Cost-sharing arrangements — how much of this can I do myself?
Some of it, yes — and we will say so on the call if that is the honest answer. The parts that are worth paying for are the ones where a missed election, a missed deadline or an unverified threshold costs more than the fee: the arrangement needs contributions valued consistently, benefit shares projected on a reasonable basis, and buy-in or balancing payments where participants join or contribute pre-existing value.
What if I have already filed and got it wrong?
That is a common starting point. We re-derive the position, identify whether an amendment or a disclosure route is the right vehicle, and tell you which one preserves the relief that is still available. The order matters more than the speed.
How long will it take?
It depends on the documents rather than on us. Once the pack is complete most filings turn around inside a fortnight; anything that needs a certificate from a tax authority runs on that authority's timetable, which we tell you at the start rather than at the end.
Is our intercompany cost recharge really a cost-sharing arrangement?
Often it is not. A recharge moves a cost from one company to another; a cost-sharing arrangement is a group of participants each bearing a share of the risk of a development and each expecting a share of the benefit that comes out of it. If one company carries the downside, directs the work and owns what results, and the others simply pay a slice of the cost, that is a service or a licence being described in the language of cost sharing. The test is what the participants actually bear and actually receive, not what the schedule of charges is called.
Do we need a buy-in payment if one company already owns the technology?
If a participant brings pre-existing value into the arrangement — developed technology, a platform, a customer base, work already part-finished — then the other participants are getting the use of something they did not pay to create. An arrangement that ignores that starts with the contributions mispriced, and every year afterwards inherits the error. The usual mechanism is a buy-in or balancing payment that values what was contributed, so that ongoing cost shares can then run on the current development spend alone. The valuation needs to be documented at the time, because reconstructing it after an audit opens is considerably harder.
What if the actual benefits turn out different from the projections?
Projections are allowed to be wrong; what is not allowed is for them to be wrong and unexplained. Benefit shares are set in advance on a reasonable basis, and the arrangement will normally provide for what happens when outcomes diverge — an adjustment to future shares, a balancing payment, or a documented explanation of why the divergence reflects commercial events rather than a projection made to suit the tax result. Keeping the original projection, the assumptions behind it and the later actuals in one place is the practical protection. An authority reviewing the file will compare them whether or not you have.
Can we just split development costs by headcount?
You can use headcount if headcount is a reasonable proxy for the benefit each participant expects, and you can show why. It often is not. Where one participant serves a large market and another a small one, or one will exploit the result for years while another uses it briefly, a per-head split allocates cost to something that has nothing to do with the benefit. The basis has to be chosen because it tracks expected benefit, recorded with the reasoning, and revisited when the business changes. A metric picked because the data was easy to obtain is the one most likely to be challenged.
Does a cost-sharing arrangement need a written agreement?
In practice, yes. The arrangement is a set of claims about risk, contribution and expected benefit, and the only evidence that those were agreed in advance is a contemporaneous document saying so. The agreement should name the participants, describe the activity, state how contributions are valued, state the basis on which benefit shares are projected, and deal with participants joining, leaving, or contributing pre-existing value. Where it exists only as an accounting practice and a series of invoices, the position has to be argued from conduct after the fact, and conduct is usually less consistent than anyone remembers.
Why is the tax authority calling our cost share a licence?
Because of where the risk and the ownership sit. If one participant funds the development but has no ability to control the work, no realistic exposure to its failure and no right to exploit the result independently, it looks like a company paying for access to someone else's property. A payment for access to property is a royalty, and a royalty is priced on the value of what is accessed rather than on cost. The way to answer the point is with evidence of shared risk and commensurate expected benefit, present in the agreement, in the decision-making and in the accounts from the start.
What is country-by-country reporting?
A report that the largest multinational groups file with their home authority, setting out revenue, profit, tax paid and accrued, capital, employees and tangible assets for every jurisdiction they operate in. It is exchanged between authorities and used for risk assessment, not to compute tax. Its effect on the ground is that inconsistency between the report, the local files and the statutory accounts is itself what draws attention. See our transfer pricing work.
Does a remote employee create a permanent establishment?
It can. One employee working from home in another country may be enough where the arrangement gives the company a fixed place at its disposal, or where that person habitually concludes contracts. Seniority and function matter more than headcount: a salesperson closing deals is a far greater risk than a developer. The exposure is corporate tax and payroll registration in that country, which is why it is worth testing before the hire rather than after. See PE risk review.
