O.K. some friends of mine are directors of two companies. They own all the shares in both companies. Company 1 received bill for amount x (pretend it's £120 to make the VAT simple). They paid the non-VAT amount (£100) using company 1's bank account. No problem.
However, they then paid the VAT amount £20 using the bank account of company 2.
Can I just setup a liability in company 1 and a debtor in company 2 for £20 and do a bank transfer to settle it? Can companies just transfer funds between themselves like this?
As far as I know, you can. Associated companies can transfer funds (well, 'lend' each other money) like this but you need to have formal agreements in place if larger sums attracting interests are involved.
Hopefully, your friends are aware that as both companies are associated, there are CT implications, depending on profit levels.
