Setting up a new business alongside existing

[greg_b]

Hi all

I currently run a landscaping business, which in 2015 went above the VAT threshold so I had to register.

Since becoming VAT registered, it has had quite a detrimental effect on the business, with us not winning as many residential clients due to the higher price.

I have somebody who currently works for me, who I completely trust and we have often talked about partnering up in either this business or a new venture.

Currently our business turnover is around £85,000 (so not massively over the VAT threshold and close enough to be able to bring it below should we wish).

My employee suggested the idea of setting up a new company, registered in his name and address, with me as a subcontractor, to allow us to take on more clients without having to register as VAT. It was he who then raised the concern that there would be legally nothing to stop him then walking away with a client base built up by the both of us.

Our next thought was to set up a partnership, but wondered if the hmrc would see this as avoidance?

I wonder if anybody would be able to give any guidance on this issue.

Thanks

[section 44]

Our next thought was to set up a partnership, but wondered if the hmrc would see this as avoidance?

I don' think HMRC would view you and your employee working in partnership as being avoidance.

[greg_b]

Even if this brought Both companies underneath the threshold? Also there's the issue that at the moment all of the vans and tools etc have been bought under the existing company, so the new company would form with no assets but would have a considerable turnover.

[section 44]

presumably the partnership's turnover would exceed the VAT registration threshold

[greg_b]

No the idea is that it wouldn't. At the moment my turnover is approximately £85,000 before vat. I can bring this down to below £80,000 (under the threshold). The new company would then have a turnover of approximately £30-40,000 by the end of Its first year

[bd6759]

And if business really takes off you can open another company,...and another,... and another...

There are association rules. If you control more than one company the limit will apply to them collectively, not to each individually.