# VAT Liability Question



## kkelliher (20 Jul 2012)

Quick Question which I hope someone can answer.

As a sole trader if you are VAT registered for your business and you decide to open a second business (again as a sole trader) in a different field do you need a second VAT number (assumeing you wish to register for VAT on the second business) or is it all done under the initial registration.


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## bazermc (20 Jul 2012)

One VAT number should be fine on the basis that the VAT number you have is attributable to the individual.  and the new business is trading under that name.  You might just want to keep records neat and tidy, assuming you are doing that anyway.  

Also I assume you are fully recoverable for - both businesses?

If you get into setting up companies and VAT registering them, than that is a different story.


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## Graham_07 (22 Jul 2012)

Sole traders can only have one VAT number for all the enterprises they engage in as sole traders.
Some activities may be VATable and some may be VAT exempt e.g. the publican (VATable) who also operates as an undertaker (exempt). Or the auctioneer (VATable) who also operates as an insurance agent (exempt). 
There are also other issues regarding the same sole trader carrying on sale of goods type businesses and service businesses and the relevant thresholds for each.


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## och aye (16 Aug 2013)

As a sole Trader with say three different business's 
ie, B&B, Hostel & Engineering
does registering for vat on say Engineering mean all three are vat registered or liable for Vat ?


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## bazermc (16 Aug 2013)

AFAIK it means the sole trader is registred which ever activities he carries on can be included.

However the rules around those seperate activities are vastly different  -rates, recovery etc.


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## och aye (16 Aug 2013)

Thanks.
Just to clarify 
can I register n apply Vat for the Engineering Business only ? 
and not apply Vat to the other Accommodation business's ?


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## Joe_90 (16 Aug 2013)

A sole trader who is registered for VAT is registered for VAT on all their trades. 

If you want to have one trade registered and others not, then you need to set up the engineering business as a partnership or a company.


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## och aye (16 Aug 2013)

Thanks.
That raises the query:
if my turnover  on Business No1 was 37k  (below vat threshold of €37500 )
why would I take the risk in setting up a second business with prospective turnover of say initially 5k 
n risk vat on 42k @ 23% n pay  €9660  vat ?


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## Crugers (17 Aug 2013)

Think you have the wrong end of the stick...
If you were selling 42k of 23%VATable goods you would charge your customers 42k+23% vat for them.
Then remit the 9.6k to revenue...


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## Joe_90 (17 Aug 2013)

Businesses that are around the VAT thresholds always face anomalies.

The VAT rate on B&B is 9% and you could recover VAT on purchases.  Clearly your customers can't recover the VAT so there is no opportunity to pass on the VAT or is there, are your rates cheaper than others because they are VAT registered and your not.

Assuming that the Engineering is business to business then you simply pass on the VAT to the customer.

If the engineering is going to be a reasonable business can you set up a partnership or company and keep the B&B separate. As this is a completely different enterprise the anti avoidance would not apply.


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## och aye (17 Aug 2013)

Thanks Crugers:
The point Im making is at 37k turnover no vat is paid to vatman ..gross37k (
at 42k turnover all subject to vat @ 23% ( I realise vat rates vary 9- 23%)
However on 42k T/O .....9.6k is owed to vat man.
leaving risk taker 4.6k worse off.


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## Joe_90 (17 Aug 2013)

The threshold is a concession by Revenue to reduce the admin burden on small business.

You have to accept that in your case your customers can't recover the VAT and you have no VATable inputs at all, this would be unusual.

Most businesses would pass the VAT change on to their customers who could recover it, and recover the purchase VAT so effectively end up in a neutral position.

As there is a method to keep your current business turning over €37,000 out of the VAT net and running you new business I think you should be ok.

You are at a competitive advantage to your competitors who have to charge VAT on their sales and have no VATable deductions,  perhaps they have a complaint too.


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## och aye (17 Aug 2013)

Thanks Joe 90.
You views probably come close to reflecting revenue stance on these issues.
Although it often depends who you speak to in Revenue or which accountant you ask.

Thanks again, appreciate


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## Compass (19 Aug 2013)

och aye said:


> Thanks Crugers:
> The point Im making is at 37k turnover no vat is paid to vatman ..gross37k (
> at 42k turnover all subject to vat @ 23% ( I realise vat rates vary 9- 23%)
> However on 42k T/O .....9.6k is owed to vat man.
> leaving risk taker 4.6k worse off.



I think you maybe missing something here - if your takings are for arguments sake, 37k on one business and 5k on another when you are not registered for VAT, then these takings will increase to 45.5k and 6+k when you are registered for VAT, based on a 23% VAT rate.

You charge your rate and add the VAT on, your customers pay the tax (or claim it against their VAT inputs, if they're VAT registered)

So, two things arise if you register for VAT:
1) the effective rate that you sell your goods/ services will rise and may put you at disadvantage wrt competitors.
2) you should put aside the VAT that you collect - don't be tempted to use it to pay bills & wages etc. The Revenue will coming looking for it and as you are basically a tax collector on their behalf - you'd better have it to hand when it's due! Unlike a certain well known politician!


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## och aye (20 Aug 2013)

Sorry, you can of course offset some outlays etc but 
that most important point...as mentioned above n earlier
you are approx 25% less competitive 
when u register for vat 
esp if you are a small business on the borderline of 37.5k


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## QED (29 Aug 2013)

Compass said:


> I think you maybe missing something here - if your takings are for arguments sake, 37k on one business and 5k on another when you are not registered for VAT, then these takings will increase to 45.5k and 6+k when you are registered for VAT, based on a 23% VAT rate.


 

Takings will only increase if customers are willing to pay!

- A VAT registered customer will be willing to pay because they can reclaim the extra VAT charge. 

- A Non-VAT Registered Customer might not be willing to pay, so gross selling price may have to remain the same and the Seller will have lower income to keep for themselves.

(I'm sure you know this but it may have been too simplistic to just say that your takings increase)


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## bazermc (30 Aug 2013)

Interesting VAT case below as detailed in a tax publication from Institute of Tax


The ECJ in the case of 
_Galin Kostov _confirmed that a VAT-registered
person is liable to account for VAT in respect of one-off supplies
made outside the scope of the business in respect of which the
person registered for VAT. This is so, even if the person would
not have been considered to be within the VAT net if the one-off
transaction were carried out when the person was not VATregistered​in respect of his or her normal business.
 ​


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