Readers’ forum: VAT for services to associated business

I act for a VAT-registered property letting agency which wholly deals in the buy-to-let market. The company employs five staff and manages about 300 properties on behalf of residential landlords. There is one single shareholder and director.

The same woman is also the sole director and shareholder of a separate company which owns five buy-to-let residential properties. It is not VAT-registered because all income is exempt from VAT. The properties are managed by the first company but no charge for services is ever made by the agency to the second company.

Is this correct? If there is an output tax liability how would this be calculated as there are no time-sheets kept – the staff just do the job so to speak providing a free supply of services.

Secondly do readers think that there is any advantage in my client forming a VAT group?...