Do you charge VAT on salary recharges?
Whilst the employees’ salary costs, such as wages, PAYE, pension etc., do not attract VAT themselves, VAT could be due when they are recharged to related companies.
Is there VAT on insurance recharges?
It should be noted that, regardless of the option to tax position, the recharge of insurance, rates, or utilities is actually an additional supply of rent. Conversely, where there is no option to tax, the recharge is then free of VAT (i.e. it is exempt).
Do you have to charge VAT on intercompany recharges?
The services are supplied directly to the relevant businesses by the individual and not from one company to another. Therefore, there is no supply between the companies and so no VAT is due on the share of money recovered from each subsidiary.
What are management recharges?
Management or service charges between related businesses are fairly common. A management charge by the service company can sometimes help to level out the profits of both companies, ensuring a lower rate of corporation tax overall.
What is an intercompany recharge?
What are Intercompany Recharges? If you incur costs on behalf of another company – you may wish to recharge them. This may be an external company – a client or associate for example, or it may be a company within your group. The cost will net off against the income to nil effect in A Ltd’s accounts.
Why do insurance companies not pay VAT?
Insurance transactions are generally VAT exempt. Insurers are unable to recover VAT incurred in obtaining replacement goods or having repairs carried out for a policy holder. This supply is treated as being made to the policy holder regardless of who makes the payment to the supplier.
Does car insurance include VAT?
Insurance Premium Tax ( IPT ) is usually included in the price you pay for insurance. You do not pay VAT on insurance. The rate of IPT depends on the type of insurance and who supplies it.
What are intercompany recharges?
Do you pay VAT on intercompany transactions?
Intercompany Transactions Transactions between group members are ignored for VAT purposes – this is useful when there are intercompany management charges because businesses often forget to charge VAT and HMRC gleefully issue assessments to correct the position – with a VAT group this problem disappears.
What is a salary recharge?
When the purchasing company pays the staff’s wages it does do on Company A’s behalf and, therefore, the recharge is merely a request for a repayment of this disbursement.
What are recharges in accounting?
Recharges are costs that your business incurs when supplying goods and services to your customers. It’s standard accounting practice to add VAT on to a recharged expense. Examples of a recharged expense: Airline tickets that you buy to visit a client or to travel to a job. You then pass this cost onto your customer.
What does recharge mean in accounting?
Is there a vat impact on salary recharge?
There is no VAT impact so long as the recharge is not more than the total cost of the staff so your client can decide how much each one pays (within reason). This does mean that the employee has employment rights over both companies and that each employee needs a new employment contract.
When is a recharge outside the scope of VAT?
Secondly, recharges are also outside the scope of VAT in the case of disbursements paid by “B” in the name and for the account of “C”, i.e. where “B” purchases certain goods or services not its own name, but in the name and for the account of its customer (“C”) and later wishes to recover the cost by claiming a reimbursement from “C”.
Is the term ” recharge ” defined in VAT law?
One of the reasons behind this could perhaps be the fact that the term “ recharge” is not defined in VAT law. Consequently, this term is colloquially used to describe a number of similar albeit legally different situations which carry different VAT implications.
Do you have to charge VAT on supplies of staff?
Determining the VAT liability of supplies of staff is far from straightforward and we are frequently asked by our clients whether VAT should be charged. The relevant legislation is not particularly clear on the point and with the advent of penalties for the NHS, clarifying the issue is a means of taking reasonable care.