What date to register for VAT from?

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in General accounting discussion

Funny situation here - client is a sole trader employing about 5 staff. He's trying to set up a new business which will be completely separate & has been set up as an LLP.
He'd offered someone a job working for the LLP, and he quit his previous job to take up the offer, however there have been problems with the LLP premises and therefore trading hasn't commenced yet, so this new employee has been working with the employees from the sole trader business until LLP trading commences.
The thing is that when he completed his P46 I thought that he'd be working for the LLP and therefore he is now employed by the LLP. I thought that I'd just send an invoice from the LLP to the sole trader for the cost of his wages, but now I've got to fill in the VAT registration form and don't know what to put as the date of the first taxable supply! Should I put the date that his employment started, or the date that we expect trading to commence (hopefully 1st May) and then just do one invoice to the sole trader to cover the cost of all of his wages after the date of registration? Or should I send in a P45 for him working for the LLP and set him up as an employee of the sole trader until LLP trading commences?
That's probably a bit long-winded but hopefully someone can offer some sensible advice as to the simplest way forward...

Ta

PS: isn't this just a typical example of how HMRC don't cater for the 'real world'?!

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:What date to register for VAT from?

    A few points:
    1. Is the LLP carrying on a different trade to the sole trader?
    2. Does the client have the controlling interest?
    3. I take it the LLP is registered for PAYE?

    I suspect the charge across from the LLP to the sole trader would't exceed 61k, therefore you could use the 'histroic test' for VAT pupposes, subject to the above answers.

    About the 'employee':
    1. Where is he being paid? (through the LLP acount for sole trader account)
    2. Where are his deductions being accounted for? Which yellow book are they going on?
    3. Who is his contract of employement with?

    Depending on these answers you might not need to make the charge?

    Regards

    Dean
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:What date to register for VAT from?

    thanks dean

    1. yes, completely different
    2. he's got a 50/50 interest with another partner, so it definately needs a sepatate VAT number
    3. yes

    yes, you're right on the 'historic test' point, I suppose that if the LLP did invoice the sole trader for wages before the business becomes VAT registered then they could just issue invoices without VAT, but does that mean that I need to say on the VAT appliaction form that trading hasn't yet commenced and ask to be registered from May, but still give the date of the first taxable supply as the date that the employee started?

    1. He's being paid through the sole trader's account, but so are all other start-up costs for the LLP as we're waiting for the chq books etc to be sent for the new account.
    2. Well he's only been here 3 weeks now, so no deductions have been paid over yet - i can put them on either.
    3. I've not done his contract yet as I wanted to get this sorted out first!


  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:What date to register for VAT from?
    Jodie R wrote:
    1. yes, completely different
    2. he's got a 50/50 interest with another partner, so it definately needs a sepatate VAT number

    Based on that, it's a new trade, no connected persons rules, there is no controlling interest etc.

    I would watch the 'histroic test' until such time you are legally required to register.

    If the employee is primarily going to be employed by the LLP, I would;

    1. Account for deductions on the LLP yellow book.
    2. Once you have bank bank details etc. - re-imburse the members account for payment of the wages, PAYE etc.
    3. Do the contract out in the LLP name.

    If your client is already a sole trader, why have an LLP? Wouldn't he be better forming a LTD company and producing directors'/shareholders' agreements, for his own tax pupposes?

    Quite a good case you got there :)

    Regards

    Dean
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:What date to register for VAT from?

    Thanks for clearing that up dean, this message had vanished last time i checked - glad it returned!

    I don't know what the reasons behind setting it up as an LLP are but the man who suggested it is a chartered accountant who knows the client & his situation very well, so I'm not questioning it!

    Although I will have to register the LLP for VAT now, as he's purchased some pretty large machines and in the HP schedules the finance company has anticipated that he'll get the VAT refunded in a few months time and consequently he has to make a large payment back to them in July/August.

    thanks again
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:What date to register for VAT from?
    Jodie R wrote:
    I don't know what the reasons behind setting it up as an LLP are but the man who suggested it is a chartered accountant who knows the client & his situation very well, so I'm not questioning it!

    Go on, you know you want too! :wink:

    Regards

    Dean
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:What date to register for VAT from?

    ignorance is bliss :wink:
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:What date to register for VAT from?

    Not knowing something irritates the hell out of me :shock:

    Claudia
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:What date to register for VAT from?

    I only do the books for this client so I'd feel a bit nosey asking any more detail as to why this accountant suggested setting up as an LLP! I just came in one day & was told 'xxx has said that it'll be best for the new venture to be set up as an LLP, can you please fill in the forms' and that was that :lol:

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