{"id":468,"date":"2018-01-12T00:00:00","date_gmt":"2018-01-12T00:00:00","guid":{"rendered":"http:\/\/taxbak.co.uk\/index.php\/2018\/01\/12\/vat-what-is-disaggregation\/"},"modified":"2018-01-12T00:00:00","modified_gmt":"2018-01-12T00:00:00","slug":"vat-what-is-disaggregation","status":"publish","type":"post","link":"http:\/\/taxbak.co.uk\/index.php\/2018\/01\/12\/vat-what-is-disaggregation\/","title":{"rendered":"VAT &#8211; what is disaggregation"},"content":{"rendered":"<p>There are many businesses that benefit from not being VAT registered. In the UK, there is no obligation to register until your taxable turnover exceeds &pound;85,000. For many smaller businesses, especially those that buy and sell goods and services in competition with larger concerns, charging their customers without the 20% VAT add-on can be a compelling advantage especially when they are selling to the public, who can&rsquo;t reclaim the VAT they would otherwise be obliged to pay.<\/p>\n<p>There is a temptation for traders who want to capitalise on this competitive advantage, to split off parts of their business into a separate trade if VATable turnover was likely to exceed the &pound;85,000 registration limit. In this way, the two businesses could bill up to &pound;85,000 each and therefore double their advantage in the market place.<\/p>\n<p>Unsurprisingly, HMRC are not keen on this strategy and the disaggregation &ndash; business splitting &#8211; rules basically outlaw this attempt at avoiding VAT registration.<\/p>\n<p>To challenge this type of arrangement, HMRC need to be able to prove that the two (split) businesses have &ldquo;financial, economic and organisational links.&rdquo; For their challenge to work, HMRC must prove that all three apply.<\/p>\n<p>In practice, this still offers planning opportunity for smaller businesses, but to be successful achieving the necessary arms-length outcome can be difficult especially if family members are involved. There are other issues that need to be considered. For example:<\/p>\n<ul>\n<li>Separation of bank accounts and business records.<\/li>\n<li>Each business must be separately registered with HMRC and submit its own tax return.<\/li>\n<li>Customers should be convinced that they are dealing with two businesses.<\/li>\n<li>Any charges for goods and services between the split businesses must be conducted at arm&rsquo;s length.<\/li>\n<\/ul>\n<p>Traders who are approaching the registration threshold, and would like to consider splitting off part of their trade to a separate business, should undertake careful planning to avoid the disaggregation rules, if that is possible. Please call if you would like to discuss your options.<\/p>\n<!-- -->","protected":false},"excerpt":{"rendered":"<p>There are many businesses that benefit from not being VAT registered. In the UK, there is no obligation to register until your taxable turnover exceeds &pound;85,000. For many smaller businesses, especially those that buy and sell goods and services in competition with larger concerns, charging their customers without the 20% VAT add-on can be a [&hellip;]<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-468","post","type-post","status-publish","format-standard","hentry","category-uncategorized","blog-left-layout","blog-style-postblock","","blog-alt-odd"],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","_links":{"self":[{"href":"http:\/\/taxbak.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/468","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/taxbak.co.uk\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/taxbak.co.uk\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"http:\/\/taxbak.co.uk\/index.php\/wp-json\/wp\/v2\/comments?post=468"}],"version-history":[{"count":0,"href":"http:\/\/taxbak.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/468\/revisions"}],"wp:attachment":[{"href":"http:\/\/taxbak.co.uk\/index.php\/wp-json\/wp\/v2\/media?parent=468"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/taxbak.co.uk\/index.php\/wp-json\/wp\/v2\/categories?post=468"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/taxbak.co.uk\/index.php\/wp-json\/wp\/v2\/tags?post=468"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}