Limited or self-employed?
Residence and domicile update
VAT and overseas expenses

The introduction of the starting rate of corporation tax of 10% on the first £10,000 of profit, followed by the reduction in that rate to 0% encouraged many very small businesses to incorporate to exploit the tax advantages that step offered them. Indeed the smallest businesses making up to £15,000 per annum in profit were the ones that saved the most in relative terms, by eliminating their tax liability completely.

 

If you did incorporate your business to take advantage of the lower corporation tax rates, now may be an opportune time to reconsider your business structure; the lower rates of corporation tax have long since been withdrawn!

 

The remainder of this alert sets out the issues you may like consider.

 

 

 

 

 

 

Due to the ever changing face of UK fiscal legislation there is a constant need to re-evaluate tax strategy. If you would like us to review your business tax structure please call.

Who is affected?

 

You will be affected by the changes to the residence and domicile rules if;

 

• You are non-domiciled in the UK but have been here for seven consecutive years or more and wish to continue to make use off the remittance basis of taxation; and/or

• You are an internationally mobile worker who is non-resident in the UK but do return to the UK on a regular basis.

 

If you are affected, what do you need to do now?

 

There are many complex elements to these rule changes and therefore by necessity this alert only points out those tax payers who should seek advice. This is an area where expert advice will be required.

 

For those of you who are affected, the key things you will need to do immediately (if you have not already done so) are:

 

 

These are issues that cannot be left to the end of the current tax year. If you are affected by this alert, call us. We will be happy to flesh out the details of the changes and how they affect your personal tax position in the UK.

This alert will be of interest if you sell or buy services or goods in an overseas market.

 

In many situations if you are a UK based supplier (i.e. the company providing services to say EU customers, but delivering the services in the UK, you could take on the task of obtaining UK VAT refunds for those customers. This may offer you a competitive advantage?

 

Your business can only reclaim input tax on its VAT return if the expenditure was incurred in the country in which it is VAT registered. For example, a UK company can only reclaim input tax on expenditure relevant to other UK businesses. Overseas VAT is reclaimed as follows:

 

• countries within the EC – VAT can be reclaimed by submitting a claim to the country in which the expenditure was incurred – this is known as an 8^th Directive claim 

• countries outside the EC – many non-EC countries have their own system of indirect taxes e.g. Australia has a tax called GST (Goods and Services Taxes). In many cases, a reciprocal arrangement will be in place with the UK (Australia included) whereby claims can be made between the two countries in exactly the same way as 8^th Directive claims. This procedure is known as a 13^th Directive claim.

 

For example if your UK business incurred GST on a business trip to Australia (not a trip to watch an Ashes cricket series!) you could submit a claim to the Australian authorities to recover this tax. Equally, an Australian business registered for GST could submit a claim to the UK to recover any relevant VAT paid in the UK.

 

If you do trade overseas and would like to discuss any of these issues in more detail please call.