We have worked with retail groups operating in multiple countries to design and implement a streamlined, tax-efficient operating model. By leveraging our expertise in transfer pricing, customs duty compliance, and tax planning, we support retail groups in aligning their financial and operational processes with international requirements, whilst identifying significant savings opportunities.

MENZIES’ STRATEGIC APPROACH & SOLUTIONS

1) For a group operating in multiple countries, we highlight the client’s current flow of goods against the proposed flow of goods under their new operating model to illustrate where potential tax and customs duty savings could be achieved.

2) We then advise on a tax efficient “future proofed” transfer pricing model, taking into account their expected operational changes. This included a full Functional Analysis Review (FAR) being documented which looks at key functions, assets and risks in each entity/country, and advising on a tax efficient model for operating in the EU.

3) We offer full end to end transfer pricing services, including benchmarking intercompany product prices since the transfer price was to potentially be used as the basis for customs valuation.

4) We then advised on the various valuation methods for customs duty purposes when moving goods around the world. This included supporting groups in selecting the most appropriate method for each jurisdiction to minimise costs and ensure compliance.

5) We recommended processes for monitoring and managing customs duty procedures to ensure that any under or over payments of customs duty can be minimised. This is also to ensure our client’s could demonstrate well-controlled processes in the event of enquiries from tax authorities.

6) We worked with our HLB Network firms across the world to ensure that all local law requirements, including compliance and reporting requirements, were understood and appropriately planned for.

7) Wider tax issues were considered so that the customs duty and transfer pricing issues were not looked at in isolation. These included VAT and sales tax, Permanent Establishment risks, and withholding taxes on cross-border payments.

Our holistic approach enables multinational groups to successfully navigate the complexities of cross-border operations. By combining technical expertise, global coordination, and strategic tax planning, we help groups achieve compliance, unlock savings, and build a framework for future growth. This case study demonstrates our commitment to delivering integrated, value-added solutions to meet the unique needs of multinational businesses.

We can assist clients by working in partnership with them to establish tax efficient product flows for movements of their goods especially where operating models may be changing (e.g. new markets being explored, new routes for moving goods, new warehouses being opened etc).

Our approach:

1) To consider the current model: Is too much customs duty being paid? Can a different valuation method be used which will result in duty savings?

2) To review how the customs duty policies and procedures are being managed and monitored. What are the risks and opportunities?

3) To evaluate a Group’s transfer pricing policies and consider whether these are both tax efficient and future proofed given any expected business changes.

4) To advise a Group on any recommended changes to transfer pricing policies; any benchmarking needed to support the transfer pricing policies; and what reporting and documentation is needed in all relevant jurisdictions.

5) To consider other associated tax matters, for example, VAT and sales tax implications; global mobility and permanent establishment issues if key employees work across different jurisdictions; withholding tax issues on cross-border payments; optimal financing structures etc.

CLIENT PROFILE

Skin Cupid Limited (“Skin Cupid”) are the UK’s leading online retailer of Korean and Japanese skincare and beauty range, home to over 80 brands. Established in 2021 and based in London, Skin Cupid sell their diverse range of products locally and worldwide via wholesale to shops, online shops, and individual consumers.

CHALLENGES FACING THE CLIENT

As a rapidly growing business in a highly competitive market, Skin Cupid faced several financial and operational challenges, whilst also requiring compliance support.

Popularity of Korean skin care: Skin Cupid’s sales have grown year on year and meeting their product’s increasing demand required streamlined systems for importing and selling products.

Importing goods to the UK: Managing VAT compliance, customs declarations, and import documentation proved complex for the client.

Accounting records: Financial records were not kept up to date, invoices were missing, whilst profit and loss reporting was deemed basic. There were also concerns surrounding the client’s unreconciled balance sheets for key accounts, including PayPal, cash control, stock and stock-in-transit. Ultimately, this resulted in inaccurate reports and unbalanced accounts.

Rapid growth and software limitations: The company relied heavily on Shopify for stock management and Excel for order tracking of imported goods into the UK and goods arriving at the client’s warehouse. The accounting software, Xero, was also underutilised.

MENZIES’ STRATEGIC SOLUTIONS & OUTCOMES

Through close collaboration, a structured approach, and a clear understanding of the client’s objectives, we helped deliver several key solutions to address the challenges facing Skin Cupid.

1. We helped Skin Cupid bring their accounting records up to date, significantly reducing time spent on financial tasks that were done manually, such as updating Excel documents.

2. We supported the client with their Customs Declaration Service, C79 certificate, and Postponed Import VAT Accounting (PIVA) to streamline their VAT returns.

3. We assisted with the reconciliation of Skin Cupid’s PayPal and bank accounts to ensure their balance sheets accurately reflected their financial activity.

4. Monthly management reports were created to provide insights into Skin Cupid’s business performance. To improve and consolidate the client’s cashflow forecasting, plans are also underway to migrate their monthly reporting to the financial forecasting software, Fathom.

5. As part of our ongoing strategy to help improve the client’s systems and processes, our Digital Transformation team have initiated discussions with Skin Cupid about transitioning to the cloud-based inventory management software, Unleashed.

ADDITIONAL SUPPORT PROVIDED TO SKIN CUPID

Whilst this case study primarily focuses on the Outsourcing aspect of the assignment, there have been other departments involved with the client on this project. The project drew on expertise from multiple Menzies’ teams, including:

Tax: Guidance has been provided for both personal and corporate tax compliance.
VAT: Support with VAT compliance and preparation of the client’s first VAT return.
PAYE: Addressed payroll issues and resolved outstanding HMRC payments.
Systems advisory: Collaboration with Skin Cupid to transition stock management to Unleashed for improved operational efficiency.

IN SUMMARY

Skin Cupid’s journey highlights the importance of a proactive and collaborative approach in addressing financial and operational challenges. Through our integrated services and strategic support, we’ve enabled Skin Cupid to focus on expanding their business while maintaining compliance and financial clarity. This case study demonstrates our ability to add value as trusted advisors to rapidly growing businesses withing the retail and e-commerce industry.