I'm a little "rusty" on group companies so hope you can help me!
What are the rules for a subsidiary invoicing supplies of services to customers on behalf of the parent company?
And in the same vein what are the accounting implications of the employees being paid by the parent and the cost being invoiced to the subsidiary (contract solely with parent).
The companies are both Ltd and as yet the subsidiary is not VAT registered , though I am considering the benefits of "Group" registration.
If the subsidiary is not VAT registered then any arms-length services it invoices to the parent will not have VAT on it... the sub cannot charge it and the parent cannot reclaim it.
Employees of the Sub can be paid by the parent but if the parent is then INVOICING that cost, presumably as a management charge (?) then there may well be VAT that the parent must charge but the sub cannot reclaim.
Presumably the payroll is done within the Parent? i.e. gross wages and relevant taxes are dealt with at parent level?
Group VAT will help eliminate annoying intra-group invoicing situations like this.
This is based on my understanding of groups, so am open to others beefing up my answer.
