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Well-intentioned efforts by parents to help their children can sometimes create a VAT problem
KEY POINTS
- VAT is a commonly overlooked tax when gifts are involved.
- The fact that business turnover is less than the registration threshold does not mean that there is no liability.
- Business splitting can be a high-risk strategy without arm’s length commerciality.
- HMRC can direct that several businesses should be treated as one where they are closely bound to one another by financial economic and organisational links.
- Business should be able to provide commercial justification when they provide sponsorship to related persons.
Several years ago I was asked to advise on a situation where a mother owned a commercial property that she was renting out to tenants. She was VAT registered and an option to tax was in place on the property which she...
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