Recharges Before the Close: Five Intra-Group Habits That Weaken the 2026 Year-End File
Photo: Foreign and Commonwealth Office, OGL v1.0, via Wikimedia Commons
Intercompany invoices rarely command attention in the same way as a large customer contract or a refinancing. They are operational plumbing: shared-service fees, recharged payroll, property costs and management charges that move quietly between entities. Yet at the 2026 year-end close, those lines can become disproportionately time-consuming if the group cannot show why they exist, how they were priced and who owns them.
The point is not that intra-group recharges are inherently problematic. Most UK groups need them. The risk lies in the habits that grow around them: generic descriptions, annual estimates that are never trued up, pricing set by precedent and no single view across the group. Auditors, tax specialists and, increasingly, board committees will ask for the commercial logic. Finance teams should be able to answer in plain English.
1. The recharge that exists only in a spreadsheet
In many groups, the recharge schedule is a working file maintained by one finance team and understood by very few people outside it. Descriptions are vague, dates are missing and there is no signed agreement or service schedule behind the numbers. The recharge may be entirely legitimate, but the evidence is thin.
The fix is not necessarily a lengthy legal document for every line. It is a single recharge register that records the counterparties, the service provided, the basis of charge, the owner and the supporting evidence. If a line cannot be described in one clear sentence, it probably needs review before it reaches the year-end file.
2. Shared-service fees set by habit rather than method
Shared-service charges are often rolled forward with an inflation uplift because that is what happened last year. That may produce a sensible number, but it does not explain why the number is sensible. Cost pools, allocation keys and review dates are frequently undocumented.
A defensible approach does not need to be elaborate. It needs to be consistent and written down. Is the charge based on headcount, desk count, transaction volume, time recorded or revenue? Why is that method appropriate? Has it been reviewed in 2026? The board does not need to approve every allocation key, but it should be able to see the method and the exceptions.
3. Payroll recharges that stop at gross salary
Recharged payroll is a common blind spot. A subsidiary may recharge a secondee's salary but omit employer National Insurance contributions, pension contributions, benefits or bonus accruals. Joiners, leavers and mid-year changes can leave the recharge out of step with the payroll records.
This is not only a finance arithmetic issue. It is a governance issue because ownership is often split between HR and finance. The group should agree who owns the recharge, which payroll elements are included and how secondments are documented. A simple reconciliation from payroll source data to the intercompany invoice is more useful than a late-year adjustment that nobody can explain.
4. Property costs caught between landlord and occupying company
Where one group company holds a lease and another occupies the space, the recharge can become an estimate that is never reconciled. Rent, service charge, utilities, business rates and dilapidations provisions may be treated differently across entities. The occupancy arrangement itself may exist only in correspondence.
Before the 2026 close, groups should be able to point to an occupancy schedule that links each property to the occupying entity, the lease obligations and the basis of apportionment. If the charge is based on floor area, that should be recorded. If it is based on an estimate, there should be an annual true-up and a named owner for the reconciliation.
5. Management charges with no visible service
A parent company may charge a management fee for strategic, financial, IT, HR or legal support. The label is convenient, but it can obscure what was actually provided. When a counterparty, auditor or board member asks for the service behind the charge, a generic description is not enough.
A service catalogue does not need to be bureaucratic. It should identify the main services, the entity providing them, the entity receiving them and the basis of charge. Where the charge is material, the group should be able to show that the receiving entity has the commercial reason and capacity to bear it. VAT treatment and any cross-border withholding positions should be confirmed with advisers; this article is a governance and finance review, not technical tax advice.
A five-point checklist before the 2026 close
- Build one recharge register. List every material intra-group recharge by entity, service, basis, owner, agreement and supporting evidence.
- Tidy the documentation. Ensure service schedules, secondment letters, occupancy arrangements and board approvals are available in one place.
- Review the pricing method. Record why each allocation key is appropriate and log any exceptions or one-off adjustments.
- Reconcile to source records. Tie payroll, property and shared-service recharges back to payroll data, lease records and cost pools, and post true-ups before the close.
- Secure governance sign-off. Ask the finance director, tax lead and audit committee to review a plain-English summary of material recharges and the judgements behind them.
Why this matters beyond the year-end file
Intercompany recharges are a useful test of how a group governs itself. They show whether entities are treated as separate businesses or as extensions of a parent's spreadsheet. They reveal whether finance, HR, tax and property teams are working from the same facts. And they give the board a clearer view of where profit and cost actually sit.
A clean recharge file will not eliminate every question. It will, however, make the group easier to audit, easier to explain and harder to misread. Before the 2026 year-end close, that is a worthwhile discipline.
