intercompany accounts

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:28AM in AAT student discussion
Hi everyone, <BR><BR>I ahve been working for a large public organisation for a couple of years now, but never really got the hang of it as to what sort of transactions should be going through intercompany accounts (this is 2 different co's with different VAT numbers). <BR><BR>I find that other departments are trying to charge (or recharge) all sorts of things to the interco a/c. Sometimes the parent even pays an external purchase invoice, then puts it throught the intercomany, so we can not reclaim the VAT back. <BR><BR>It is quite dificult to explain the concept of having intercompany accoutns to non-finance people. I am trying to put together a list of allowable (just examples) transactions that should be going through intercompany accounts. Does anyone have an idea where to start?<BR><BR>thanks<BR>Dia<BR>

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    intercompany accounts

    If you have separate registrations i.e. not a VAT group, then you have to account for VAT on all transactions, including recharge of labour, unless you have joint service contracts.<BR><BR>So long as both companies have 100% standard or zero rated supplies, then this only produces a potential timing difference, depending upon VAT periods. If one company is exempt or partially exempt then you have problems in that interco VAT chaged may not be claimable in full.<BR><BR>You should insist upon VAT invoices for all interco transactions.<BR><BR>Have you had a VAT inspection recently? If not, then I would practise my response to their questions.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    intercompany accounts

    thanks very much for this, extremely useful<BR>Dia
  • System
    System Posts: 100,534 🤖 Admin 🤖
    intercompany accounts

    Only the company which incurs the cost of invoice plus any Vat should be put through interco.<BR><BR>i.e if company A pays an invoice from which Company B has incurred the cost, then this should go through interco (VAT and all). <BR><BR>Therefore if company A pays an invoice which belongs to its own costs, this is not transferable through interco.<BR><BR>An easy way to stop people posting items through which may not legible is to have a block put on all postings to this account, except for designated people i.e yourself or direct manager.

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