Businesses bartered battered fish

An interesting case highlights how VAT accounting can became confused when various closely linked but separate businesses trade from the same building, swap goods and make purchases on behalf of each other. It’s an interesting scenario too, involving fish and chips, ice cream and alcohol!

VAT risks associated with family trading

A challenge for tax advisers when there are a number of family-linked businesses trading closely together is to look at the potential VAT risks associated with such arrangements. This usually involves checking that the following two objectives are met:

  • input tax is claimed by the correct business on expenses that are directly related to the taxable supplies made by that business; and
  • output tax is correctly charged on any goods or services that are supplied from one business to another.

The four businesses

The lovely seaside resort of Swanage has a building on the seafront with four businesses, all trading independently but with close family links:

  • A fish and chip take-away kiosk – VAT registered.
  • A restaurant selling fish and chips and drinks, including alcohol – VAT registered.
  • An ice-cream parlour – not VAT registered.
  • Freehold of building – not VAT registered.

Input tax challenges

The VAT case mainly concerned the partnership who operated the kiosk. HMRC disallowed input tax claimed over a three-year period on two categories of expenditure:

  • Alcoholic drinks: £20,904 – the VAT officer said these were relevant to the restaurant, not the kiosk.
  • Building costs: £12,966 – HMRC claimed was a capital cost relevant to the freeholder/landlord of the building – again, not the kiosk.

The alcohol issue

Evidence was given that the kiosk sold alcohol as well as seafood, so at least some of the input tax claimed related to that business. HMRC was strangely unaware of this fact until the tribunal hearing.

The taxpayers argued that the rest of the input tax was claimable because it related to onward supplies made to the restaurant, which were paid for by supplies of fish and chips made by the restaurant to the kiosk. The tribunal agreed this and separate output tax assessments were therefore needed on these ‘barter’ supplies (which became input tax claims of the other business). Confusing?

The building costs

The tribunal decided that the costs assessed by HMRC were ‘occupant costs’ rather than ‘landlord capital costs’ and that one-third of these costs was relevant to each trading business.

Conclusion

It looks as though the HMRC officer was unclear about the overall trading operation here. The approach should have focused on making sure that neither of the two VAT registered businesses were claiming input tax on costs relevant to the two unregistered businesses. Output tax had not been accounted for on onward supplies to the unregistered businesses, but the VAT officer ‘got bogged down’ worrying about the supplies of alcohol between the kiosk and restaurant.

This is a complex and confusing scenario – and one that you can avoid if you’re involved in a similar situation by simply calling us. We’ll make sure your business paperwork is correct and you pay the VAT you owe and not a penny more.  Call us on 020 8530 0720 or email social@nordens.co.uk to find out more.

You can read the original AccountingWeb article by Neil Warren here.

Beyond Accountancy

At Nordens, we're more than just accountants - we're business experts who can help you achieve your biggest goals.

Nordens Strategic

Our specialist strategic division at Nordens boasts some of the leading entrepreneurial business minds in the country. We cater towards delivering consistent success stories, whilst helping businesses achieve above and beyond their initial goals.

Through highly-tailored guidance, coaching and advice, Nordens Strategic are able to define exactly how your business can reach new levels of success.

Regardless of how you define ‘success’ for your business, our strategic service is guaranteed to bring about real and lasting change. By partnering with some of the UK’s top business coaches, we’ll steer you along the path to a greater future.

Accounting 2 You

Every business, no matter how big or small, needs to make the right decisions, and how to best manage your accounts can put huge question marks over your business. Accounting2You is here to take that pressure off and provide you with all the answers you need.

Our bookkeeping branch offers a fully inclusive, comprehensive service that you can trust. Since 2005, our specialist bookkeepers have been successfully managing the accounting of both individuals and small businesses.

With experts in payroll analysis, credit control and financial recording, Accounting2You will lead your business efficiently, and with real purpose, towards a prosperous future.

Voted as EXCELLENT - 9.9 out of 10 based on 164 reviews

<
Chris Dyer

Director - Metro Bank

Nordens are always very easy to deal with and extremely professional and efficient. I would have no hesitation in recommending them to my clients for their accountancy needs, no matter how complex they may be.

Read more reviews on Trust Pilot

Jamie Brown

Co-Founder - Chicmi Limited

Very good to work with - the team go above and beyond to make the accounts easy and efficient. They're all super friendly and a joy to work with.

Read more reviews on Trust Pilot

Simon Rose

Director - Rose Opticians

I have been using Nordens Chartered Accountants for 5 years and very happy with the service provided. All members of the team are very knowledgeable and have a wealth of experience which has proved very beneficial to my organisation

Read more reviews on Trust Pilot

Rebecca Bossick

Founder & Director - Physio LDN

Very easy to contact and put me in touch with the right person whenever I need to ask any questions. Extremely knowledgeable and can help me manage my various businesses whenever I need.

Read more reviews on Trust Pilot

James Aconley

Principal - Pauline Quirke Academy

Great accountants, always available to offer advice. The team have transformed my business.

Read more reviews on Trust Pilot

Christopher Wilce

Founder - Dataphone

Having worked with Nordens over the last 5 years, not only to look after my annual accounts but they have also provided outstanding professional advice. They have guided me through a Company share buyback with clear and objective advice. We have also been using Nordens strategic services for a couple of years, which has helped bring about significant improvements that exceeded my expectations. With experience of working with several local accountants over my 29 years in business, I’m very pleased with the service I have received from Nordens.

Read more reviews on Trust Pilot

Dave Hodges

Director - Linekers

Trusted our business with Nordens for over 10 years now and watched the company grow into the successful innovative business it has become today. Deservedly so. Every aspect of financial advice we need is always given promptly and with a smile. We have total confidence in all aspects of advice Nordens give. If you are looking for accountants, its a no brainer!

Read more reviews on Trust Pilot

Tony Charles

Founder - Foundation Sports Limited

A fantastic, modern, vibrant firm that care about the clients and their staff in abundance. It is rare to find an Accountancy firm with such vibrance and focus and relationships. It is no wonder they win award after award in their field.

Read more reviews on Trust Pilot

Peter Horlock

Managing Director - Prime Time Boilers

I have been with Nordens for many years now and they are a great accountants.

Read more reviews on Trust Pilot

Simon Cushing

Founder - Vivid Finishes

We have used Nordens for the last 5 years and have had a great service throughout. The guys are very passionate about what they do and have played a part in the growth of our company, highly recommended.

Read more reviews on Trust Pilot

Andrew Martin

Managing Director - AMD Interior Architecture

Great Service at Nordens from a friendly very approachable team Particularly Kirsty Willis and Joe Sword who have been helping us since we started the business in 2016.

Read more reviews on Trust Pilot

James Robinson

Director - Forma London

Nordens provide a first class service. We moved to Nordens last year and have been impressed with the level of service provided. Keep up the good work!

Read more reviews on Trust Pilot

>
Latest News

We've always got our ears to the ground when it comes to interesting, useful and topical information relating to business and accountancy.

Nordens Chartered Accountant and Business Advisers | Strategic Business Planning | London | Essex | Award winning accountant
Escape From Your Ex-partner’s…
Do you dream about selling your business? Could you retire to your perfect home, take those magical holidays and generally chill out, content that you’ve got enough in the bank to see you through? Or you may fancy selling up an...
Nordens Chartered Accountant and Business Advisers | Strategic Business Planning | London | Essex | Award winning accountant
How Two Capital Gains…
If you’re in a stressful situation such as you’re getting divorced or have had to move due to a disability, the last thing on your mind is likely to be a tax bill. It’s certainly not something that would cheer anyone up at the ...
Nordens TV

We love making videos that break down convoluted accountancy jargon into plain-talking, actionable and accessible facts.

SEIS Video
The SEIS Scheme
Achieve huge tax savings by investing through the SEIS scheme Many small businesses need to raise investment or finance, and the SEIS scheme is a brilliant way to do this. SEIS - otherwise known as the Seed Enterprise Invest...
Inheritance Tax Video
What Is Inheritance Tax?
Safeguarding your loved ones against paying too much inheritance tax If your estate is worth more than £325,000 when you die, your heirs will have to pay inheritance tax on everything over that amount - but they will pay nothi...
  Why I Founded Nordens
Accounting 2 You

In November 2002, having sold our other business interests off earlier in the year, I decided to set up Nordens Chartered Accountants. The easy part was knowing how to do it, as I had established and built a smaller practice a few years earlier. The difficult part, for me, was not following the traditional accountancy path. Having run businesses, both successfully and unsuccessfully, I wanted to help business owners resolve their short term problems and work with them to achieve their longer term goals. Business has always been my interest and I love that I can help business owners achieve what seems like the impossible every single working day.

Mark Norden Signature

Mark Norden
Founder

We're Professionally Certified

Our limited company accountants have a range of qualifications from The Institute Of Chartered Accountants (ICAEW) to the Association of Chartered Certified Accountants (ACCA). We worry about the bye-laws, regulations and ethical guidelines of the ACCA so you don’t have to! That makes us an ACCA-accredited employer as well as a Professional Passport-accredited one!