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Subsidiary uncertainty

15 December 2009
Issue: 4236 / Categories: Forum & Feedback
A UK subsidiary of a US parent is carrying out work in the UK on behalf of an offshore ‘sister’ company to whom all receipts are paid and all costs charged

A Ltd is a private limited company registered in the UK which is a wholly-owned subsidiary of a group whose ultimate parent is a US-based listed corporation.

A Ltd has been carrying out work in the UK on behalf of a sister company – another wholly-owned subsidiary but registered in the Isle of Man (IOM) – which has a contract with a UK company.

A Ltd has simply been utilised as a convenient but passive vehicle for carrying out the IOM company’s obligations under the contract with its UK customer. There is no arm’s length trading between the two.

The financing of our client company is partly on loan account and partly by inter-company invoicing (which does nothing more than recharge costs to the IOM company).

Once the IOM’s contract with its UK customer is finalised the client company will be wound up. It has not traded...

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