Intercompany Agreement Template for the UK
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What is an Intercompany Agreement?
An intercompany agreement records the terms on which companies in the same group deal with each other, covering shared services, management charges, financing, the use of intellectual property and the supply of goods between group entities.
Its main purpose is tax. UK transfer pricing rules require transactions between connected companies to be priced as they would be between independent parties, and HMRC expects the written agreement to match what actually happens in practice. Where the paperwork says one thing and the conduct another, it is the conduct that is examined and the pricing that gets adjusted. Large multinational groups must also keep master file and local file documentation, and the intercompany agreement is the primary evidence sitting underneath it.
Sample clauses: standard wording in a UK intercompany agreement
5. Charges
5.1 In consideration of the Services, the Recipient shall pay the Provider charges determined on an arm’s length basis in accordance with this clause 5, consistently with Part 4 of the Taxation (International and Other Provisions) Act 2010 and the OECD Transfer Pricing Guidelines.
5.2 The charges for each Service shall be the Costs properly attributable to the provision of that Service, determined in accordance with the cost allocation methodology in Schedule 3, plus a mark-up of [5]% (together, the Charges).
5.3 The Provider shall invoice the Charges quarterly in arrears. The Recipient shall pay each invoice within 30 days of receipt, in [currency], together with any applicable VAT.
5.4 The parties shall review the Charges, including the mark-up, at least annually and shall adjust them where necessary so that they remain consistent with the arm’s length principle, having regard to any benchmarking or comparability analysis available to the group.
5.5 If a tax authority in any jurisdiction makes or proposes an adjustment to the taxable profits of either party on the basis that the Charges are not arm’s length, the parties shall make such compensating adjustment to the Charges, including retrospectively, as is appropriate to give effect to the arm’s length principle, and shall cooperate in any claim for a corresponding adjustment under an applicable double taxation arrangement.
6. Service standards
Illustrative extract showing typical drafting under the law of England and Wales. Documents generated with GenieAI are tailored to your rules, standards and context.
Frequently Asked Questions
When should you use an Intercompany Agreement?
You need an Intercompany Agreement when your business group starts sharing resources, staff, or services between affiliated companies. This becomes essential before launching shared service centers, implementing group-wide IT systems, or setting up management fee arrangements between parent and subsidiary companies.
HMRC expects to see these agreements in place for all significant intra-group transactions, particularly when dealing with transfer pricing reviews. Put them in place early - ideally before starting any new arrangements between group companies. They're particularly vital when expanding operations, restructuring your group, or establishing new subsidiaries in England and Wales.
What are the different types of Intercompany Agreement?
- Inter Company Services Agreement: Used for shared services like HR, IT, or accounting between group companies
- Intercompany Credit Agreement: Governs lending and financing arrangements within the group
- Intercompany Assignment Agreement: Transfers intellectual property or contract rights between affiliates
- Intercompany Licence Agreement: Manages IP licensing and technology sharing within the group
- Intercompany Asset Transfer Agreement: Handles the sale or transfer of physical assets between related companies
Who should typically use an Intercompany Agreement?
- Parent Company Directors: Set group-wide policies and approve Intercompany Agreements for major transactions or strategic arrangements
- Subsidiary Company Management: Implement and oversee day-to-day operations under the agreements
- In-house Legal Teams: Draft, review, and maintain agreements to ensure legal compliance and protect group interests
- Tax Directors: Review terms to ensure transfer pricing compliance and defend arrangements with HMRC
- Finance Teams: Handle invoicing, payments, and financial reporting requirements between group entities
- External Advisers: Provide specialist input on complex arrangements or cross-border implications
How do you write an Intercompany Agreement?
- Group Structure: Map out all participating companies, their relationships, and roles in the arrangement
- Transaction Details: Document the specific services, assets, or resources being shared between entities
- Financial Terms: Determine pricing, payment schedules, and how fees or costs will be calculated
- Operational Specifics: List service levels, delivery timeframes, and performance metrics
- Compliance Requirements: Check transfer pricing rules and any sector-specific regulations
- Approval Process: Identify required signatories and internal approvals needed
- Document Generation: Use our platform to create a legally-sound agreement that includes all mandatory elements
What should be included in an Intercompany Agreement?
- Party Details: Full legal names, company numbers, and registered addresses of all group entities
- Service Description: Clear outline of services, goods, or rights being transferred between parties
- Payment Terms: Detailed pricing structure, payment schedules, and invoicing requirements
- Duration & Termination: Agreement length, renewal options, and exit provisions
- Performance Standards: Specific service levels, quality metrics, and delivery timeframes
- Compliance Clauses: Transfer pricing provisions and tax compliance requirements
- Governing Law: Explicit choice of English law and jurisdiction
- Execution Block: Signature sections for authorized representatives of each party
What's the difference between an Intercompany Agreement and a Business Acquisition Agreement?
A key distinction exists between an Intercompany Agreement and a Business Acquisition Agreement. While both involve transactions between companies, they serve fundamentally different purposes in corporate operations.
- Transaction Nature: Intercompany Agreements govern ongoing relationships between related group companies, while Business Acquisition Agreements handle one-time purchases of entire businesses or substantial assets
- Relationship Type: Intercompany Agreements work between affiliated entities under common control, whereas Business Acquisition Agreements typically involve independent parties in an arm's length transaction
- Regulatory Focus: Intercompany Agreements primarily address transfer pricing and group taxation concerns, while Business Acquisition Agreements concentrate on ownership transfer, warranties, and post-completion obligations
- Duration: Intercompany Agreements usually establish continuing arrangements, but Business Acquisition Agreements mainly cover the transaction period and immediate aftermath
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About the Intercompany Agreement
- Group Structure: Map out all participating companies, their relationships, and roles in the arrangement
- Transaction Details: Document the specific services, assets, or resources being shared between entities
- Financial Terms: Determine pricing, payment schedules, and how fees or costs will be calculated
- Operational Specifics: List service levels, delivery timeframes, and performance metrics
- Compliance Requirements: Check transfer pricing rules and any sector-specific regulations
- Approval Process: Identify required signatories and internal approvals needed
- Document Generation: Use our platform to create a legally-sound agreement that includes all mandatory elements
Explore 208,390+ legal templates
Explore 208,390+ legal templates
All Intercompany Agreement templates
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- Intercompany Settlement Agreement
- Intercompany Shared Services Agreement
- Intercompany Subordination Agreement
- Master Intercompany Agreement
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