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Partnership between two Ltd Companies

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    #11
    Originally posted by dynamicsaxcontractor View Post
    I did exactly this and got stung by the HMRC as they claimed the companies were associated and therefor I was kicked off the VAT flat rate scheme. Reading the rules strictly speaking I shouldn't have been kicked off it, but you try to argue with the HMRC. I proved several times I should not be kicked off but they found another reason why this was not allowed. In the end I surrendered as I didn't fancy them kicking off another investigation.

    Would I do it again? Absolutely not.
    I also did something similar, but never had an issue with VAT. I did note the rule about "connected companies" (I think those were the words) but it didn't seem to apply.

    If it's a separate income stream it makes sense to start a new company, but I would just pay yourselves dividends from that company rather than routing it via your contracting company as consultancy fees. Alternatively just have an agreement between the two of you. Of course all of this is great as long as you stay friends, and then becomes a nightmare as soon as you fall out.
    Will work inside IR35. Or for food.

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