Multiple businesses to avoid VAT registration

[fax machine]

Is there any guidance - or is anybody prepared, please, to share their experience - for the "Chinese walls" that must be present between businesses in order for hmrc not to aggregate the businesses to determine when VAT registration is required? The hmrc site appears to be sadly lacking...

The classic example is a pub, where the husband runs the food & bar, and the wife the bedrooms.

The case in question is a retail business.

One part of the business buys heavily marked down surplus designer wallpaper, and retails it at a high profit margin - 95% or so(!). Stock is held. Clearly VAT registration would have a huge impact on the effective tax take.

The second part of the business sells paint obtained from wholesalers at a normal price. No stock is held, the paint is retailed on a drop-shipping basis, and sold on the basis of paint cards. The profit margin is about 15%, but the costs, stock risks and effort surrounding the business are minimal. Significant input VAT is incurred, and there may be benefits to trading as a limited company - and indeed to VAT registration.

The third part sells small silver trinkets made by a relative. This is done as a favour, as the trinkets brighten up the display, the relative is infirm, and no profits are retained by our entrepreneur.

Is there any hope that the same individual can retail these three separate classes of items, with different business strategies, from the same stall at fairs and summer shows, under three separate VAT umbrellas; ideally none of them registered?

Wallpaper as a sole trade; paint as a Company; trinkets as a partnership.

The entrepreneur in question has a partner (in the conjugal sense of the term, not business). She, being aware of the entrepreneur's suppliers, is able - as would be anybody with the same knowledge - to obtain the same items for sale at the same price. The couple could split the round of summer shows into two; she could sell her wares at one half, he his wares at the other the other half. Naturally, they would both be at all the shows, but the legal person undertaking the retailing would be different.

There is the prospect of a website, which would promote the wares of all businesses. Would this hinder the situation? In the interests of promoting the company, it would be best if the umbrella www.getyourwallsdoneforcheap.co.uk could be promoted at all opportunities.

Many thanks

[Generix]

I am of the view that there is nearly always a way to segregate businesses in such a way as to avoid VAT registration, however, there would be some initial outlay and it may involve a few limited companies which would mean ongoing costs, so you'd have to way up the costs of segregation and the costs of VAT registration.
It would be near impossible to have all running under just 1 Ltd and or sole trader status.

Email me generixbanshee@hotmail.com if you would like some professional advice with regards to this.

[King_Maker]

If there are separate legal entities, it is up to HMRC to attempt to counter any disaggregation by the issue of a Notice of Direction.

But, even if successful, such a Notice will not be retro-active.