Suppose two companies A and B are separate but closely connected, e.g., run by the same director(s), collaborate in a new product where
- A is responsible for procurement, manufacturing, logistics, etc.
- B takes care of customer support and marketing.
So B is customer facing. Now, for the sales receipts generated, how would HMRC view the split of the sales receipts since each company plays a part in generating sales? Is it purely dependent on the amount each company puts in their bank account? Since A and B are closely connected, if A so happens to be resident in a tax-favourable jurisdiction, B could take a minimal "fee" for providing the CS and branding services and shifts profits to A.
The fair value of B's services would be relatively low compared to the services A provides (manufacturing, logistics, etc.). So, even with the arm's length principle, B could still shift most of the profits away - correct?
Any thought appreciated.