Questions about splitting payment

I

imaginethat

Registered User
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Hi there,

I have a question about splitting payment on a job that I'm doing for a client. Just to give you a little background...

I'm a web designer. I have my own company (sole trader) and up to now I've been working on my own. Lets say the name of my company is "Company A".

I've arranged with a friend of mine, who is a software developer, that we would work together on some projects. He has his own limited company, "Company B".

We have decided to outsource some of the work to other contractors because we are in the process of setting up a separate business together and want to focus on that. We have decided to split everything 50 / 50. My question is, what is the best for us to split the payment between us? I'll give you an example of the costs:

  • We are charging €1,815 to the client for the work (€1,500 + 21% VAT)
  • The contractor is charging €900 to do the job (there is no VAT on this as the contractor is based in India
So, the €1,815 has been lodged to Company A's account from the client. Company A will pay the contractor €900, leaving €915 in Company A's account. To split this 50 / 50, is it best that Company B invoices Company A? If so, how much should company B invoice for? Please bear in mind that we are both registered for VAT and both have to file tax returns at the end of the year.

Any advice would be appreciated.
 
Company B issues an invoice to Company A for €363 (300 + VAT)

1,500 - 900 = 600 "profit" to be divided between A & B

Company A remits VAT 315 - 63 = 252 net VAT to Revenue
 
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