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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Can a Franchise (with a turnover of less than £100k) join

Resolved Question:

Can a Franchise (with a turnover of less than £100k) join the Flat Rate Vat Scheme. Would it not satisfy the 'business being closely linked with another business' rules?
Submitted: 1 year ago.
Category: Tax
Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your question..

A franchise with a turnover of less than £100k can join the Flat Rate VAT Scheme.

Section 3.8 of VAT Notice 733 covers the point about "business closely linked with another business" and the llink is here

https://www.gov.uk/government/publications/vat-notice-733-flat-rate-scheme-for-small-businesses/vat-notice-733-flat-rate-scheme-for-small-businesses#what-if-my-business-is-closely-linked-with-another-business

You would be paying a fee to the franchisor for a licencsed privilege to the franchisee to do business.

This does not make you associated with another business for Flat rate VAT Scheme purposes.

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 1 year ago.
But in Section 3.8 it states that a company cannot exert a dominant influence over a vat registered business. Reading a Franchise agreement they are giving so many directions and restrictions, is that not giving directions and influence ?
Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your reply.

A franchisor would always have tight clauses in an agreemnet as you are using their name/expertise. As far as the day to day running of the business goes, if you mess it then they are not going to bail you out..as you are the risk taker. In my view section 3.8 does not cover your scenario.

I hope this is helpful.

taxadvisor.uk and 2 other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 1 year ago.

I thank you for accepting my answer.

Best wishes