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Can a new business be subdivided to mitigate the impact of VAT?
I have been asked to act on behalf of a new client who is starting to import and sell clothing. She can sell either to individual customers – perhaps online at first – or to other retailers who will apply a mark-up and sell in their shops.
Ideally the client would like to sell to retailers on the basis that they will make multiple purchases. However initially and while demand is built up more immediate sales may be obtained by selling directly to individual customers.
We assume that most shops will be VAT-registered so VAT could be charged by my client and recovered by the shop before charging it on the sale to their customer. But for sales to individuals the VAT will represent a straight deduction from profit.
The inevitable questions are whether these activities could realistically be separated and whether this would be achievable...
