Invoicing other Company

[davey85]

Is it possible to invoice my Ltd Company from my other Company for services?

Main Company has overdrawn DLA which will be repaid in 2/3 years when I get a lump sum of money but in the meantime it’s a bit messy so wanted to invoice from my other Company to draw income from rather than going on a higher PAYE salary.

 

[DWS]

Is it possible to invoice my Ltd Company from my other Company for services?

Main Company has overdrawn DLA which will be repaid in 2/3 years when I get a lump sum of money but in the meantime it’s a bit messy so wanted to invoice from my other Company to draw income from rather than going on a higher PAYE salary.

What services will you be invoicing for? Have these services actually been carried out?
Once paid and if you draw income as salary it will still be on a higher PAYE salary when added together.
Have you paid tax on the overdrawn DLA?
Could one Company not just loan the other Company?

 

[DontAsk]

Iwanted to invoice from my other Company to draw income from rather than going on a higher PAYE salary.

What sort of income?

You cannot reduce your overall tax bill by being paid by someone else.

Are you referring to dividend withdrawals? Do you fully understand the tax treatment of those?

 

[GLAbusiness]

So, company A invoices company B for some services

• Company A must have provided some services to Company B.
• If company A is VAT registered it must include VAT on the invoice to company B
• Company B then pays Company A
• The money now belongs to Company A

No, you want to withdraw some income from Company A

• How will you do this?
• Whatever way it will almost certainly increase your personal tax bill

 

[davey85]

I am aware of the personal tax consequence which is not an issue. This will be two shareholders drawing dividends.

The main Company has negative shareholder funds due to excess profits previously drawn. It will be some time before that can be put right but don’t want to go onto PAYE only method and need to draw current profit levels to live on.

The hope was to invoice through the other Company, pay the Corp tax and dividends and ensure they are not drawn in excess.

Once the amounts have been paid back to the main Company at a later date the Company will be in better shape.

 

[GLAbusiness]

looks like a loan between companies to me. but not an expert

please talk to your accountant

 

[DontAsk]

The main Company has negative shareholder funds due to excess profits previously drawn.

You may have other things to worry about.

What was the situation when the funds were withdrawn? Were the dividends (if that's how funds were withdrawn) actually legal?

 

[Newchodge]

I am aware of the personal tax consequence which is not an issue. This will be two shareholders drawing dividends.

The main Company has negative shareholder funds due to excess profits previously drawn. It will be some time before that can be put right but don’t want to go onto PAYE only method and need to draw current profit levels to live on.

The hope was to invoice through the other Company, pay the Corp tax and dividends and ensure they are not drawn in excess.

Once the amounts have been paid back to the main Company at a later date the Company will be in better shape.

Invoice for what?

 

[ChrisCallaghan]

Hi all,

@davey85 , I think the important question is as others have already asked - what would company B be invoicing company A for exactly??

Wearing my liquidator's hat here - if you carry out this plan, and company A finds itself entering into liquidation in the future, these transactions will be scrutinised by the liquidator to establish if company B has actually provided the services for which it invoiced.

Potentially the liquidator could then make claims against company B, possibly the director personally.

@Lisa Thomas & @Elliot Green - what would your thoughts be in this scenario should company A enter liquidation?

 

[Elliot Green]

There *might* be a failure of consideration issue and that *could* create a transaction at undervalue / preference / misfeasance issue in the event of liquidation. Management charges can be a bit of a grey area.

Case of Clements (liquidator of HHO Licensing Ltd) v Henry Hadaway Organisation Ltd - [2008] 1 BCLC 223 might highlight some of the issues.

Disclaimer: Posts are not legal advice and should not be relied upon as such. They are provided for information purposes only.

 

[numbersrule]

I am not an expert but in my opinion the OP is exhibiting muddled thinking.
It' seems like a classic example of how not to think.

'invoice from my other company to draw income from rather than going on a higher PAYE Salary'

It just doesn't make any sense whatsoever.

I think you are all being too kind to the OP in seeming to suggest that they are making some sort of 'technical' error. They may well be making a technical error, but more importantly it sounds like they just don't understand how Company business should be conducted.

 

[Daybooks]

You may have other things to worry

Indeed and starting with understanding why the given statement has to be incorrect.

 

[numbersrule]

I am aware of the personal tax consequence which is not an issue. This will be two shareholders drawing dividends.

The main Company has negative shareholder funds due to excess profits previously drawn. It will be some time before that can be put right but don’t want to go onto PAYE only method and need to draw current profit levels to live on.

The hope was to invoice through the other Company, pay the Corp tax and dividends and ensure they are not drawn in excess.

Once the amounts have been paid back to the main Company at a later date the Company will be in better shape.

I am no expert but this sounds like you are suggesting that you would Invoice for dividends.

It makes it seem like you are confused about Dividends. There is no Invoice for Dividends.

If the other Company has made a profit then the two shareholders may be entitled to Dividends.

When you say 'once the amounts have been paid back to the main company'. Why would the amounts paid as dividends from the other company be paid back to the main company?

 

[Lisa Thomas]

Maybe instead your other company can provide you with income which you then use to repay the unlawful dividend/overdrawn DLA you owe to the first company.

You may also need to take insolvency advice for the first company.

 

[elaine@cheapaccounting]

Is it possible to invoice my Ltd Company from my other Company for services?

Main Company has overdrawn DLA which will be repaid in 2/3 years when I get a lump sum of money but in the meantime it’s a bit messy so wanted to invoice from my other Company to draw income from rather than going on a higher PAYE salary.

Might be a daft question but why have you got two companies?