Reply to: Married Couple - 2 companies, same address

[DonaldG]

Two separate points here - regarding VAT and Corporation Tax.

First the more straightforward one CT - husband and wife both owning different companies are "associated" companies. This basically means the limit for the higher rate of corporation tax is halved from £300K to £150K for each company. Therefore if either company makes more than £150K then you are taxed on some of this at the higher rate of corporation tax at 28% (the calculation uses the marginal rate).

The second point on VAT is not so clear - you would have to prove that you are commercially separate businesses eg independence, separate contracts etc to get separate VAT numbers. The VATman may argue that for all intents and purposes you are really one company - the only real downside is that you wouldn't be able to register for FRS - i would suggest that you speak to your accountant regarding this.

A combined company wouldn't really help on IR35 as each contract is viewed independently.

[WindyAnna]

Yep, but I think what Robwg was trying to say is that it may be easier to satisfy a Right of Substitution if there is someone within the company to substitute. He may well be right, but the subsititute would not necessarily have to come from the same company - a subcontractor would work as well IMHO.

Indeedy

[Alan @ BroomeAffinity]

ISn't it the contracts that the company signs that matter rather than the fact that there are two of us?

Yep, but I think what Robwg was trying to say is that it may be easier to satisfy a Right of Substitution if there is someone within the company to substitute. He may well be right, but the subsititute would not necessarily have to come from the same company - a subcontractor would work as well IMHO.

[WindyAnna]

This covers CT:-

http://www.bytestart.co.uk/content/t...ompanies.shtml

However this really only made a difference when the 0% rate on 10k applied, now it's flat I can't see it makes any difference. Can't see it would affect the VAT flat rate scheme either, never used it but isn't it just based on turnover? 1 company at £100k or 2 at £50k, what's the difference?

Cheers for that - reason FRV is an issue is because it only applies to companies with a turnover of less than 150K - by being together we would blow that easily but separately Mr WA comes in a bit under that and so do I just about. It is more the hassle than anything else as well as the slight benefit!

Windy

[WindyAnna]

While you may save on Flat Rate - have you considered doing a joint firm for IR35 purposes? I would have thought a husband and wife team doing the same thing would have an excellent case for avoiding IR35 - particularly if either of you did a bit of substitution for the other?

I know I am planning on attempting a similar thing with my missus.

ISn't it the contracts that the company signs that matter rather than the fact that there are two of us?

[xoggoth]

This covers CT:-

http://www.bytestart.co.uk/content/t...ompanies.shtml

However this really only made a difference when the 0% rate on 10k applied, now it's flat I can't see it makes any difference. Can't see it would affect the VAT flat rate scheme either, never used it but isn't it just based on turnover? 1 company at £100k or 2 at £50k, what's the difference?

[Robwg]

While you may save on Flat Rate - have you considered doing a joint firm for IR35 purposes? I would have thought a husband and wife team doing the same thing would have an excellent case for avoiding IR35 - particularly if either of you did a bit of substitution for the other?

I know I am planning on attempting a similar thing with my missus.

[VectraMan]

I agree with Mr. X. I didn't join the FRS initially as an ex-director and current shareholder of another VAT registered company I didn't think I could. But some trawling of the website by me and my accountant and we agreed I was eligible.

It's not as simple as "they're two seperate legal entities so sod off". Remember FRS is a concession to save on paper work, it's not a right. In theory you don't lose out by not being on the FRS.

[xoggoth]

I had occasion to look this up once as I run a company with my sister and the related companies thing can apply not just if the companies are effectively related in business terms, sharing work for example, but by an actual relationship between the directors. A different address would not help. That's for CT purposes anyway, not sure if it applies to flat rate VAT.

However there are various conditions and extra statutory concessions. Best thing is just search for related companies on the HMRC webtulipe, it's all explained fairly well on there somewhere.

PS Not sure "related companies" is right search term. Anyone know the proper term? I've forgotten.
PPS It's associated companies. Darned if I can find it on that crappy site but it'sthere somewhere.

[BrilloPad]

Thanks all - advice was not from an accountant but from another contractor who says it happened to him. We have not got the same directors (me for mine, Mr WA for his), our clients are completely different, however we do both work in SAP.

WA

So you asked opinion from some contractor you met down a pub and took their word as true?

Next you will be asking an open internet forum for advice and believing it.....

[Alan @ BroomeAffinity]

I can't see how there could be any problems in that case.

The client I had split his business in 2 so that both sides would be below the VAT threshold (before we acted for him - not on my advice, btw). The VATman came in had a look, had a laugh and then made what I believe was called a complulsory partnership between the two entities.

[pmeswani]

Thanks all - advice was not from an accountant but from another contractor who says it happened to him. We have not got the same directors (me for mine, Mr WA for his), our clients are completely different, however we do both work in SAP.

WA

Personally I would see that as 2 separate entities. But that is based on my understanding of this thread and my somewhat limited knowledge of life in general.

[WindyAnna]

Thanks all - advice was not from an accountant but from another contractor who says it happened to him. We have not got the same directors (me for mine, Mr WA for his), our clients are completely different, however we do both work in SAP.

WA

[Alan @ BroomeAffinity]

If the VAT office can oprove that the 2 businesses are 1 business that has been artificially divided in order to save / avoid VAT then they can effectively put them both together. It happened to clients of mine years ago and I can't remember the full details. I think there needs to be common directors and ownership but I can't be sure.

If you can prove that they are two individual companies then you should be OK.

[pmeswani]

Me and Mr WA are both contractors. We are now both UK based so will need to wokr through UK Ltd (he was previously in Europe).

So, we have 2 limiteds - only I've been advised that HMRC will consider it to be one company in terms of flat rate VAT etc as we are married? Combined turnover would blow flat rate VAT.

Is this true? Can we register second company from any address (e.g. my parents)?

Thanks y'all

Windy

If your accountant told you that, then that is rubbish and should be sacked. The Flat Rate scheme is related to your business, not to the individual, regardless of who the Director of the business is and where the business is being run from. I reckon that your accountant is trying to find a way to reduce the workload.