Commentary

V2.223 Single or separate businesses (including disaggregation)

Part V2 Registration – deregistration

V2.223 Single or separate businesses (including disaggregation)

V2.223 Single or separate businesses (including disaggregation)

This paragraph examines when businesses are to be treated as single or separate for VAT purposes. In particular it covers:

  1.  

    •     the status of businesses carried on by related or connected persons

  2.  

    •     business splitting/disaggregation

For an overview of VAT and business more broadly, see V2.201B.

Businesses carried on by related or connected persons

Problems may arise where businesses or the persons carrying on businesses are related in some way. It may be difficult to determine whether a single person is carrying on one or more businesses, or whether a number of persons are carrying on one or more businesses. This question is likely to arise, in the main, where goods or services are supplied directly to a person who is unable to recover any VAT which may be chargeable. Predominant in this category is the retail sector (as illustrated, for example, in SN Khan1).

Example

X is a hairdresser with a turnover of £90,000. He is therefore required to be registered for VAT, and consequently his net (ie VAT exclusive) turnover, assuming a VAT rate of 20%, is £75,000.

Y is also a hairdresser who operates from premises on Mondays, Tuesdays and Wednesdays. His turnover is £45,000 and he therefore has no liability to register for VAT.

Y's wife, Z, operates from the same premises on Thursdays, Fridays and Saturdays. Her turnover is also £45,000, and she similarly has no liability to register.

Assuming the above arrangements are tenable, and all other circumstances being equal, Y and Z have

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