Re-invoicing income between related companies

[TC72]

A limited company, VAT registered, that I do bookkeeping for earlier in the year set up another company to split operations. That company is VAT registered too. On many occasions, invoices from company B to customers then have to be amended to invoices from company A because the customer placed the order with company A and so won't pay anything to company B. I have asked the Director (who deals with orders) to sort this out moving forward. In the meantime, so that income is showing in the correct company, do I invoice company A from company B and should VAT be added. To complicate matters, Domestic Reverse Charge is involved! Thanks in advance.

 

[lesvatadvice]

I would not invoice between Company A and B. Money in the 'wrong' company should be transferred by journal adjustments.
Where a supply by either company is subject to the Reverse Charge, you should make the usual Reverse Charge entries. This applies in relation to supplies made by a company, irrespective of the receipt of the money.

 

[TC72]

I would not invoice between Company A and B. Money in the 'wrong' company should be transferred by journal adjustments.
Where a supply by either company is subject to the Reverse Charge, you should make the usual Reverse Charge entries. This applies in relation to supplies made by a company, irrespective of the receipt of the money.

Thanks, so the "incorrect" invoice in company A I would issue to the customer showing DRC. Then when paid journal the net sales to a loan account, then in the other company journal from loan to sales?

 

[lesvatadvice]

that makes sense.

 

[NicoJ]

Sorry Les, but I disagree. If the order has been made to Company A and invoiced by them then the income has nothing to do with Company B at all, it is the income of Company A.

Company B would have to invoice Company A to get the income into its accounts - whether this is VATable depends on the circumstances but the general rule would be that it needs to have VAT added.

 

[Bobbo]

Sorry Les, but I disagree. If the order has been made to Company A and invoiced by them then the income has nothing to do with Company B at all, it is the income of Company A.

Company B would have to invoice Company A to get the income into its accounts - whether this is VATable depends on the circumstances but the general rule would be that it needs to have VAT added.

Agreed. If the customer has placed the order with Company A then that income belongs to Company A. The income is already in the correct company.

Director needs to accept their having messed this up by letting orders go to the wrong company.

 

[lesvatadvice]

... which is precisely why you should take this thread to your Accountant, and make the best decision to sort out the invoicing and cash, so your VAT Returns are correct.