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VAT on recharged costs

Between two VAT exempt businesses

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Two companies in the same group will be recharging costs between them, mainly head office costs such as finance/management salaries etc. Both solely provide services which are exempt from VAT.

I understand the recharges would ordinarily be subject to VAT if one was VAT registered, on this basis will this mean the businesses are now making taxable supplies and should be registered for VAT and would thus be partially exempt? This seems overkill on a VAT neutral transaction so hopefully I have missed something here?

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By paul.benny
17th Feb 2020 14:49

Are the other ways of dealing with this? For example, are the companies actually making Exempt supplies or are they just not making taxable supplies?

The recharges would mean that the companies are making taxable supplies and so could be included in a group registration.

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RLI
By lionofludesch
17th Feb 2020 16:37

Salaries ?

Cannot these people just have two jobs ?

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