Management charges between companies

Management charges between companies

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Hi everyone,

2 companies, both VAT registered and under common control.  All salaries for directors/admin have been paid via company A, and we want to re-charge a portion of these costs to company B, to reflect genuine time spent etc.

Any issues to consider - VAT chargeable?  Can these be posted via inter-company balances or do they actually need to be paid across between the companies to claim a CT deduction?

Many thanks!

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By Burbage Accounting
05th Sep 2011 13:14

Charge VAT

Hi noggs,

There are two different accounting treatments, one for companies in the same VAT group and one where they are registered for VAT separately. I would assume that you are referring to the latter. However, I will cover both in what will hopefully be a brief answer.

1) One VAT group

In this situation there is no need to raise an invoice as there is no VAT to be charged. As you say, you can simply transfer between intercompany accounts.

2) Separate VAT entities

Company A should raise an invoice for the services provided to company B and charge VAT which is fully reclaimable by Company B (unless they are partially exempt).

I'll try and find some useful links but I do struggle trying to find specific info on the HMRC website sometimes.

 

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