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A UK business that has assessed the case for Ireland and decided to proceed has already worked through the commercial rationale. The structure that follows needs to reflect that same rigour, because HMRC and Irish Revenue examine an Irish subsidiary through its economic reality, and that examination is methodical.
What regulators look for is evidence of genuine economic life within the entity. Employees with defined responsibilities and real authority. Premises where work is actually conducted. Contracts entered into by people with the power to commit the Irish entity. Banking activity that reflects real commercial operations. A board that meets in Ireland, makes real decisions, and records them in a way that stands behind those decisions. Contemporaneous documentation is the foundation on which any well-founded position rests, and regulators are experienced in assessing whether that standard has been met.
The substance an Irish entity requires scales with the economic claims it is making. An entity holding intellectual property and receiving royalties from a UK parent is asserting that significant value originates in Ireland, and the substance required to support that assertion is proportionate to it. An entity providing defined services to Irish customers is making a more contained claim, and the substance required reflects that. In both cases what matters is that the substance matches the function the entity performs, and that the match is demonstrable through documentation that exists at the time the activity takes place.
A properly structured entity has at least one senior individual in Ireland with real authority and real accountability. That person attends board meetings in Ireland, signs contracts on behalf of the entity, manages relationships with Irish customers or suppliers, and participates in commercial decisions that are formally recorded. The entity maintains its own premises, its own bank account, its own insurance, and its own Irish professional advisers. Intercompany arrangements with the UK parent are documented at arm's length and reviewed as the business evolves. The transfer pricing methodology is recorded at the time it applies. The entity files its own Irish corporation tax return every year.
Most structures that develop problems did not begin with problems. They begin well and then drift. The person hired to lead the Irish operation moves on and the authority that person held is not carried forward. Board meetings that once took place in Ireland begin happening remotely. Decisions that should originate in Ireland begin to be made elsewhere and recorded in Ireland afterwards. Transfer pricing documentation that accurately described the business in 2020 remains in place in 2026, unchanged, though the business has evolved considerably. Each of those changes can appear minor in isolation. Over time they can reduce a well-designed structure to one that would not survive a regulatory examination.
The question that deserves to be asked every year is whether the substance is adequate now.
A review of the substance position begins with a small number of direct questions, and the answers need to exist in writing. Who in Ireland has authority to bind the entity, and are they exercising it in practice? Where are board decisions actually being made, and does the minute record reflect that accurately? When was the transfer pricing methodology last reviewed against current standards? Does the intercompany agreement still accurately describe what is happening between the two entities? Has the Irish entity filed its own corporation tax return for every year since incorporation? Where those answers are documented and accurate, the substance position is likely to be defensible. Where they are not, that is where the work needs to begin.