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Can a small business be divided between family members to avoid VAT?
I have a client who runs a coffee shop in a small market town and the business has just exceeded the VAT registration threshold. The coffee shop opens seven days a week the lease is in the client’s name and she trades as a sole trader.
The loss of margin as a result of VAT registration will be considerable and the following suggestion has been made – although I am not sure by whom. The proposed plan is that the client should trade from the premises for only five days a week. She would then charge a rent to her daughter who would trade for the other two days.
The result will be that there are then two sole trader businesses each trading independently and each is below the VAT threshold. The daughter has a good knowledge of the shop because she has helped her mother there for the...
