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Post Info TOPIC: Client with 2 companies - garage/MOT


Veteran Member

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Client with 2 companies - garage/MOT


Hi everyone,

I've just completed the first set of accounts for a new client who has 2 Ltd companies. He is the sole shareholder and director of both and was advised to set them up separately, but I think I'm missing something as I'm not sure why! Both companies operate out of the same double unit and are profitable.

Company 1 is the garage that does servicing and repairs. This company is Vat registered as they are over the threshold.

Company 2 is the MOT station that just does MOTs. This company is not Vat registered as MOTs are outside of the scope for Vat. They are a proper registered MOT station.

As far as I can see, combining the 2 companies would save on costs, especially admin costs (eg 1 paye scheme and set of accounts rather than 2), and all the Vat could be claimed in respect of the expenses that Company 2 are currently paying.

Am I missing something? Is it beneficial to run the separate 2 companies?



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Master Book-keeper

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On the face of it it does seem a bit daft, and like you I can't see any reason to have two separate companies.

How does it work on the rent and business rates of the unit, are they in one name or two?



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John

Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.



Veteran Member

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Thanks John, they are technically 2 units with 2 doors, just missing a wall in the middle! It did work in his benefit recently as he got 2 of the rate grants, one for each company.

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All thoughts are my own and should not be used as professional advice.



Master Book-keeper

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Hi Rachel
What has your client said about the reason for 2 companies?

Just to clarify - is this the company's 1st ever set of accounts? Or the first set you are completing for them?

What came first - the MOT station or the garage, I suspect the latter. Im wondering if there were any issues with the original company that would have prevented it from applying for the MOT station, given the DVSA have such hugely stringent rules, including financials and credit history (even unspent and frankly sometimes seemingly spent litigation against a limited!)

As an aside, they could still have received 2 rates grants, one for each heredictment, regardless of being two separate limiteds.

I presume the shareholding is exactly the same?

All I would urge is great caution when you are conidering merging/closing one down that it is done carefully with regards to the DVSA. Do not jump through their hoops sufficiently and they will lose their ability to perform MOTs. (The admin can be a bit of a mare)



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Joanne

Winner of Bookkeeper of the Year 2015, 2016 & 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position



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Hi Joanne,

They were trading for 2 years before I took over, this will be my first set of accounts for them. He says that he was advised by his accountant at the time to set it up that way, but the accountant in question has turned out to be a bit dodgy so neither of us trusts that advice!

Both companies were set up at exactly the same time, they were 2 directors/shareholders when they were incorporated, but the current director bought out the other guy last year.

I can only think that it must be a DVSA reason to keep them separate. Accounting wise I can't see any reason to keep them this way.

I'll have a sit down chat with him when I can and see what's best.

Thanks :)

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All thoughts are my own and should not be used as professional advice.



Master Book-keeper

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Rachel19 wrote:

Hi Joanne,

They were trading for 2 years before I took over, this will be my first set of accounts for them. He says that he was advised by his accountant at the time to set it up that way, but the accountant in question has turned out to be a bit dodgy so neither of us trusts that advice!

Both companies were set up at exactly the same time, they were 2 directors/shareholders when they were incorporated, but the current director bought out the other guy last year.

I can only think that it must be a DVSA reason to keep them separate. Accounting wise I can't see any reason to keep them this way.

I'll have a sit down chat with him when I can and see what's best.

Thanks :)


DVSA dont generally specify. You can be a sole trader/partnership or limited to set up as an MOT station.

Care if they have separate trading names if/when getting round to sorting with DVSA.

Accounting wise from what you say - no apparent reason. Let us know what you find out.



__________________

Joanne

Winner of Bookkeeper of the Year 2015, 2016 & 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position



Veteran Member

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Posts: 59
Date:

I think this might be one of those conversations that is best done face to face, so I might have to wait until it's a bit safer to do so.

I'll keep you posted.

__________________

All thoughts are my own and should not be used as professional advice.

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