My wife and I are both directors of the same limited company working for different clients. This arrangement has worked fine for many years and saved the expense of running two separate companies. However as a result of me finding a lucrative contract this year, we will go over the flat rate VAT limit and would therefore need to leave the scheme in September when we reach our anniversary of joining the scheme.
I’m keen to stay in the scheme as it has generated a few thousand pounds of extra profit each year
What do people think of this strategy:
1) I create a new limited company and we now separate our work going forward (my contract is due for renewal next month so this split could start asap)
2) My new company registers for VAT and joins the flat rate scheme
3) My wife's company would still exceed the limit this year but we would ask HMRC for permission to stay in the flat rate scheme on the basis that the lucrative contract for that company had now finished and future company earnings would definitely be below the limit. (the final VAT return before September would already show a marked drop in turnover after separating into two companies)
I understand HMRC does not like associated companies, but both our companies would be VAT registered, the work we do is very different (and for different clients), and one company would not be under the direction or control of the other. Even if HMRC refused to allow my wife’s company to remain in the scheme we would still be better off at least having one of our companies in the scheme.
What are people’s thoughts on that approach?
Thanks for your help!
I’m keen to stay in the scheme as it has generated a few thousand pounds of extra profit each year
What do people think of this strategy:
1) I create a new limited company and we now separate our work going forward (my contract is due for renewal next month so this split could start asap)
2) My new company registers for VAT and joins the flat rate scheme
3) My wife's company would still exceed the limit this year but we would ask HMRC for permission to stay in the flat rate scheme on the basis that the lucrative contract for that company had now finished and future company earnings would definitely be below the limit. (the final VAT return before September would already show a marked drop in turnover after separating into two companies)
I understand HMRC does not like associated companies, but both our companies would be VAT registered, the work we do is very different (and for different clients), and one company would not be under the direction or control of the other. Even if HMRC refused to allow my wife’s company to remain in the scheme we would still be better off at least having one of our companies in the scheme.
What are people’s thoughts on that approach?
Thanks for your help!
Comment