I have a general query regarding inter-company transactions that you may be able to help me with.
Company A is 100% owned by director A. Company B 100% is owned by director B. Company C is 50% owned by director A and 50% owned by director B. All three companies are separately registered for VAT.
Company A provides services (e.g advertising) for company C and pays for costs for advertising for company C. (Let's say that company A could get a better rate than the newer company C.) Company A receives a VAT invoice in the name of company A for all the costs attributabel to company C and pays the invoice in full. .
My question is what is the correct VAT treatment please? (e.g the invoice is posted to the ledger in company A, company A claim the VAT in full and post the expense to the p and l. Company A could then raise a sales invoice for a gross amount to company C, including VAT.
How would this situation change if company A suffered a zero rated charge on behalf of company C? Would company A have to raise and invoice to company C and include VAT on top of the charge? (e.g a zero rated invoice is £100 for company A. Does company A need to invoice this out at £100+VAT to company C?
If there is a management charge being put through the companies then the charge will be VATable irrespective of the VAT status of the supply.
eg company A will change £100+VAT to company C and pay over £20. However the VAT effect between both companies together will be £nil. Company C will have a cost of £120 and be able to recover £20 VAT.
Slightly complicated by there being different ownership of the companies but looking at the 3 companies together the VAT effect of any recharges will be £nil.
