Separation of businesses

[LesleyHill]

I am due to become self employed in the next couple of months. My main income will come from running a franchise operationand I will apply for VAT registration for this business immediately (it is required in my franchise agreement). Also as part of the agreement I have to send the franchisor copies of my quarterly VAT returns. However I will also be doing some occasional work for my ex-employer, who will expect me to invoice them for the work done. I do not want my franchise company to receive details of this income so I asked C&E if I could have 2 separate VAT registrations and they have refused me. The businesses are in a similar field but are very separate with totally different client etc. Is there anything anyone can think of to help me keep the 2 businesses separate. Thank you.

[paultaylor@vatease.c]

You could set up 2 separate legal entities, i.e. 2 ltd cos, 1 sole prop and 1 partnership, etc....

Provided both businesses were properly separate (separate accounts, bank accounts, invoices for any supplies between the two) then they would be separately registrable for VAT.

In theory, if either one or both were below the VAT registration threshold it need not register for VAT. However this would likely attract the attention of HM C&E who could issue a direction to treat the 2 businesses as one.

However, as you appear to wish to be registered for VAT, with both companies registered HM C&E are unlikely to be overly concerned about the separation.

This arrangement may have negative consequences for other taxes.

Regards

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

[LesleyHill]

Thanks Paul. I was hoping that I might be able to run the 2 separate businesses as a sole trader but it looks like your option may be the best one. I don't have any preference about my sub-contracting being VAT registered or not, but I was keen to avoid C&E assuming I was trying to avoid VAT, so I thought it best to just register early on.

[UKTAXSAVER]

Lesley - take care here. What Paul says at the end is spot on - there are potential problems with other taxes here. The main issue is that the government doesn't like small limited companies with taxable profits of under £50,000 distributing those profits by paying dividends. There is already new penalising legislation hitting such arangements and the feeling is more is to come. The government has announced it will be issuing a paper later this year [around November] putting forward new proposals for the taxation regime of small companies. Take care and watch upcoming legislation with scruitiny.

UKTAXSAVER
info@taxaccount.co.uk