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inter-company payments on behalf of other companies

Hi all

I do accounting for a group of companies, all of whom are under the control of a group of 4 directors. There are often transfers of money between the companies in order to help pay off invoices etc, and usually this is a simple transfer of money on a tax code of T9 (no tax paid on these transfers) as opposed to the most used tax code we use of T1 (17.5% VAT). One of the companies does very little trade (say company A) and has few invoices, but recently we made a payment to company X which was more than the amount of money sitting in its bank account. My director told me to simply make a payment directly from our company B's bank account. However, now I can't clear the outstanding invoices on company A's account with differeing tax codes; there is an internal credit note on our account with company X for the amount that I wanted to pay (it covered about 5 invoices) which goes to the nominal code that we use for intercompany transfers. This credit note has a tax code of T9 relating to the untaxed transfer. However, now I can't pick up that credit note and allocate it to the 5 invoices, as they are standard tax invoices from the supplier, company X, on a tax code T1, so they can't be paid off with the internal credit note. Is there a way to do this?

I can't really receipt a payment directly into company A's account as that isn't what happened, the money left company B's account to pay company X on behalf of company A. Anyway, it would be on a T9 tax code, and I couldn't then apply any money to the invoices as there would be no money leaving company A's bank account to be applied to these 5 invoices in the bank rec.

I am fairly new to accounting, as is probably obvious, so any help, in fairly simple terms, would really help!

thanks
Charlotte

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By David2e
02nd Nov 2007 07:19

Clearing in Sage
Hi Charlotte

This sounds like a Sage thing, that is what you are using?

In the past to clear these we would allocate a T1 tax code but manually adjust the tax to nil.

Then you will be able to allocate a credit note in the correct amount to clear the invoices.

Do let me know if that solves your problem, I think it should.

Kind regards

David Toohey
The Accountants Circle

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02nd Nov 2007 16:33

Intercompany loan accounts
Personally I would open a set of intercompany loan accounts in the balance sheets of each company and every time funds are moved between companies (T9) simply park the funds there, then settle creditors accounts cleanly in each company. Separating the intercompany movements in your mind, from the settling of creditors accounts may help. It would probably be easier to track the funds and the balances due between your companies if you move round sums (multiples of 100s of 1000s) instead of bits and pieces to match invoices and credit notes here and there.

I would be very inclined to talk to your company's accountants to see what their recommendations are for your circumstances as there are probably corporation tax implications when you move funds between companies - but I admit I am not an expert in this area.

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