Readers’ forum: Tax construction

My client Bloggs Ltd is a successful scaffolding company with a turnover of more than £1m. The director has now been approached by a prospective customer to carry out a substantial roofing contract which by itself should be worth about £1m.

The director has asked me whether he should form a separate limited company (say Bloggs Roofing Ltd) or simply put the income and expenses for this work through the scaffolding company? My immediate response would be to put the sales through Bloggs Ltd because this saves administration and other costs. However I am now wondering whether Mr Bloggs should form a holding company that owns 100% in Bloggs Ltd and 100% in Bloggs Roofing Ltd.

Could Taxation readers let me know what the potential advantages and disadvantages of such a plan would be from a tax and VAT point of view.

Query...