My client has two registered CCs, each with a trust account and cheque account. But they run the business as one business and there are a lot of transfers between the bank accounts. They are registered for VAT. Where does the VAT input and output come from? How does it work?
Each registered CC must be treated as a separate business for VAT purposes. Where a CC makes a taxable supply, they must issue a tax invoice and charge Output VAT at 14% on this supply. Input VAT can be claimed on goods/services acquired by each entity in the course of making taxable supplies, providing they are in possession of a valid supplier’s invoice reflecting the CC’s name, VAT registration number and address as well as the VAT charged.
The VAT treatment of transfers between the CCs will be determined by the nature of the transfer – if the one CC is making a supply of services/goods to the other then this is a VAT-able supply (the CC making the supply must charge Output VAT and pay this over to SARS, the CC purchasing the supply can claim back the input VAT from SARS). If the transfer relates to a loan then there is no VAT implication for either CC. Similarly intra-company bank account transfers (i.e. from the trust account to the cheque account and vice versa) is simply a re-allocation of funds within the company which will have no VAT impact i.e. no VAT must be charged or claimed in this instance.
Hope that helps!
Don’t forget that I’m here to answer your questions about the ICBA, or just queries about your accounting at work. All you have to do is email me!