A group restructuring often turns informal cooperation into transactions between distinct legal entities. Staff may remain in one company while supporting several others, or treasury may be centralised under new arrangements. Those flows need commercial logic, contracts, tax analysis and consistent accounting. Common ownership does not make every payment a dividend or allow services and loans to be recorded interchangeably.
Begin with services actually provided. Name the provider, recipients, tasks, personnel and benefit to each recipient. Distinguish shareholder oversight from services delivered to subsidiaries and check for duplication. An allocation key should reflect the activity: employee numbers might help for a genuine payroll service, while another function may require different evidence. The corporate tax rules on related party transactions require attention to arm's length conditions.
For loans, specify lender, borrower, purpose, principal, repayment, interest and any guarantees. Consider the borrower's capacity to repay, the lender's resources and restrictions in external financing agreements. An amount posted to an intercompany account is not a complete financing arrangement. Cross border flows require additional analysis of residence, withholding and applicable agreements; copying a domestic contract will not settle those issues.
Imagine a hypothetical restructuring of a retail group. Its administration team stays in the former operating company and begins supporting two subsidiaries. A signed contract alone cannot justify a monthly charge if nobody tracks the work. A simple service register and a documented allocation method make the charge understandable. Separate loan documentation addresses temporary cash advanced for a new store's opening.
Prepare service descriptions, cost schedules, relevant invoices, loan agreements and a reconciliation of balances between companies. Check cutover dates so that old arrangements do not continue alongside new charges accidentally. Each entity's accounting should show the same underlying transaction consistently, including accruals and repayments. Review indirect tax and corporate tax treatment according to the nature of the specific flow.
Common problems include year end charges without evidence, permanently unresolved balances and contracts that describe functions nobody performs. Review arrangements when staffing, borrowing or activities change rather than treating them as a one off restructuring appendix. The accounting framework and tax legislation provide reference points, while the method needs to match reality. A general description sent to info@taxdevelopmentconsulting.com can help identify which service and financing schedules to assemble first.