Readers’ forum: Business splitting to save VAT for kitchen fitters?

I act for four brothers from the same family. All are sole traders trading as kitchen or flooring fitters and they are trading close to the annual VAT registration threshold of £85 000; this is partly because of the kitchen units and flooring materials that they source for their customers and then invoice on. They apply a mark-up to the goods which is an important source of profit.

My question is as follows: if their mother set up her own limited company to buy the materials from the suppliers – registering for VAT from day one – would it be legitimate for customers to trade with her company in respect of the material purchases and with her sons in respect of the fitting costs? In other words would there be a problem with HMRC’s business splitting VAT rules? All of the customers are residential so are unable...