[bettakleen]

I have a question regarding VAT that maybe someone could help with. I do apologise if its been raised before.

My domestic cleaning business, which I operate as a sole trader, has a turnover below the VAT threshhold. As such I have never gone VAT registered, as with all of my clients being domestic customers, they are unable to claim back any VAT we add. Not being VAT registered has worked to our advantage as I have been able to keep my prices lower than some of the "big boys" (although not too low as to "cheapen" our image).

I am now considering starting a second, non-cleaning related business in the retail area, again as a sole trader. The turnover for this would be way over the VAT threshold.

I understand that it is the INDIVIDUAL that registers for VAT, not the individual's business(es). Therefore do I have it correct that if my new retail business needed to be registered for VAT due to its turnover, then I would also have to charge my cleaning clients VAT as well.

Is there any way around this, as I really dont want to go the VAT route for the cleaning business if I can avoid it (legally, of course).

One obvious and straight forward solution would be putting the cleaning business in my wifes name - I would be VAT registered, she wouldn't. However, I'm not keen on this as we plan to start a family shortly and we would lose out on maternity benefits if she had an income from the cleaning business.

What about if I was to make the cleaning business a limited company, and operate the new retail business as a sole trader.  Could I then be VAT registered for the retail business, as required due to the turnover level, yet leave the cleaning business not-VAT registered, as I understand a ltd company is taxed as a business not as an individual.

I would welcome any feedback on this anyone can offer.
many thanks

Regards
Gary

[Liahona]

I dont know of a good reason why you wouldnt want to be Vat registered. We all moan of prices of stuff petrol or fuel being the biggest moan I would imagine. Being Vat registerd at least I pay only 82.5p a litre if you were to pay a pound. When I set up my business over here I got £7000 pounds back from the Vat man, so again why would anyone not want to be reistered? If you or anyone is scared of putting the Vat on top of the cleaning price then just include it to start with. Means more paper work for you but might help, and its not illegal to do it, just like i said a pain when you have to do the Vat return. Best, Dave.....P.S. I havent a clue about your other questions on Vat, sorry..Phone the Vat man and ask him.

[dustycorner]

Hi all,

I agree with liahona, also its the business that registers for vat not the individual.

Cheers Mark.

[andrew chrysler]

As long as the two businesses are not connected (ie not sharing customers, not in same trade) you may well be able to vat register one and not the other.

You would need at least one of the businesses to be a limited company, otherwise by adding the turnover of two businesses owned by a sole trader both would be required to register for vat.

www.customs.hmrc.gov.uk

is the place to go and check.

[busydaffodil]

Oh well, I was mis-informed then.  When I ran 2 businesses, 1 of which was commerical work & therefore requiring VAT registration, that if the 2 businesses were in my name (or both were in in same joint names, etc), I had to register for VAT and charge it on both businesses.   
I opted down the route of having a "partnership" business for 1, thereby making it different to sole trader on the other and thus avoiding VAT registration on my sole trader business.

My only suggestion would be to phone VAT helpline and make a general enquiry(giving no names etc).  they're not monsters really.

[andrew chrysler]

If they are both cleaning businesses, then, yes, both must register. Otherwise you could avoid vat by putting vat registered customers through one business and non registered customers through the other.

However, if one is a cleaning business and the other is (say) a sweet shop, then its a different matter.

[keen2clean]

Hi the simple way around this problem is to have your cleaning business and ur retail business as two seperate limited companies this way u definately dont have to vat regster both
Another good idea would be to creat a holding company which puts the earnings of both together and then you ge ttaxed on the profits from them both, this is  a good way of doing it because if you are loosing money in retail why u start up u can ofset it against ur cleaning biz to pay less tax
Hope thats of help

[busydaffodil]

If they are both cleaning businesses, then, yes, both must register. Otherwise you could avoid vat by putting vat registered customers through one business and non registered customers through the other.

Andrew....surely thats if both businesses were in different peoples names?
Actually, I was told if my 1 catering business AND my other cleaning business were both in my name ONLY, then BOTH would be liable for VAT if I registered 1.   These are unrelated businesses but if both in exactly the same name, they would both be liable for VAT.
 
BETTAKLEEN - As I said before........check with VAT customs & excise.
 Quote from their website "So if you have a question about Customs, Excise, VAT or any of our other taxes or duties, please feel free to call us on 0845 010 9000."

Their website is[/color]]http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_Home

Ultimately, the buck stops with you,  so you need to make sure you have the 100% correct information.   Though people are very helpful & mostly right......do not fully rely on others word.  Always make sure yourself when it comes to Tax & Vat.

[andrew chrysler]

Andrew....surely thats if both businesses were in different peoples names?

What I meant to say is that the rules prevent you from avoiding vat in that way!

Two seperate limited companies may solve the matter, provided they are in different types of business, but as soon as you establish a holding company then the holding company being over the vat threshold means that all the companies it holds are required to register for vat.

Also, having more than one limited company (with the same directors & shareholders) can impact on the 10% corporation tax band and on your ability to take profits as dividends.

Been there, got the T shirt, and the Accountant's bill!

[andrew chrysler]

Actually, I was told if my 1 catering business AND my other cleaning business were both in my name ONLY, then BOTH would be liable for VAT if I registered 1.   These are unrelated businesses but if both in exactly the same name, they would both be liable for VAT.

That's because, as a sole trader, they are both the same legal entity. Business names as a sole trader are merely "trading styles" not seperate businesses: to seperate them legally requires one or both to become incorporated, then it becomes a seperate legal entity from yourself.

I have a Caravan Park (Limited, vat registered), a small retail business (self employed, not vat registered) and had until recently a car valeting business (Limited, not vat registered).

This situation arose when I inherited my father's business to add to my own.

Things get very complicated when I do my car expenses; I can claim all fuel against income tax, but only the fuel used on caravan park business against vat.

Gradually, all businesses will come under one vat registered "umbrella" company as whilst the vat bill will be higher, there will be other savings to offset it (ie only one public liability policy, one annual return fee, one set of bank charges, one AGM, etc)

Imagine how much correspondence my accountant has had with the local vat office...........

[D woods]

Hi Andrew
Did you bother with the carpet cleaning business you were thinking of
starting ?

[andrew chrysler]

Hi DW

Not done anything yet....... I got back from the prochem course to find an email from an estate agent about a caravan park for sale near Peterborough......

If I can get it for the right money then I will have enough to concentrate on!

[D woods]

Hi Andrew
that seems a more lucrative business than cleaning carpets (and less stressful)

[andrew chrysler]

......and less stressful........

You would be surprised

[busydaffodil]

Thanks for clarifying that Andrew.

All I knew was what my accountant had told me about my businesses. 

I still recommend Bettakleen consults the VAT people....just so he/she knows directly from the horses mouth. 

Good luck with the peterborough caravan site purchase...I hope it comes off for you.

Liz

[bettakleen]

Thanks to all for your help. I agree its best to double check anything with the tax/VAT office before proceeding, but the advice given by you all has certainly given me some insight..thanks folks.
Regards
Gary