Splitting costs between 2 companies - how to do?

Splitting costs between 2 companies - how to do?

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Ive just started to look after three restaurants, 2 of which are based close together in Manchester.  They are run through separate limited companies and both are VAT registered, and mostly keep all the paperwork separate, apart from:-

1) Some of the food ordering from a couple of suppliers is done by the out of town restaurant and the food used by the city centre restaurant.  The owner wants me to split the invoices 40 / 60 in the books.  They are both VAT registered so my initial thoughts are we shouldnt do it as the invoices need to be in the name of the relevant company we are re-claiming VAT for. Then I wondered if we could do so by copying the invoices and claiming  40 / 60 from the business, so claiming VAT in these ratios - although then I wouldnt have a VAT invoice in the correct company name so that worried me.   I then wondered about processing it through the out of town/VAT claim as usual and then creating sundry debtors/creditors each month to split out per the above ratio, but this wouldnt work as really key to this is that  the Director is looking for more accurate Gross Margin figures for each restaurant and this latter option wouldnt provide that.    Food purchases are non-vatable, but all sales of food by the restaurants is at standard VAT.     (Can I 'buy' the 60% food from the out of town by issuing an invoice (would need to include VAT as standard though)?

2) The staff are paid under separate payrolls for each company dependent on the restaurant they work for (hourly paid/part timers). On occasions the staff may have to work at the other 'branch' due to staff shortages etc.  Again the Director is looking to apportion the cost out to the company that it relates to.   Suggestions are possibly putting the payroll through the holding company and apportioning it out (with the holding company making a loss!) or Director's preference is again that we do some kind of internal transfers between the companies?

Want easy/transparent/non messy methods if possible whilst providing the correct breakdown of costs for each company.

For eg 2) - If I invoice for the services would I need to include VAT as its for wages?

Anybody have any ideas?  If you cant answer both question then would still appreciate your assistance with the one you can answer!!

Thanks in advance

Replies (7)

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By GW
02nd Sep 2013 13:56

Ideas

1) The out of town restaurant raises sales invoice to the other restaurant for the food supplied. Output tax charged on one equals input tax recovered on the other.

2) Payroll, as for food.

 

Do the businesses meet the conditions to be a VAT group? in which case once the group was set up transactions between the comapnies would not attract VAT and one joint return would be filed, it would not matter from a VAT  viewpoint that goods invoiced to one restaurant were used in the other

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Replying to jcace:
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By Cheshire
02nd Sep 2013 15:34

Hi

Thank you for this, seems the easiest way.   I was wondering this morning about Group VAT although Ive personally had no experience of it and was trying to wade through the HMRC website - just a bit worried as all the companies have different VAT dates (and year end dates) and wondered if that might affect matters, but havent come across that bit on the HMRC website yet (going round in circles as sometimes do on their site!)

Also for the Group VAT I have nooooo idea how that would translate to Sage - do you have any advice on that matter?

Thanks again for your help so far.

 

 

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Replying to DJKL:
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By GW
02nd Sep 2013 15:54

VAT group

Creating the group would create a new VAT number and return periods so each business would have to file a seperate return up to the start of the VAT group, possibly covering one or two months rather than the normal three. It would be normal for the group to be set up to coincide with one of the existing VAT quarters.

 

Regarding Sage, any intergorup transactions would be posted as T9 so they don't show on the return. The return filed would be the the two company returns as generated by sage added together. One company would be the representitive member that would normally pay any VAT due, there can then be a payment between the companies so each company ends up paying their own share of the amount due.

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Replying to Jayden:
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By Cheshire
02nd Sep 2013 18:18

VAT Group

Makes total sense now and not as complex as I thought it would be - I should trust my instincts more, although its always good to hear it from someone else.

Thanks for your detailed explanation.

Chesh

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Replying to jcace:
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By Cheshire
02nd Sep 2013 20:16

Ideas

Hi again

Although I just thought......this makes his purchases right, but will skew his sales!!  Cant win!

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Replying to RedFive:
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By GW
03rd Sep 2013 16:13

Can sometimes win!

Two choices:

Assuming the sales between the companies are at cost, on the basis that the purchases are being made on behalf of the other company, on Sage credit the sale to purchases and/or payroll cost rather than sales, then the recharged amounts do not appear in the "selling" company's P&L

 

Alternatively create seperate sales and expense accounts for the recharged items, that way you can keep track of the amounts that have been recharged, the dirrerence between the recharged sales and the expenses is the amount still to be invoiced to the other company. In working out the P&L account ratios you would need to cancel out the sale and purchase.

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By Cheshire
03rd Sep 2013 17:19

What a star GM  - thank you,

What a star GM  - thank you, option one is my favourite and makes so much sense.  

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