Commentary

V7.189A Disaggregation—definition of an 'artificial' scheme

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.189A Disaggregation—definition of an 'artificial' scheme

Part V7 Tax planning | Commentary

V7.189A Disaggregation—definition of an 'artificial' scheme

The dictionary definition of 'artificial' is something that is not real. In effect, therefore, the key question an adviser should ask when discussing the separation of business activities with a client is:

“Is this a genuine business arrangement made for commercial reasons and with commercial motives – or is it an artificial measure designed to avoid paying VAT?”

Consider Example 1 below.

Example 1

Mr A owns 12 laundrettes, each with taxable turnover of about £60,000 per year. Each laundrette operates in a different town, under the trading name of 'Keep Clean'.

Mr A decides to set up a

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