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Can UK Ltd company lend to it's Irish Ltd parent?

What restrictions or tax implications to UK Ltd subsidiary lending to Irish Ltd parent ?

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I have recently formed a group of companies comprising of an Irish Ltd parent company and a UK ltd subsidiary (100% owned by Irish company). As the the UK company has been trading for 2 years we wanted to use retained earnings in the UK company to finance the Irish company to get it up and running.

1) Are there any restrictions to a cross border intra-group loan in this situation?

2) What considerations must be given to the terms of the loan, if any?

Many thanks for your replies in advance.

Replies (14)

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By Accountant A
10th Feb 2020 20:41

1) Ask your accountant

2) Ask your accountant/solicitor

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By Wilson Philips
10th Feb 2020 20:41

Replies in advance of what? In advance of you engaging an accountant?

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By Accountant A
10th Feb 2020 20:43

https://www.accountingweb.co.uk/terms-and-conditions-of-use

"No reliance on information

The content on our site is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site."

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By Matrix
10th Feb 2020 21:05

Did you take UK and Irish tax advice before setting up the companies? What is your role - are you FD?

On your other post you mention transfer pricing so this would also need to be addressed here.

Why Ireland? If you are trying to extract pre tax earnings from the UK to Ireland then, well, I would just refer you back to my first point - advisers would need to advise based on all the facts (what is being done where etc).

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Replying to Matrix:
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By TellMeMore
10th Feb 2020 23:17

Both my wife and I are the owners, directors, founders -50/50 split.

Yes - so two questions: loan & transfer pricing. We consulted both our UK & Irish accountants, no one giving us the full picture and UK accountant not providing any info on transfer pricing other than to say it's very complex and looking for more consulting fees. It's been a bit like trying to get blood from a stone. Hence, why I'm here seeking validation on the loan aspect and also just an answer on transfer pricing (or some info that I can go talk to another accountant about).

Full scenario details (and please let me know if need more info):

We're Irish living and working in the UK for the last 7 years and so set our company up here selling a new product wholesale to retailers and also ecommerce. We wholesale mainly to retailers in the UK & Ireland and some on the continent - all out of the UK entity.

We are planning on moving back to Ireland permanently later this year and so after seeking an accountant's advice he suggested that with the move to Ireland and Brexit on the horizon that having a Irish entity servicing Ireland and EU going forward would make sense. Also, that's the reason the Irish entity is the parent and also the reason we are looking on getting it stood up, it being a new entity.

Not trying to do anything fancy - just looking at the easiest and more efficient way to get the Irish entity up and running using the fact that there exists both funds and stock in the UK entity.

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Replying to TellMeMore:
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By Matrix
11th Feb 2020 14:05

Well if you want to keep both Tax Authorities happy then conclude the deals on arm’s length terms, that is what transfer pricing is doing. So sell at the same price as to customers if you think this is right or, if not, ensure you can justify why you are selling at a different price.

If you start using the Irish company now but run it from the UK then you will likely have to declare the profits here so I would wait until you move back to Ireland if you are averse to paying lots of professional fees.

However I would go back to the adviser who advised you to set up in Ireland due to Brexit (I thought it was business as usual at the moment) and ask them why they suggested it if it brings the Irish profits onshore? Please let us know what they say.

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Replying to Matrix:
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By Tax Dragon
11th Feb 2020 14:39

I tend to agree your sentiment here. Seems the OP has been stitched up by an Irish accountant and then been given short shrift in a forum for UK accountants. I don't think accountants are coming out of this story very well.

Matrix wrote:

If you start using the Irish company now but run it from the UK then you will likely have to declare the profits here so I would wait until you move back to Ireland if you are averse to paying lots of professional fees.

That's the current position anyway. All profits taxable in the UK. Running it through an Irish company doesn't change the UK tax (unless, of course, it also creates a liability in Ireland). By the sound if it, the company has already been created. It might make just as much sense to transfer everything over to Irishco whilst UK resident. Or not bother with the transfer at all - is it enough just to have a dormant Irish parent?

There are potential exit charges on the migration of the companies. IMHO UK advice may be more pressing than Irish advice here. OP - do what Matrix says and get the advice already received explained, but perhaps also take UK advice before you go.

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By Tim Vane
10th Feb 2020 23:53

So your accountant is asking you to pay for him to research and give written advice on a complex and difficult area of taxation that, if he gets it wrong for your particular circumstances could see you massively out of pocket and him hauled over the coals by his insurers and professional body.

Oddly enough I’d want to be paid for that as well.

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Replying to Tim Vane:
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By TellMeMore
11th Feb 2020 00:26

Is it really that complex...

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Replying to TellMeMore:
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By Accountant A
11th Feb 2020 00:39

TellMeMore wrote:

Is it really that complex...

Are you taking the p!ss now or are you really that thick? I don't know what you do for a living but I wouldn't start devaluing it without the first idea what's involved.

Now go away and don't come back.

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Replying to Accountant A:
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By TellMeMore
11th Feb 2020 01:18

I'm not trying to devalue anything here and apologies if you feel that way. I'm just looking for advice and its genuinely an honest question. If these two entities were not in a group it would be a simple transaction between 2 entities that could be done at any price..cost plus).

Genuinely just trying to understand why it gets so complex, a transfer of stock between two entities that are in a group - I just want the 10,000 foot answer but once again you've responded with '..you must be thick' if you dont understand how complex the situation is.

Maybe I am, maybe I'm not, but I do complex everyday and it's usually the people who dont understand the topic that keep referring to it as complex...

Anyway, genuinely just looking for a bit of advice & insight into transfer pricing. Is a group structure worth it if then becomes complicated, would it have been better to keep the entities separate even...

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Replying to Tim Vane:
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By Matrix
11th Feb 2020 14:09

Tim Vane wrote:

So your accountant is asking you to pay for him to research and give written advice on a complex and difficult area of taxation that, if he gets it wrong for your particular circumstances could see you massively out of pocket and him hauled over the coals by his insurers and professional body.

Oddly enough I’d want to be paid for that as well.

Actually the accountant advised the OP to set up the Irish company so I think should also be able to advise how it will all work, given the company will currently be managed and controlled here.

It is indeed complex but didn’t need to be so.

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By Tim Vane
11th Feb 2020 02:19

Ah well. We tried.

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By Tax Dragon
11th Feb 2020 07:05

I hadn't seen this thread when I posted on the other one.

Reading this thread makes my other comment seem even more apt.

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