There are three companies in ABC group of companies. A the holding company, B is wholly owned by A while C is partly owned. A is VAT registered, B is not and C is registered under a different VAT grouping outside of ABC. All the assets and infrastructure used by A, B and C are owned by A. All services (utilities, rentals, rates ect) are paid by A.
From time to time A transfers money from either B or C to pay for central services. A also has an agreement with the subsidiaries to issue a management charge invoice to B and C.
Should it charge VAT on the management charge invoices to B and C?
(2) A & C are not grouped and VAT will be included on the invoice for the inter company transaction.
Always check that a group really does exist and is not just a managements perception. To be a group it must be properly registered as such with HMRC who will have refused registration if they feel that they are going to lose anything on allowing the simplification of the groups tax affairs.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
The situation I presented is not hypothetical, it does exit in the companies I work. I am employed (in this case by company A) by the holding company but I cover the two subsidiaries B and C.
Most of the group's revenue is generated by company B, which is not VAT registered, whereas mangement (directors, Finance, and HR) is done from comapny A
Could you please extend your answer considering that B is not VAT registered and A does transfer funds from time to time from B to cover the groups operating costs.
My dilemma is to ascertain whether A needs to charge VAT on its management charge invoices it raises to B.
