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Desirability of business splitting to save on VAT.
I act for a father and daughter who trade as architects through a limited company that is registered for VAT.
The father is concerned that they are losing out on lucrative private work for wealthy house owners because of the 20% VAT charge on their fees. He has suggested that they form a separate company (or trade as a partnership) for the private clients which would trade below the VAT registration threshold and therefore be a competitive entity in the domestic market.
I know that business splitting is something HMRC frowns upon – but what do readers think about the father’s suggestion? Is it a definite ‘no go’ area to be avoided at all costs and what would HMRC do if it doesn’t like the proposed arrangement? Is there a ‘best route’ we could adopt to keep both HMRC and my client happy?
Query 19 069 – Land Man.
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