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VAT registration avoidance

I’ve been running a bed and breakfast for a few years now, and my turnover to March was just over £60k. I therefore fear I may breach the VAT registration threshold soon, so could I split the business up and deem a portion of it to be my husband’s? My husband has a full-time job and does very little to help with the business.

Firstly, let me start by making you aware that the turnover limit for VAT registration is for any consecutive twelve months; not the turnover during your accounting period nor the turnover in the tax year. Therefore, as you are getting close to the threshold, you must ensure you review this at least every month. Late registration can lead to penalties and interest.

In answer to your question, business activities cannot be ‘artificially separated’ in order to avoid VAT registration. And HM Revenue & Customs even go as far as to specifically list the bed and breakfast trade as a sector where artificial separation is a common tactic.

If you deliberately avoid registering for VAT, you may be liable to a penalty. For serious offences, you could even face prosecution. HM Revenue & Customs have also recently launched their VAT Initiative Campaign, which is essentially an amnesty for traders to come forward and admit they should have been VAT registered, so VAT is a hot topic at the moment.

If you are concerned about breaching the VAT registration threshold and the impact it would have on your business, contact your local TaxAssist Accountant for further advice.

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0800 0523 555

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