VAT Associated Company Query

[kjedwards]

My wife an I run a VAT registered Ltd Co.

We now wish to start up another company trading in a totally unrelated area.

We are not sure yet whether the new company will be Ltd or just a sole-trader.

Our query is since we already have a VAT registered Ltd Co, will the new Ltd Co or Sole-Trader company be regarded as an associated company and if so, will we have to account for VAT on the new company even though the new company will not be registered for VAT?

Many thanks

Kevin

[cranleys]

Kevin

If the second company is completely different in nature you will not need to worry about VAT unless you plan to be selling goods or services which will be VATable and the turnover exceeds (has done in past 12 months, will do in 30 days) the £58,000 limit.

It may then be convenient to be part of the same VAT group.

If you open another Limited company the tax on both may well be higher. This is because the limits at which the 23.75% rate of CT (levels between £10,000 - £50,000) will be reduced (in this case by 50%).

The sole trader route is often the best way in a new venture for two main reasons.

1. You can offset losses aginst other income

2. You may be able to sell the goodwill to a new company after 2 years and pay little or no tax on this. The result being a large cash free sum being available to draw on.

Of course, before your embarked on your chosen route I would advise you used the services of a qualified Chartered advisor as there is a degree issues which I have not investigated.

Colin Davison
Cranleys Chartered Accountants
01256-766655
www.cranleys.co.uk

[paultaylor@vatease.c]

A VAT registration is specific to a person or legal entity. Your new company is not affected by the existing VAT registration of the old company.

Paul Taylor
http://www.vatease.co.uk/

[kjedwards]

Hi

Thanks for the information that is very useful

Thanks again

Kevin

[VAT officer]

Kevin,

Even though the above advice is correct may i add that for Customs and Excise purposes it WILL be an associated company as it will have the same directors but as previously stated will have no affect on your limited company's VAT. Just to bear in mind in case you have to complete forms/join VAT group/schemes/Transfer of going concern as it will be asked whether the two are associated.

[Bill001]

I had a similar sort of problem and finally ended up with a sole trader and Ltd company grouped together classified under partnership grouping by customs so I file both under one VAT return - but treat them as separate entities for IR returns.

I am note sure how this will be affected when customs and IR merge?

Cheers,

Dave