Intercompany Management Charges

censuspro

Does anyone know of there are any anti-avoidance provisions for excess management charges between connected copanies?

dbran

Hi

I suspect you would have to have some rational for them.

For example if there were management charges to a dormant company say, you would not really be able to argue the management charges. What is there to manage? It is dormant. But if there was in increase in the eg volume of work or costs incurred by one company on behalf of another, which are quantifiable, then an increase in the management charges would be appropriate and allowed.

As for anti avoidence, in general you cannot have an artificial transaction the sole purpose of it being to avoid paying tax. This is throughout tax legislation.

There must be an underlying commercial reason for the management charge. If there is not then it may be subject to attack by the revenue.

DB

censuspro

Im aware of the anti avoidance provisions, however this is not the case in this scenario. Effectively, the directors want to shift all the assets and reserves from one company to another and were considering doing this via management charges. I understand that assets can be moved interco via group relief however the companies are not part of a group but just share common directors and shareholders.