HMRC are now reviewing transactions between associated businesses to ensure that supplies have been made and that beneficial VAT arrangements such as monthly VAT returns and cash accounting schemes are not being abused. They are reviewing such arrangements even when both parties are fully taxable and can claim all of their VAT under the normal rules. Just because there is a written agreement between the parties does not prove that supplies have been made. VATWoman’s guide to management charges and other transactions with associated business explains when transactions with associated businesses, such as management charges, property costs and sharing employee costs, are liable to VAT. It also explains when you can claim VAT on goods and services used to make such supplies.

Source: New ebook: VAT on management charges …. now available |