[Roland S]

hi

this is probably not the right place to ask as it's more of an accounting/hmrc  question but would it be legit if i put all commercial work through a vat registered ltd company with me as a director and worker, but continued to work as a non vat registered sole trader for all my residential work under a different trading name if nessarcary? Obviously it's an advantage not having to charge vat to residentials and wondered if this would fly with hmrc as it's me doing the exact same work?

[simon w]

I'm guessing your reaching VAT threshold, do you employ or are you solo?

[Ooooooog]

Artificial separation innit.

[Roland S]

I'm guessing your reaching VAT threshold, do you employ or are you solo?

solo currently but that may change soon

[Roland S]

Artificial separation innit.

ooh spot on just looked up what that means. i guess i can't then, i thought it seemed like too simple a solution for mr tax man not to prevent. cheers

[FriedOnion]

Split into 2 separate ltd companies.
One commercial window cleaning company that is VAT registered, one purely domestic non vat registered and below the threshold? One is business to business and one is business to customer??

[deeege]

Split into 2 separate ltd companies.
One commercial window cleaning company that is VAT registered, one purely domestic non vat registered and below the threshold? One is business to business and one is business to customer??

Completely illegal and you’ll get screwed when they find out.

[AuRavelling79]

Split into 2 separate ltd companies.
One commercial window cleaning company that is VAT registered, one purely domestic non vat registered and below the threshold? One is business to business and one is business to customer??

As mentioned - this would fall under artificial separation. There is no practical reason why the businesses need to be separate - you are cleaning windows ... end of.

My wife is self employed as a part time cleaner and a little bit of bookkeeping she also does my books and tax returns for which she invoices me. I am self employed too. Our joint turnover does not reach the VAT threshold but if we both expanded our operations it would be under accountants advice whether we could run separate cleaning and window cleaning businesses.

The last time I asked the question I got a common sense answer along the lines of "If the taxman asked why you run your window cleaning business and your wife runs her domestic house cleaning business separately, what would the answer be?"

This is because for keeping running costs down you would use any vans to both your best advantage, the same with office space, computers, mobiles etc., answering the phone for each other ... and on ... and on. The only reason to separate would be tax saving that would compensate for the above. So a big no ... no.

This could be OK if you had two obviously separate businesses such as (e.g) your wife running a crafting business and you running a window cleaning business. But even then there are strict rules such as shared computers, vehicles, addresses that raise concern about whether you are doing it to avoid tax.

[Crystal-clear]

As above however... the fact you you wanted to split commercial and domestic possibly suggests you have a good sized commercial customer base?

Check with your accountant first if you qualify for the reduced flat rate and secondly if it's the most beneficial. Because technically if you're hovering around vat and 50 % of your turnover is b to b
You'll be able to add vat to your commercial invoices  so charge 20% and pay vat at 11% first year If you qualify.

( with a decent commercial customer base you might end up exactly the same or even better off )

You don't necessarily need to up any of your domestic clients my accountant has a very good motto "end of the day it's all about how much money is left in your account"

[Arnold Palmer]

[FriedOnion]

This is what the accountant advised me to do.

Also there could be other reasons other than keeping tax thresholds down, not crossing vat threshold when it comes to you running a window cleaning business and a wife running one too. Simply that you both want independence from each other in terms of decision making, your own personal salary from the company, one spouse may want to work one area, the other may not. One may have a pricing structure in mind and the other may not agree.

I see the point about artificial separation, but i dont think this would always be the case. There should be nothing stopping a married couple from starting their own businesses of the same kind as long as they genuinely are their own separate companies

[Crystal-clear]

This is what the accountant advised me to do.

Also there could be other reasons other than keeping tax thresholds down, not crossing vat threshold when it comes to you running a window cleaning business and a wife running one too. Simply that you both want independence from each other in terms of decision making, your own personal salary from the company, one spouse may want to work one area, the other may not. One may have a pricing structure in mind and the other may not agree.

I see the point about artificial separation, but i dont think this would always be the case. There should be nothing stopping a married couple from starting their own businesses of the same kind as long as they genuinely are their own separate companies

It sounds like a lot of rigmarole. You will have to have it so separate and convince the vat man should they have questions someone on this forum once said even your pen needs to be different.

One other thing you will need to use your own common sense as well an accountant can advise you however he's not responsible for any repercussions its always you.
Imagine a few years down the line and they decide that you have artificially separated the VAT fine and backdate could be a tremendous amount the question is would it be worth it?

so what's the turn over percentage of your commercial client base? Because its possible that you would probably be on the same level of profit if it's a decent amount.

if you are are actively sourcing new commercial clients it is much BETTER that your vat registered
Even if you're below the threshold.