

T.C.

Basically you are right. He can't start another business with no VAT. It simply wouldn't be allowed and would cause all sorts of trouble for him. De-register, as you say.

groundy

Agree with TC. This is dissaggragation (excuse spelling) in the eyes of HMRC. However, where they different trades then it would not be a problem.

Fingersan

Thanks for your replies. It is very much how I expected it.