Inter-company transfers and VAT - how to treat?

Inter-company transfers and VAT - how to treat?

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We act for some commonly (majority) owned companies and LLPs (some of which are VAT registered, some not because of exempt supplies).

One of the VAT registered companies employs someone who carries out work for all the companies, so the cost is shared.

There isn't any way of avoiding charging VAT on the cross charges is there? Even if no profit element (straight recharge of cost)?

The other alternatives are to employ the person in one of the non VAT registered companies, or to have the person employed a little by each company/LLP (but NIC would need considering), or stand that VAT cost.

Thanks for any suggestions.

Replies (4)

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By andrew55
10th Jul 2014 14:18

Joint contract

The answer here is to have the employees contract drawn up so all the companies are their joint employer.

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Replying to J accountant:
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By newmoon
10th Jul 2014 14:22

Can that be done with the payment going through one PAYE scheme?

andrew55 wrote:

The answer here is to have the employees contract drawn up so all the companies are their joint employer.

Thank you.  Is that effective with the whole payment going through one PAYE scheme? 

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By andrew55
10th Jul 2014 14:31

Yes I believe so

As far as I am aware this is fine and I have certainly seen this pass muster in the past. The point is that one company operates the PAYE scheme for simplicity but because all companies are legally employing the staff member they are reimbursing their share of payroll cost and not paying a VATable recharge.

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By newmoon
10th Jul 2014 14:41

Thanks

That's great thanks. I've been looking at HMRC 'Aggregation of Earnings' regulations, which is aimed at preventing avoidance of NIC where multiple jobs within associated employers, but haven't found an example where HMRC suggest on PAYE scheme is used.

Anyway what you suggest sounds good. Thanks

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