Davey M started this topic @ 12:38 on 06/10/2006
I am looking at investing in a franchise. The business model suggests setting up two companies (one Ltd and a sole trader) to allow both companies to remain under their respective VAT thresholds. They are of course connected (doing different aspects of the business) but the franchisor assures me that his is a legal loop hole. Can any one adivse me.
RE: VAT Threshold - disaggregation
safenet | 07/10/2006 12:15 AM
Sounds dodgy to me but I am no accountant. If I were you I'd speak to one to clarify the situation - you don't want the revenue knocking on your door.
If you're doing B2B stuff it may well benefit you to register anyway as you can reclaim VAT on your purchases and the businesses you are selling to are likely also to be able to do the same. The VAT return also isn't that complex.
Cheers
Chris
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RE: VAT Threshold - disaggregation
bhimalhira-associates | 08/10/2006 08:10 PM
Again, im no accountant, but sounds dodgy to me too.
By setting up two companies just stay under the VAT threshold could be seen as trying to evade paying VAT/Tax etc.
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RE: RE: VAT Threshold - disaggregation
James Smith | 09/10/2006 11:34 AM
Well you can actually do this but often its a real pain trying to keep it all separate and the right side of the law. Tou need an incredibly good reason for doing this as it is quite costly in extra time and fees etc for having the extra entities books sorted out etc.
This is certainly not something to muck about on by yourself - certainly don’t trust a franchise for tax advice!
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RE: VAT Threshold - disaggregation
fastfences | 09/10/2006 06:18 PM
Hi Davey,
At first glance this seems fraught with danger. James' post above, has glossed over the 'legals' but I think if james were to look deep into this he may well advise to exercise extreme caution.
Firstly, If the franchise is being purchased as a single entity, you will then be demonstrating that you've 'split' it, and will have to have a very good reason why.
Secondly, the advice suggests that the franchise must be turning over well in excess of £62K; have you seen figures yet?
Have you spoken to other franchisees of the company?
Is the franchisor BFA (www.british-franchise.org ) registered?
You need to do heeps of homework on this.
Cheers, Nigel
fiorstly
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