I'm currently having opposing opinions from old and new accountants over management charges between a holding company and subsidiary.
The subsidiary invests in property and makes a healthy profit each year, but has very -ve RE due to questionable accounting advice in the past (putting all refurb costs through as expenses, so huge losses in the years projects were taken on, meaning no divi can now be paid). There are no expenses in the holding company other than a small directors salary. The old accountant said we could just put in a management charge from the holding company to the subsidiary to move any/all profits up the group, and then take the profits out as a divi from the holding company, where there were +ve RE due to the income from the management charge.
The new accountant says that the amount that can be charged by the holding company can only be as much as the expenses incurred in the holding company (i.e. just the small directors salary).
Which is correct? And if it's the latter, is there any other efficient way of moving the profits up the group/taking profits out of the subsidiary (other than as a salary) when RE are -ve and won't turn +ve for a long time?
Thanks in advance!