Couples: income splitting and VAT.  VAT Flat rate scheme discounts. Increase in time to claim pre-registration inputs.

Income splitting and VAT
A business cannot be split into two or more separate businesses to avoid VAT registration because under VATA 1994 Schedule 1, paragraph 2, HMRC has the power to treat two businesses as one taxable person. This can create a problem when two businesses are run under the same roof as may occur when there are entreprenuerial families, for example if husband runs one business and his wife a different one.

A recent tax case PC & VL Leonidas [VTD 16558] highlights this problem. However, when the record keeping muddies the waters HMRC has the power to seek a retrospective date of registration.

VAT Flat rate scheme:1% discount
When a business has insignificant vatable inputs, perhaps because it is based at home, the VAT flat rate scheme may be attractive, especially when a 1% discount is given in the first year of registration.

Pre-registration input tax
From 1 April 2009 the time period in which you can reclaim VAT on assets and stock is increased from three to four years. However, as this only applies to purchases made on or after 1 April 2006, so this means that the four year claim back period will only start to apply to businesses registered on or after 1 April 2010.

VAT top tips: abridged by us, but provided by Neil Warren, Taxation magazine 7 January 2010