How to account for services shared by two private limited companies?

Discussion in 'Accounts & Finance' started by Kerwin, Sep 15, 2020 at 5:24 AM.

  1. Kerwin

    Kerwin UKBF Regular Free Member

    117 11
    I have a server that will be used for mailing list purposes such as sending out registration complete emails. I want to use it for both of my private limited companies. Am I right in thinking I just split the cost 50 / 50 between the two companies and account for it like that? Or do I need to count the number of emails sent by each company and then use that to determine the amount of money each company pays for the server for that particular month? There are going to be a couple of services that it makes sense to share rather than duplicating them, so this is an important consideration to me.

    Also, if I pay for it on one company debit card, should I just do a bank transfer from the other company to the paying company with its share of the bill, or would you use a different solution? Are there any extra considerations I need to think about when deciding which company pays for the initial bill? I mean, I could pay for it myself and then account for it in both companies as a directors loan with their share of the bill.
    Posted: Sep 15, 2020 at 5:24 AM By: Kerwin Member since: Dec 1, 2018
  2. Scalloway

    Scalloway UKBF Legend Free Member

    16,390 3,466
    The first question is how much are we talking about? £5,000 pounds a month needs a bit of thought. £50 quid a month 50/50 or whatever split seems fair would be ok.

    I would suggest the compnay that pays the bill should invoice the other to make things clear. If the paying company is VAT registered then it will need to charge VAT on the bill.
    Posted: Sep 15, 2020 at 8:03 AM By: Scalloway Member since: Jun 6, 2010
  3. Kerwin

    Kerwin UKBF Regular Free Member

    117 11
    We are only talking about £20 a month to start. The servers are just for email and a couple of small databases.

    Thank you for your reply. An invoice seems the best policy. Neither of the companies is VAT registered yet, but it might make sense for one of them to voluntarily register for VAT so that might be an issue in the future.
    Posted: Sep 15, 2020 at 8:46 AM By: Kerwin Member since: Dec 1, 2018
  4. NicoJ

    NicoJ UKBF Regular Free Member

    271 49
    The cost goes into the company that it is invoiced to.

    To separate the cost you then invoice the other company as Scalloway suggests.

    VAT becomes a complication as this will not be reclaimable if it's not in the "correct" company.
    Posted: Sep 15, 2020 at 8:51 AM By: NicoJ Member since: Mar 27, 2017
  5. Cloud Accounting

    Cloud Accounting UKBF Contributor Free Member

    36 5
    One company buys it then charges the other for usage. Each company cant have half a serve on its balance sheet. Needs to be charged out at a fair market rate though to avoid transfer pricing issues.
    Posted: Sep 17, 2020 at 4:03 PM By: Cloud Accounting Member since: Apr 22, 2020