How should transactions between companies I own be recorded?

When money moves between companies, first establish the reason. One company may be lending to another, settling an invoice on its behalf, purchasing goods or paying for shared services. Those transactions do not all belong in the same account. Keep the supporting invoices, approvals and any agreement, and record which company received the benefit. A director owning both businesses does not make the payment personal or remove the need for separate records. Avoid using vague labels such as ‘transfer’ for every entry. Clear classification at the time saves work later and helps explain each company’s cash position and obligations accurately in its own reports.

For a loan, record the amount, purpose, repayment terms and any interest arrangement. Consider whether the lending company can afford the commitment and whether it is in that company’s interests. For shared costs, use a reasonable, documented allocation linked to the services or resources provided. A recharge may need an invoice and VAT assessment. Being connected does not automatically make charges VAT free, although a formal VAT group can change the analysis. Connected-company loan rules can also affect tax treatment. Ask for advice before introducing interest, writing off a balance or making a significant transfer, rather than deciding the treatment after the year-end accounts are prepared.

The amount owed by one company should agree with the amount recorded as due by the other, with timing differences explained. Check invoices, receipts, credit notes and interest entries on both sides. If one company paid a supplier directly, ensure that the original cost and repayment are not recorded twice. Keep a schedule showing opening balance, movements and closing balance for each relationship. Review old balances to establish whether repayment is realistic and the classification remains appropriate. Group reporting may eliminate some internal transactions, but that does not remove the entries or obligations in each company’s individual accounts. Differences should be investigated while the supporting records are still available.

Discuss large loans, asset transfers, debt waivers and changes in ownership before they happen. Accounting entries cannot make an unsuitable legal arrangement appropriate or remove a tax consequence. Directors must consider the duties and financial position of each company, especially where one has cash pressure. International transactions or complex group structures may require specialist advice. CASS can help maintain the schedules, reconcile balances and assess accounting treatment within an agreed service. Provide the agreements and ownership details so the analysis starts from the facts. Legal documentation, valuations or specialist tax questions should be handled by suitable advisers alongside the bookkeeping, rather than assumed to be included automatically.