VAT treatment of management charges and other intra-group payments
VAT treatment of management charges and other intra-group payments

The following Tax practice note provides comprehensive and up to date legal information covering:

  • VAT treatment of management charges and other intra-group payments
  • What are management charges?
  • When does VAT apply to management charges?
  • Is there a supply for VAT purposes?
  • Is the supply made in the course or furtherance of a business?
  • Place of supply rules
  • Consequences of VAT on management charges
  • Can VAT on management charges be avoided?
  • VAT grouping
  • Cost sharing exemption
  • More...

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marks the end of the Brexit transition/implementation period entered into following the UK’s withdrawal from the EU. At this point in time (referred to in UK law as ‘IP completion day’), key transitional arrangements come to an end and significant changes begin to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see Practice Note: What does IP completion day mean for Tax?

What are management charges?

Management charges generally refer to the position where group companies make intra-group supplies of management services and charge for such services. This is frequently the case when one group company pays for various services provided to the group as a whole and recovers a proportion of costs from the other companies within the group. Such arrangements are common in relation to overhead costs such as rent, office equipment, rates, heating, stationery, telephone etc. This type of payment structure is most common in corporate group structures (ie holding companies with subsidiaries) but can also involve independent businesses and organisations coming together to form cost sharing groups.

Management charges may also be charged intra-group as a result of transfer pricing adjustments which seek to ensure arm's length prices are paid between connected parties for intra-group supplies. For information on transfer pricing,

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