Related Company VAT Transactions (Cash/Invoice accounting loophole?)

The infamous, reputable and infallable "Bloke Down The Pub & Co." have discovered another gem in the plain sight of the tax community. But we've failed to see it apparently! Shame on you.

A client, who happens to have two VAT registered Companies, has received some excellent advice to issue an invoice, from one to the other... for say, management services or whatever you like, with incredibly generous payment terms as you would naturally expect.

The idea being one Company is on the invoice accounting basis, the one receiving the input vat charge, whilst the "service provider" is on cash accounting. Effectively, this generates an interest free loan.. for as long a credit term as one Company will give the other... All courtesy of the VAT man! Very generous.

My question is.. This smacks of fraud. Surely not allowable, right? But can the boffins point to any cases where people got smacked bottoms?

 

 

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unpaid suppliers

Tonykelly |
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cparker87 |

Cash accounting

leshoward |
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cparker87 |

Cash accounting

leshoward |
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