A consultancy business with global client base and had expanded into overseas locations without planning for possible tax consequences. Concern was raised over likely risks of attribution of profit, local compliance, and sales tax for existing and planned overseas offices.
The business had expanded rapidly from a UK base. The local audit partner and “trusted advisor” had provided sound advice to the UK company, but had focussed on UK compliance rather than a Business Advisory role. The business now faced a significant risk to overseas tax on UK revenue.
The challenge was to “regularise” existing overseas operations, and to formulate a low cost scalable solution to enable this entrepreneurial high growth business to continue to expand profitably. As most of the expenditure incurred within the business was charged to the UK company, it was important for the associated revenue to be taxed in the same company.
In observance of OECD Guidelines and local legislation, appropriate branch and subsidiary structures were implemented in order to ring-fence UK revenue and reduce local taxation. These structures were supported by Service Agreements between the parent and subsidiary companies to define the activities of the local entity, together with a Transfer Pricing Methodology. Other local compliance issues were identified, and a template created to enable the role-out across more than 50 countries.
The company was provided with a scalable and cost effective solution to enable the expansion of operations overseas with minimal risk.
Case Study: Steve Smith (Click here to see his profile)