Separating Businesses

23 May 2002 / Neil Warren

Categories: Comment & Analysis , VAT

NEIL WARREN looks at recent case law on artificial separation of business activities, and the impact of the new human rights legislation on Customs' attempts to ensure the maximum VAT yield is obtained in this area

IN THE EARLY 1990s there was a famous case of a launderette proprietor who had twelve different outlets in twelve different towns each with a different trading name each trading under a separate limited company. The aims of such an arrangement were clear: each of the shops traded below the VAT registration threshold and therefore none of the companies had a liability to VAT.

Such schemes presented a nightmare situation for Customs. This was not just because of the massive loss of tax being suffered but also because of the potential complaints from other launderettes who were suffering a competitive disadvantage by having to charge VAT on their supplies while a competitor trading on exactly the same footing did not. In golfing terms Customs needed to keep the club members happy rather than the occasional paying guests.

Fair play

Customs originally thought...

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