View Full Version : VAT and income tax question

08-08-2011, 12:53 PM
We are thinking of buying a B & B with a shop and cafe. Are we better to put half the business in my name and half in my husbands. The VAT threshold is around the 70,000 mark, would that enable us to go up to the 140,000 mark without having to register for VAT ? Are we better to do this for income tax purposes too ?

08-08-2011, 11:41 PM
Welcome to the forum stacky. This is far from my expertise, but since no one else had responded I thought I would in the hopes it would get the attention of someone who knows more than I do.

VAT isn't something I'm familiar with, but I'm doing a little searching now. It sounds like what you're thinking of doing is fairly common. If I'm understanding right VAT is comparable to a sales tax so I'm not sure that it affects your income tax. I'm guess, but I would think your combined income would be the same regardless of whether or not you split the business or keep it as one.

Am I right in saying that if you don't have to register for VAT you don't have to collect any kind of sales tax? The obvious advantage then is not having to pass that tax on to your customers, which I would think could result in more business. Whether or not the extra income tax from the greater business is more than the VAT payments would have been I don't know. I also don't know if there's any kind of stigma attached to not registering.

Having said all that I'm not an account and all my taxes have been filed in the US. Please don't trust anything I said above. I'm mainly rambling a bit in the hopes that someone who knows more finds the thread now that it's risen to the top of the new posts list again.

08-09-2011, 08:43 AM
I am not familiar with the intricacies of VAT, and what it may be applicable based on the laws of your country. Every country is slightly different. Wish I could be of more assistance.

08-09-2011, 09:34 AM
Hi there stacky,

I believe from a VAT point of view that you register yourself, not the business. So unfortunately, I'm not sure your method would double the allowance :)

The current VAT registration limit is 73,000 - but there are benefits of registering before this level, which are highlighted in this article (http://www.wisteriaformations.co.uk/articles/index.php/do-i-need-to-register-for-vat-and-paye/). It does mention PAYE as well, but has some useful tips and links with regard to VAT.

Hope this helps!