separating business activities to avoid vat

[Accountancy]

I run events from a pub that has a function room, they supply, food, beer and charge us room hire as well.

They are going to start a second limited company that will not be vat registered so that they can avoid paying the vat on any events in the function room.

Is this legal to do ?

[Marie Stein]

Hi Zatherus

Yes, it’s illegal. And HMRC will take action to recover the VAT as and when they become aware of the situation.

I’ve written a number of articles about this subject here on the website and the issue often comes up on the forum – here’s a typical query and reply where I’ve gone into the subject in more detail that you may find interesting: https://vatexchange.co.uk/node/309.

I do have some sympathy for small business owners dealing with VAT on on small business activities, but at the end of the day, they could end up paying a lot more in unpaid VAT, penalties, interest on unregistered activities as and when HMRC find out. The pub owners should make sure that they are taking advantage of all of the legal ways to minimise their VAT bills, particularly by ensuring that they are claiming back all of the input tax they incur and using the Flat Rate Scheme or retail schemes to minimise their VAT liability.

Marie

[Author]

Posts