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Post Info TOPIC: VAT Aggregation


Master Book-keeper

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VAT Aggregation


What are the rules regarding aggregation, separate Ltd's, but identical trade in different geographical locations, both under the VAT threshold but combined total possibly over the threshold. One owner husband and one owner wife

I suspect these would be aggregated for VAT purposes but I can't find anything specific, other than this

"There are no financial, economic and organisational links between the separated parts of the business and the conditions set out in VATA 94 Sch1 para 2(2) are not met. The separation is not artificial, so there is no further action to take."

One would assume that the whole shebang would have to be kept completely separate, unless by virtue of the relationship, financial links come into it.

EDIT: Changed organisational to financial links



-- Edited by Leger on Wednesday 24th of March 2021 04:25:29 PM

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John

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



Guru

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Hi John,

If they are both doing the same thing then I would have thought that the likelihood that they share equipment/stock etc would be really high and that alone would be enough for HMRC to count them as one business. I'm not sure on the point of whether the fact that essentially both owners would benefit from both businesses would be enough to join them together. I guess the clients could try to argue that her money is her money and vice versa, not all couples have shared income/bank accounts.



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Jenny

Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.



Guru

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Just to add to my response, in herehttps://www.gov.uk/government/publications/statement-of-practice-4-1983/statement-of-practice-4-1983#the-meaning-of-financial-economic-and-organisational-links it says that a common financial interest in the proceeds of the business would be a link, so I think that Mr & Mrs would need to be able to demonstrate that their private finances are kept completely separate of each other as well as the business finances



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Jenny

Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.



Guru

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Hi John

I think you would find it hard going to convince HMRC that this is not one business, do the H&W still live together?

Have a look at the rules of disaggregation, that might help some more



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Doug

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Master Book-keeper

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Hi Jenny and Doug

Thanks for the comments, you confirmed what I suspected.

It's the financial aspect that would let it down. The H & W live together and personal finances wouldn't be separate. It was just an avenue as he is looking at another business, which offers better opportunities, but the combined income would take it over the VAT threshold. It's catering so no scope to increase the prices to allow for the VAT.



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John

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

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