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When is a management charge not a management charge?
In Neil Warren’s article ‘ Howzat? Not out!’ (see Taxation 22 November 2018) it seems that Holding Company Ltd referred to in the first example was happy to avoid a VAT charge on the payment to its subsidiary Trading Company A. But if the payment was not a management charge what was it? Perhaps more importantly how was this treated in the accounts of the parent and subsidiary companies?
If we assume that the payment was physically made is the parent subject to tax and the subsidiary eligible for an equivalent deduction? Does it make any difference if no payment was made and it was left as a debt?
I recall seeing this problem many years ago and the Revenue disallowing the payment....
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