Over the last week, I have had two separate queries from potential clients, but both of which had a UK holding company with 100% ownership of an EU subsidiary (eastern Europe and Balkans). They would be companies where most of the transactions take place in the overseas sub. We are talking about SMEs here rather than larger enterprises.
What should I consider before quoting my fees for these type of clients?
Immediate items which come to mind are consolidation of the sub in the UK holding company. However, if the group qualifies as a small group, then no consolidation would be required and I don't need to worry about pricing this into my quote?
The other item which comes to mind is AML on the subsidiary and the activity that company might undertake. I will need to be more vigilant, but what requirements should I look at immediately now outside of passport and proof of address of directors of the UK holding? Will I need this for the sub. too, even though the beneficial owners would be the beneficial owners of the UK holding?
Replies (3)
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Here is an outline answer:
1. Consolidation is the accounting/company law part.
2. If you're responsible for taxation then you might want to check items like whether CFC rules apply - given the number of gateways it is unlikely though. Nevertheless worth a check. You will also need to check the other usual stuff like interest/royalties/dividend taxation - if within the EU then EU interest/royalties directive applies. Then comes transfer pricing rules which do not apply to small enterprises.
In sum it's not just about accounting and company law compliance!!
You need to find out EXACTLY what you are quoting for. So you need to confirm with the client that he does not want a consolidation and that he does not want an audit. As noted above you need to confirm how profits are extracted etc. so that you know what tax areas on which you'll need to mug up.