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

[Sunny Days]

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

 

[Mr D]

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.

 

[Sunny Days]

Ah, yes I could offer them 3 months credit! Thank you, simple solution

 

[Adam93]

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...

 

[Sunny Days]

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...

I don't understand how giving 3 months credit is avoiding VAT?

 

[Mr D]

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...

So 3 months would work for the business then.

 

[Sunny Days]

So 3 months would work for the business then.

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!).