Dodgy dealing?

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in AAT member discussion
The software development company that I am doing some bookkeeping work for (company A)has a director who used to be a contractor, so is a director of another limited company which he used contract through (company B). A potential customer of company A has asked for some Project management work to be carried out but company A is not on their preferred supplier list, so the director is using company B to contract through an agency to carry out the work, then company A is going to invoice company B. Does anyone think that this is going to look fishy to the tax man? Or is it just me? :P

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Dodgy dealing?

    No Multiple companies are set up all the time. There are many reasons for doing so. My company has at lesat five in its group. One company is used solely to invoice consulting services but makes no purchases at all. Another company makes purchases and pays salaries and makes very few sales (and invoicing).

    Quite often the practise is done to clearly delineate two dioffernt tasks or functions.

    Rest easy

    Alexander
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Dodgy dealing?

    Thanks Alexander :-D Do you also know if the shareholding in the contracting company needs to be declared in the annual report and accounts?

    Thanks

    Jacqui
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Dodgy dealing?

    We have companies which trade with each other and are owned by the same directors and put a note in the accounts under 'Transactions with related parties' stating that all transactions are at arms length.

    Annette
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Dodgy dealing?

    Other things you should be aware of with companies under common control are that this affects the corporation tax and there could be transfer pricing issues if there are long term intercompany balances.

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