UK Reversal of Loan via Services

Jun 21, 2017
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United Kingdom
I work for a parent company with multiple subsidiary companies one of which often provides services for the parent company. The parent company also provides a loan to the subsidiary in case they need an immediate cash boost.
Would it be possible to list the administration of services for the parent as a reversal of the loan supplied by the parent.
For Example:
Dr Loans Payable
Cr Sales​

Werner Reisacher

VIP Member
Jun 30, 2017
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As a general rule, we are talking about intercompeny transactions. The emphasis is on the transfer of economic services rendered by one legal entity on behalf of another within the same group of companies. (Holding concept)
The way how such transactions are settled is seconday.
From a tax point of view, charges by one entity to another entity must me following rules to qualify as tax deductable.
- The must represent an economic value to the receiving company.
- Intercompany charges must be made at actual cost incurred prices without any mark up.
If such services are rendered to other companies in the same group, the Cross-boarder transfer pricing rules applied and are supervised by teh WTO. (World Trade Organization) These rules define that cross-border transfer prices charged to group companies must be based on a standard price applicable to all other companies on a global basis.
If these rules apply and the mother company has giving a bona fide assignment to a daughter company to carry out an assignment that is outside the regular activities that are part of the ordinary way business is carried out on a daily basis throught the group, than, the daugher company can carry out such an assignment and provide the services. The billing for such services must however be based on detailed supporting documentation like time sheets and documents of the assignment delivered.

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