My client's company, which is owned 50:50 (groan!) by my client and his wife, receives goods under licence from a uk importer. These goods are sold to UK retailers.
My client is also a 50% partner (non connected) in a retail business that wants to buy goods from my clients company. The client has proposed a mark up of 10%, which is lower than his normal mark up but because of the geographical locations of the two business, the apportioned overheads are also significantly lower.
So, what do you guys think? Is this arrangement going to be seen as commercially acceptable? Incidentally the profit is shifting from the company (where they could be sheltered) to a partnership where this is less straightforward.
Thanks in advance
Stormrider
Replies (2)
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Tranfer pricing doesn't seem like an issue
a) because your client does not control the partnership, and b) because the SME exemption should apply unless the partnership is resident in a non-qualifying territory. I get the impression that it's UK resident. The SME exemption is up to about £7m turnover (I say about as it's 10m Euros) and the medium-sized exemption is up to about £34m turnover. It also depends upon the number of employees and the balance sheet totals and applies globally i.e. by combining entities which are linked or partnership enterprises. I can elaborate if necessary, but if your client is nowhere near these figures you don't have a problem.
The company is selling goods to a partnership of which he is a member for, arguably, less than market value, which makes me wonder about BIK. However, as the price is greater than cost I don't see a problem.