one company paying another companies bill

[wood1e]

Hi,

I do work for two ltd companies, both owned by one guy...now sometimes one company pays the other companies fuel bill or other expense.

The owner says I should invoice the company with VAT, as they have paid. But the company paying is not selling fuel or any other product to the second company...it has just paid for something on behalf of them. Therefore it is just a short term loan/debt and nothing else?

Also I presume as the invoice was in the second companies name, the second company would report that as an expense, and VAT, and not the first comapny...once again would just report a loan for the total amoount....Also I presume he wants to invoice the comapny as he would then have an expense in both compnaies and VAT to use?

Can anyone clear up the correct procedure to this situation...I hope I have explained it clearly enough

[label]

I am a little unsure re your question....

If the Co who is paying the bills is not directly invoiced - i.e it is not in their name, then they cannot reclaim the VAT.

The method you described is correct, but if he were to show this as a loan between 2 co's, he would need to show that he has acted in the interest of the 2 co's and that they have acted at arms length. This is what I think he is trying to achieve by invoicing the second co if the first company pays for any expenses on its behalf.

Check this link - there are similar questions answered.

http//www.accountancystudents.co.uk/forums/profile.php?mode=register&ruid=153



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