UK Incorporation & VAT Questions

May 8, 2012
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Hi - I started a number of e-commerce subscription based services that are just starting to take of.

I am thinking of incorporating a Ltd company or companies in the UK to manage these and have a few questions I hope someone can help with.

1. If the companies are not VAT registered then is it correct that I do not have to charge my online customers VAT?

2. If I have, say, 3 trading companies that each run a separate e-commerce service and they individually do not earn more than the VAT threshold but collectively they do would they need to register them for VAT purposes? The only link between them would be that I would be a Director of all 3.

3. If I go the above route and have say 3 separate trading companies would there be any advantage to having a 4th holding company that owns the shares of the other 3?

4. I currently own the service websites etc - how would I go about transferring ownership of these assets to the trading companies? Can I 'sell' them on for a nominal amount of a £1 or similar?

Many thanks for any help or advice!!!


May 6, 2012
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Some responses outlined below:

1) Yes you are correct here.

2) You must be very careful in separating your company into smaller companies to avoid charging VAT (I'm not saying you have done this necessarily and I'm simply advising on face value). This is not permitted and HMRC have the power to decide that the separate businesses are in fact one business and will ask you to register for VAT.

Avoiding VAT is a serious offence which can lead to fines and even prosecution.

On the other hand, if there is no genuine link between the companies and they are all very different then you're likely to be ok with your plans. I would advise you to set up three separate limited companies owned by you to demonstrate that they are in fact separate entities for VAT purposes.

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