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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4786
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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This is a multi-part question: What are the rules around

Resolved Question:

This is a multi-part question:
What are the rules around segmenting your business - is is acceptable to separate your company in to 2 - one for the UK, and one for IP ownership and international?
Can a VAT group be made up of 2 parts, one a for profit and one non-profit?
Do companies in a VAT group charge and pay VAT on transactions between the two?
Thanks!
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.

Hello and welcome to the site. Thank you for your question.

There are no special rules pertaining to segmenting a business....
Basically, you are just adding layers of reporting for internal purposes as your accounts for Companies House and/or HMRC purposes would show total turnover and profit and loss of the company, made up of consolidation/aggregation of segments. You would provide notes to the accounts showing turnover by segments/territories etc

General principles of consistency applies. i.e follow same practices year on year.

There are certain conditions that have to be met before HMRC would consider application for VAT group. VAT group can be made up of two parts as outlined by you, if you meet the conditions. I am providing you a link that gives more information on VAT and groups of companies here

http://www.taxjournal.com/tj/articles/vat-and-groups-companies

Advantages of VAT grouping are also covered in the above link.

One advantage of VAT grouping is that VAT grouping avoids a VAT liability on intra-group supplies.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.

Thank you, ***** ***** company was actually splitting in to two separate companies, but in the same VAT group, are there not restrictions about what is an 'allowed' separation of activities.

For example, if I had a UK business that I separated in to 4 separate companies, which each did the same thing but in the different UK territories - and each then had a turnover that fell below the VAT threshold, would these automatically be viewed together for VAT and Corporation Tax due to the same person running the companies?

So I guess what I mean is providing your companies are in the same VAT group, separating your business out in to different companies is OK?

Or, if they were not in the same VAT group - would they by default be viewed as a shared threshold for corporation tax etc and VAT because the same person is running both?

Thanks!

Expert:  taxadvisor.uk replied 2 years ago.

Sian, thank you for your reply.

[q]

if the company was actually splitting in to two separate companies, but in the same VAT group, are there not restrictions about what is an 'allowed' separation of activities.

[a]

there are no restictions.

You don't have to be in a VAT group to separate your business into different companies covering different territories.

You could have 4 standalone companies for that purpose. There is a difference between a group of companies for accounting purposes and a VAT group. VAT Group is covered in the link already provided.

Four companies owned by a same person would be associated companies for CT purposes. More information on it can be found here

http://www.rossmartin.co.uk/companies/running-the-business/650-associated-companies-new-rules

I hope this is helpful and answers your questions.

taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4786
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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