Debitoor Dictionary

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  1. Joint venture
  2. Partnership
  3. VAT
  4. VAT registration

Joint venture for VAT – What is a joint venture for VAT?

A joint venture for VAT is a situation in which two parties are considered one legal ‘person’ for tax purposes.

From April 2019, all VAT-registered businesses will be required to report their VAT via online software. Find out more about Making Tax Digital software and how it can help your business.

Individuals, organisations, and companies sometimes collaborate with other parties in order to achieve specific goals (such as developing new products or services, moving into new markets, and expanding existing businesses). This is known as a joint venture.

Although the parties involved in a joint venture remain separate organisations under their own management, under some circumstances, joint ventures will handle their VAT as one legal ‘person’ that has its own VAT number and is responsible for submitting VAT returns to HMRC.

As a ‘legal person’, a joint venture for VAT is considered to be a new entity that is distinct from the people or organisations that make up the joint venture.

The parties involved in a joint venture for VAT will therefore still manage their own VAT for any business activities that are not related to the joint venture.

Partnerships and joint ventures for VAT

HMRC will sometimes consider joint ventures to be a kind of partnership, which has implications for the way these joint ventures handle their VAT.

HMRC’s criteria for being a partnership for tax purposes is based on how closely the parties work together, whether they divide costs, and whether they share profits, rather than whether there is a written agreement acknowledging the partnership.

If a joint venture meets this criteria, it is considered a joint venture for VAT and will therefore need to process any VAT related to joint activities through a new VAT account.

Registering as a joint venture for VAT

Joint ventures that are considered partnerships for VAT purposes need to follow the same rules as any other business or organisation in regards to VAT registration.

This means that joint ventures need to register for VAT once their taxable turnover crosses the VAT threshold. In the 2018-2019 tax year, the VAT threshold is £85,000. You can calculate your joint venture’s taxable turnover by adding up the value of everything you sell that isn’t exempt from VAT.

The majority of joint ventures for VAT will be able to register online. After registration, you will be send a VAT registration certificate that confirms:

  • Your VAT number
  • When you should submit your first VAT Return
  • Your ‘effective date of registration’.

Joint ventures supplying goods and services

If the joint venture isn’t considered a partnership, the guidelines for handling VAT are much more complicated and depend on whether the joint venture supplies goods or services. HMRC has detailed guidelines on how joint ventures should handle the joint supply of goods and the joint supply of services.