Management fee study — do I need an adviser, or can I do it alone?
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 study evidences the services with time records and deliverables, excludes shareholder costs, allocates on a defensible key, and tests the mark-up.
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.
Can we charge a management fee to our overseas subsidiary?
You can charge for services the subsidiary actually received and would have been willing to pay for. The charge has to correspond to something done: a person, a period, a deliverable. Where that evidence exists, the questions move on to which costs belong in the pool, how they are allocated, and what mark-up applies. Where it does not, the fee is a transfer of profit with an invoice attached, and that is how a reviewing authority treats it. The practical order is to define the services first and price them second, not to set a round sum and then look for services that justify it.
What is the benefit test for an intercompany management fee?
The test asks whether the recipient obtained something of commercial value, something that improved its position and that an independent business would have paid for or done for itself. Activities carried out because the parent is a shareholder do not pass: monitoring the investment, reporting to the parent's own board, the cost of raising the parent's capital. Nor does activity that merely duplicates what the subsidiary already does. Failing the test has an asymmetric consequence. The deduction is denied in the paying country while the fee remains taxable in the receiving one, so the same amount is taxed on both sides.
Which head office costs cannot be recharged to subsidiaries?
Shareholder costs, chiefly. These are costs a parent incurs in its capacity as an owner rather than as a provider of services: its own statutory compliance and audit, its board's oversight of the investment, consolidation prepared for the parent's reporting, and the expense of raising capital for the parent. Duplicated activity comes out too, as does anything a subsidiary receives only incidentally because it happens to be part of a group. Separating these from genuine service costs is most of the work in a study, and doing it before the fee is charged is far cheaper than defending it afterwards.
How do we choose an allocation key for a management fee?
Choose the key that tracks use of the service, then be able to say why. A service consumed in proportion to people is allocated on headcount; one consumed in proportion to transaction volume is allocated on volume; one used by two entities and not a third is not spread across all three. Revenue is the default in many groups because it is easy to obtain, and it is defensible only where revenue genuinely reflects use. Different service lines will often need different keys, and a study that applies a single key to everything is usually a study that did not look.
Do we have to add a mark-up on recharged costs?
Usually, because an independent provider would not perform a service at cost. The question is what mark-up the service supports, and that depends on what the service is. Routine, supportive activity attracts a modest mark-up; work involving unique contributions or real risk does not sit in the same category. Costs merely passed through, where the group adds nothing but administration, are treated differently again. The point is not to find a figure and apply it everywhere. It is to describe each service accurately enough that the mark-up follows from the description rather than from habit.
Our management fee deduction was denied, what went wrong?
In most cases the file could not evidence that a service was provided to that entity. A pool of costs, an allocation formula and an invoice will not do it: the missing link is the record showing who did what for whom. The other common failures are shareholder costs left in the pool, an allocation key nobody could justify, and a charge that appeared in the accounts with no agreement behind it. The damage is not only the lost deduction. The income stays taxable where the fee was received, so the group pays tax on an amount it was refused relief for.
What is a transfer pricing policy, and is it the same as documentation?
No. The policy is the forward-looking statement of how your intercompany prices are set — which method for which transaction, which comparables, what happens when margins drift. The documentation is the backward-looking evidence that the policy was applied and produced an arm's length result for that year. Authorities read both, and a policy that the intercompany invoices do not actually follow is worse than none, because it establishes what you knew you should have done. See do you need documentation.
What is OECD Pillar One?
The part of the international agreement that reallocates a share of taxing rights over the very largest and most profitable groups to the jurisdictions where their customers and users are, regardless of physical presence — plus a simplified approach to routine marketing and distribution returns. It is aimed at the digitalised economy problem that physical-presence rules could not reach, and its implementation is still moving, which is why we read the current instrument rather than the original blueprint. See BEPS and Pillar Two.
