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Inter Company employee chargeback

Co1 owns 100% of shares in Co2, Employees of Co1 work 50% of the time in co2, Can Co1 charge C2?

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As mentioned above, im looking for advice on charging for employees time between my two companies.

Given that employees of company 1 work on/in company 2 50% of there time, can Comapny one charge comapny 2 for half there saleries & costs? Im sure it can so the next question is how to account for this. i guess company 1 could raise an invoice on company 2, but given both are VAT registered do i need to charge VAT or is there a inter company transfer that works better in this situation?

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By paul.benny
24th Jul 2020 10:14

Of course Co1 can recharge Co2. In fact they probably should.
Yes you should raise an invoice and if they're separately VAT-registered, then you must charge VAT.

Your accountants will be able to give you fuller advice on this.

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Replying to paul.benny:
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By Paul Crowley
24th Jul 2020 10:39

Agree, Vat chargable as supply of services

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Psycho
By Wilson Philips
24th Jul 2020 10:37

You might want to look up “Paymaster arrangements” and/or “Joint employment contracts”

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Replying to Wilson Philips:
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By walkerma75
31st Jul 2020 09:43

this is very interesting, thank you very much

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RLI
By lionofludesch
24th Jul 2020 13:02

Do you need to charge VAT ?

Yes. Unless you have a group registration.

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Replying to lionofludesch:
Psycho
By Wilson Philips
24th Jul 2020 13:47

... or the arrangements noted earlier.

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Replying to Wilson Philips:
RLI
By lionofludesch
24th Jul 2020 13:52

Wilson Philips wrote:

... or the arrangements noted earlier.

Quite.

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By frankfx
24th Jul 2020 13:39

Is this the first year the issue has arisen?
If in prior years 50 % ( or what ever )of payroll and associated costs, wide ranging I may add, were not a cost of the trade of Company 1 was tax relief erroneously claimed?

Like wise company 2 may have had super after tax profits . distributed as dividend .. in part to company 1 and in part to outside shareholders.
The super profits only arising due to poor accounting and cost recognition.

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Replying to frankfx:
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By walkerma75
31st Jul 2020 09:44

this is the first year, company 1 has just purchased the shares in company 2 this year

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