1. Taxable PersonsIt should always be remembered that it is a person that is registered for VAT and not a business. If a person has two separate different businesses, both with taxable supplies of £50,000, then that person will be required to be registered for VAT and account for VAT at the appropriate rate on the total supplies of £100,000.

    It is possible to mitigate the effect of VAT by having one of the businesses operated by a limited company or by a partnership with a relative, but professional advice needs to be taken since HMRC have the power to treat the two businesses as one if strict criteria are not met as they may argue that a single business has been deliberately fragmented to keep below the £85,000 threshold.

  2. Taxable SuppliesTaxable supplies are all supplies made by a business either to a third party or to the trader himself (goods for own use), which are not exempt supplies. Taxable supplies therefore include zero-rated supplies.

    The major categories of exempt supplies are:

  • Land (but not buildings)
  • Insurance
  • Postal services
  • Betting, gaming, and lotteries
  • Finance
  • Education
  • Health and welfare

It is important that at the outset of a business, a trader establishes the VAT status of any supplies being made to avoid mistakes, e.g. the services of a physiotherapist are exempt, whilst the services of an acupuncturist are standard rated.