I run two companies, one is vat registerd (A) and the other isn't (B). On reallocating a percentage of the payroll expenses to company B should company A charge vat. I haven't been charging vat , is this correct? Can anyone point me towards the relevant notice that covers this.
Thanks
John
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Thanks Marc but....
I just run the one payroll in company A and my recharge to B is like a recovery of a disbursement. I also thought that salaries were outside the scope of Vat, now I am confused. I think I'll look into this more.
Thanks alot for the advice
As always, it depends on the facts...
John
When you refer to "payroll expenses" I assume you mean salary, PAYE, NIC etc, as well as the staff costs involved in running the payroll? On the basis of this assumption, we first need to determine to whom the employees whose salaries are being recharged (or recharged in part) are contracted. If they are contractually employed by Company A, any recharge by A to B of part of their salaries, where the recharge represents consideration for the time spent by A's staff on B's affairs (and where the staff come under the direction/supervision/control of B during this time) there is a supply of staff for VAT purposes and in the normal course of events, the supply is subject to VAT at the standard rate. If the employees have joint contracts of employment with A and B the recharge for the time staff spend working for B will be outside the scope of VAT. If the staff are always under A's control/supervision etc, then rather than A making a supply of staff to B, we are looking at A making a supply of services and therefore need to look at what the nature of those supplies are to determine their VAT liability.
If there is a supply of staff and no VAT has been accounted for then you would be wise to make a voluntary disclosure to HMRC (assuming the VAT error exceeds £2000).
I cannot recall the HMRC notice number, but there is one entitled "Supplies of Staff".
If you need clarification - just shout.
Regards
Marc