Selling goods from one Ltd Co to another Ltd Co..

Discussion in 'Accounts & Finance' started by Sunny Days, Jun 14, 2019 at 11:46 AM.

  1. Sunny Days

    Sunny Days UKBF Contributor Free Member

    65 1
    Hi

    I am sole director of two Ltd Co's, both offering similar services. One is VAT registered, one is fairly new and not VAT registered. Are there any rules about buying products through Company A for £10 + vat and then selling some of them to Company B for £5 + vat while Company B is getting up and running?

    Thanks
    H
     
    Posted: Jun 14, 2019 at 11:46 AM By: Sunny Days Member since: Feb 9, 2017
    #1
  2. Mr D

    Mr D UKBF Legend Free Member

    14,176 1,553
    Besides HMRC thinking you are trying to avoid some VAT?

    You are required to act in the best interests of each company. How does selling at a loss benefit company A?
    Perhaps simply charge company B same as you would any other company but give them a decent size credit account.
     
    Posted: Jun 14, 2019 at 11:57 AM By: Mr D Member since: Feb 12, 2017
    #2
  3. Sunny Days

    Sunny Days UKBF Contributor Free Member

    65 1
    Ah, yes I could offer them 3 months credit! Thank you, simple solution :)
     
    Posted: Jun 14, 2019 at 12:11 PM By: Sunny Days Member since: Feb 9, 2017
    #3
  4. Adam93

    Adam93 UKBF Regular Free Member

    245 47
    VAT is calculated based on the market value on transfers between connected parties.

    The credit account option will not work unless the seller is expecting to be paid within 6 months. If this is the case, VAT is payable on the tax point (invoice date most probably) rather than the date paid.

    If it were this easy to avoid VAT, everyone would do it...
     
    Posted: Jun 14, 2019 at 1:24 PM By: Adam93 Member since: Jan 18, 2018
    #4
  5. Sunny Days

    Sunny Days UKBF Contributor Free Member

    65 1

    I don't understand how giving 3 months credit is avoiding VAT?
     
    Posted: Jun 14, 2019 at 3:01 PM By: Sunny Days Member since: Feb 9, 2017
    #5
  6. Mr D

    Mr D UKBF Legend Free Member

    14,176 1,553
    So 3 months would work for the business then.
     
    Posted: Jun 14, 2019 at 3:28 PM By: Mr D Member since: Feb 12, 2017
    #6
  7. Sunny Days

    Sunny Days UKBF Contributor Free Member

    65 1
    Yes no problem. It wouldn't probably be that long anyway but I want to stock up in the new business but keep cash flow steady as it's new. It wouldn't be detrimental to the established company. So I just need to raise an invoice for the goods (not just keep an IOU of stock as was my first plan!).
     
    Posted: Jun 14, 2019 at 3:53 PM By: Sunny Days Member since: Feb 9, 2017
    #7