Enquiries re overseas subs and UK holding co - AML

Enquiries re overseas subs and UK holding co - AML

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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?

"a group qualifies as a ‘small’ group where two out of the following three conditions must be met:
 
aggregate turnover must not be more than £6.5m net (£7.8m gross)
the aggregate balance sheet total must not be more than £3.26m (£3.9m gross)
the aggregate average number of employees must not be more than 50"
 
 

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?

 
 
Thanks

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By User deleted
06th Nov 2014 16:28

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!! 

 

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By TerryD
06th Nov 2014 17:33

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.

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By StartUpAcc
06th Nov 2014 18:31

Thank you for the considered responses, very much appreciated.

I will confirm that he does not want an audit or consolidation and caveat my fees on that.

 

I understand that if trading profits are less than £50,000 then it would be exempt from a CFC charge. There are other exemptions too but I can base my fee on it being exempt and have this as a caveat. And allow for extra charges.

 

Likewise for transfer pricing, given the size of the company and I'll base the fees on the company meeting the Small or Medium enterprise definition which exempts it from transfer pricing rules. Caveat if doesn't meet the criteria.

 

EU Interest/Royalties directive, I am not familiar with this at all. Had a quick read and would have to mug up a lot.

 

So generally, I need to caveat for falling under legislation that would not apply to a UK company without an overseas subsidiary, and allow for additional fees there (which can be used to get a review by peers with greater knowledge in the area!).

 

 

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