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Separate Cost Centre VAT registered

Can I have all invoices for my expenses billed to one VAT registered company?

Hi All,

I have two companies. One that is VAT registered and one that supplies VAT exempt services (therefore not VAT registered). I personally own both. There is no group structure. 

My question:

Can I have all my suppliers bill my VAT registered company, eventhough the supplies (e.g. rent, advertising, webservices etc.) are for the benefit of the non-vat company?  Also, can I buy and capitalize assets through the VAT registered company, eventhough the other company will be using them?

I hope my question is clear. Let me know if further clarification is needed. Thanks.

-Sean

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13th Dec 2018 21:26

This would constitute fraud.

Please get an accountant.

I think a few of the following reply’s will be far less polite and more straight to the point.

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to Adam12345
13th Dec 2018 21:53

Adam,

I am ACCA part qualified and therefore handle a great deal of my accounts independently. I do however consult my accountant occasionally.

thanks for the reply. Do you know what exactly about it makes it fraud? Can you only be billed for services that you are consuming yourself? Or is it because of the VAT element?

-Sean

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By Matrix
to sean_basispoint
13th Dec 2018 23:52

There wouldn’t be any point since the VAT would not be reclaimable and the expense would not be deductible.

If the level of VAT attributable to exempt supplies is de minimus maybe you could form a VAT group.

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to sean_basispoint
14th Dec 2018 08:35

sean_basispoint wrote:

Adam,

I am ACCA part qualified and therefore handle a great deal of my accounts independently. I do however consult my accountant occasionally.

thanks for the reply. Do you know what exactly about it makes it fraud? Can you only be billed for services that you are consuming yourself? Or is it because of the VAT element?

-Sean

At the very least, the services to which you refer would be attributable to exempt supplies so wouldn't be reclaimable even if you had just the one company supplying everything.

Alternatively, your VAT registered company must recharge the services to the VAT exempt company, returning you to square one.

I agree with Adam - if you do this knowingly, it's a cheap, unsophisticated fraud.

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to sean_basispoint
14th Dec 2018 09:12

sean_basispoint wrote:

Do you know what exactly about it makes it fraud?

In plain terms, it's the bit where you pretend one company's expenses are actually the other company's expenses, so you can claim back the VAT, fraudulently.

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to sean_basispoint
14th Dec 2018 09:18

One definition of fraud - 'wrongful or criminal deception intended to result in financial or personal gain.'

There are a number of conditions that need to be fulfilled for a successful VAT reclaim, one being there must be a direct and immediate link to a taxable supply.

There are two ways (that I can see) around it;

1) as mentioned above, you register as a VAT group and if the exempt activities meet the de minimis test you could reclaim the VAT. If it doesn't meet the de minimis test, the group will be partially exempt and therefore, some of the VAT will not be recoverable.

2) the VAT registered company charges (at market value) the non-VAT registered company for the goods/services which will obviously include VAT which leaves you in the position you were at the start.

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to Adam12345
14th Dec 2018 19:33

Thank you very much Adam. This was a very constructive response to my query. I will probably adopt the latter suggestion of yours, as the exempt input Vat will exceed the de minimis threshold.

Even though it will not result in a financial benefit, I must channel my expenses through the Vat-Registered Company anyway, for different reasons. However, now that I am charging the non-VAT registered company back for the expenses incurred (including VAT of course), I will at least foster proper accounting practices.

Thanks again Adam.

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13th Dec 2018 21:29

Duplicate

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14th Dec 2018 10:29

I think you need to have a good look at your ethics, Sean, and maybe consider whether you're suited to the accountancy profession.

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14th Dec 2018 09:50

Crikey.

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to andy.partridge
14th Dec 2018 10:30

Tough day, Andy.

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to lionofludesch
14th Dec 2018 10:52

Not as tough as the OP's or even maybe that of his ACCA lecturer who, if watching, must have their head in their hands.

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