VAT registration

GE07DLE

Good evening

Situation: Individual is currently registered as a sole trader for work undertaken as a mechanic. Over the last year or so work has been done on land owned by the individual and expenses such as fencing, machinery, tools, fuel, etc has been incurred. The individual wishes to voluntarily register for VAT in order to reclaim VAT paid and hopefully in future, rent the fields for grazing land and possibly erect an agricultural building in order to purchase livestock.

At the moment the individual wishes to keep the mechanics business separate to the farming business that will be subject to VAT. What is the best way to do this? Should the farming business be registered separately?

The individual is in possession of a County Parish Holding Number supplied by the Welsh Assembly Government if this helps.

Any help would be greatly appreciated.

CeeJaySix

As I understand it a sole trader is a sole trader regardless of how many businesses he has or how separate they are; if he registers for VAT he would have to charge it on all his sole trader transactions.

If he wants to keep the two businesses separate for VAT you could consider incorporation of one (or both). You'd need to be careful of artificial separation - although on the face of it these look like two very different businesses, HMRC may still be unhappy if for example there is a shared customer base. If they are genuinely completely separate businesses then there shouldn't be any issues.

burg

Echo what CeeJaySix says but I would think carefully before incorporating the land/agricultural business. Have a good look at the pro's and cons but it usually isn't worth incorporating. The problem then comes with backdating the VAT as these transactions have already occurred then if he was to back date the VAT reg the mechanics business would still have been part of his self-employed income and liable to charge VAT.

This is a classic example of why clients should ask before they do something and not after.

KernowAccountant

GE07DLE said:

Good evening

Situation: Individual is currently registered as a sole trader for work undertaken as a mechanic. Over the last year or so work has been done on land owned by the individual and expenses such as fencing, machinery, tools, fuel, etc has been incurred. The individual wishes to voluntarily register for VAT in order to reclaim VAT paid and hopefully in future, rent the fields for grazing land and possibly erect an agricultural building in order to purchase livestock.

At the moment the individual wishes to keep the mechanics business separate to the farming business that will be subject to VAT. What is the best way to do this? Should the farming business be registered separately?

The individual is in possession of a County Parish Holding Number supplied by the Welsh Assembly Government if this helps.

Any help would be greatly appreciated.

You say "possibly erect an agricultural building in order to purchase livestock". If that doesn't happen and the only supply made is that of field rent you should consider whether the input VAT is actually recoverable - given the exempt supply (rent).