Arms length transactions

by **gridkey** on Mon Oct 24, 2011 9:25 pm

Hi

A slightly unusual request.

I purchased car from a chap who I thought was a sole trader specialist garage. The work his garage had carried out was defective resulting in engine failure. It transpires that the business is a Ltd Co and that he is a Director. He is maintaining that it was a "private" sale although the time between him acquiring the vehicle and prepping the car for sale was only one week, at which point his garage produced a "To whom it may concern" letter, rather than a tax invoice, detailing the work that had been carried out. Does HMRC have a opinion on what directors get upto in this sort of circumstance? The chap maintains his garage only carries out services and repairs although the nature of business recorded at Companies House does include Car Sales.

Obviously, unless I get evidence to the contrary, I believe the parts and labour used to repair the car have not been invoiced to the Director from the garage and have been "washed out" in the company's accounts.

If anyone can give me any ammunition I would be grateful.
Thanks

by **pawncob** on Mon Oct 24, 2011 9:51 pm

What does the invoice/bill of sale say? Is it from a LTD or from him?
There is nothing to stop him running both businesses, and nothing to suggest he's done anything wrong. You don't need evidence to the contrary, you need evidence before you start making accusations.

by **towat** on Mon Oct 31, 2011 10:19 am

Sounds like he is disaggregating for VAT purposes i.e. splitting his business to avoid VAT, HMRC take a dim view of this and would come down on him like the proverbial ton of bricks. You should drop hints that you have friends in the VAT office and see if he becomes more obliging, first port of call should be trading standards however.

by **section 44** on Mon Oct 31, 2011 3:17 pm

towat wrote:Sounds like he is disaggregating for VAT purposes i.e. splitting his business to avoid VAT, HMRC take a dim view of this and would come down on him like the proverbial ton of bricks.

On the basis of the information provided by the OP, this is over the top.

This sounds like a legal (not tax) question. Isn't the OP's concern whether the sale by the individual was private or business (the latter affording a greater level of protection to consumers)? Presumably the repair work was done by the individual's company and, to that extent, it and disaggregation for VAT purposes is irrelevant. The crux of it is the capacity in which the individual made the sale, was it private (caveat emptor) or business?

by **towat** on Mon Oct 31, 2011 4:33 pm

On the basis of the information provided by the OP, this is over the top.

I don't agree, to me it bears the classic hallmarks of disaggregation, I have seen a client today that was trying to do exactly the same thing, and as the OP was asking for "ammunition" I don't think it is irrelevant.

by **mullet** on Mon Oct 31, 2011 4:35 pm

I agree that Trading Standards is the way to go here. If you disclose name/address/telephone numbers of the "sole trader" then Trading Standards can interrogate advertisers' databases (e.g. Autotrader etc) to see whether chummy is placing too many ads for a "private" advertiser.