itax presentation expanding a business into the uk san francisco – september 19, 2013 presented by...

ITax presentationExpanding a business into the UK

San Francisco – September 19, 2013Presented by – Christopher OwensTax Partner, nortons UK

ABOUT THE SPEAKERChristopher Owens, Tax Partner, nortons UK

Christopher has specialised in tax since 1980. He spent 11 years with EY where he looked after the Thames Valley office’s largest owner managed businesses with international subsidiaries. Following this he went on to become senior corporation tax partner at Brooking Knowles and Lawrence, a mid-tier UK firm, advising shareholders on exit planning, handling tax on company sales & purchases and continuing to deal with international companies. At nortons he heads up the tax practice and spends much of his time assisting US companies set up in the UK.

Nortons is a founder member of an association of independent accounting firms called NIS Global and has a team of specialist advisors who set up and manage international projects.

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• Rates of UK taxation

• What is a taxable presence

• Branch or subsidiary

• Transfer pricing

• Employees

• Taxation of non-domiciliaries

TODAY’S SESSION

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RATES OF UK TAXATION: CORPORATE

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2007 30% 2012 24%

2008-2010 28% 2013 23%

2011 26% 2014 21%

?2015? 20%

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Income Tax

Personal allowance for most £9,440

(withdrawn at £100,000)

RATES OF UK TAXATION: PERSONAL 2013-14

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1-32,010 20%

32,011 – 150,000 40%

Over 150,000 45%

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National Insurance (Social Security) on earnings (usual rate)

RATES OF UK TAXATION: PERSONAL 2013-14

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EMPLOYEE

Primary threshold £7,755 -

Upper earnings limit £41,450 12%

Earnings above £41,450 2%

EMPLOYER

Earnings above £7,696 13.8%

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• An office or place of business

• Part of an employee’s home

• Exempt PEs:-

Article 5 of the DTT, storage, display or delivery of goods,

collecting information, agent of independent status

WHAT IS A PE (PERMANENT ESTABLISHMENT?

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• Branch is less formal, accounts on public record

• US intermediate holding company

• UK Limited company can ring fence liabilities

• Costs/hassle of ceasing – there is an entity

BRANCH OF THE US OR A SUBSIDIARY?

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• Commercially driven – who is making sales?

• Buy/sell

• Cost plus

METHOD OF REMUNERATING THE UK PRESENCE

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TRANSFER PRICING

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WORLDWIDE Small Medium Large

Employees <50 <250

AND EITHER

SalesOR

<euros10m

<euros50m

Gross Assets <euros10m

<euros43m

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• Essential to obtain separate VAT advice

• A tax on supplies (not payments/profits)

• UK Standard rate 20%

UK Zero rate 0%

UK Registration limit £79,000

• For goods, importer of record important

• Customs duties separate to VAT

A BRIEF OVERVIEW OF VAT (SALES TAX)

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• Goods in free circulation

• Goods & services different

• B2B and B2C different

• Applies to US companies making supplies in UK

• Documentation/systems

A BRIEF OVERVIEW OF VAT (SALES TAX)

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• Work permits

• Social security

• Pension contributions

• Insurances

• Typical benefits – automobile life cover pension scheme holidays

EMPLOYEE ISSUES

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• Deduction from profits on exercise

• Consider cost in UK accounts

• Payroll requirements

• NIC joint elections

STOCK OPTIONS - COMPANY

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• US scheme – unapproved for UK purposes

• Income tax + national insurance

• EMI scheme – can be sub-plan

<250 ‘ees worldwide

<£30m aggregate gross assets w/wide

Max value £250k per employee

STOCK OPTIONS - EMPLOYEE

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• Residence rules changed from April 2013

• Remittance basis

UK > 7/9 years £30,000

UK > 12/14 years £50,000

• Duties performed in the UK taxable

NON-DOMICILED INDIVIDUALS(non-doms)

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• Consider split pay if no need to remit to UK

• Take an overview of employee’s total liability

• Payroll obligation in overseas territory?

• PE in overseas territory?

DUTIES OUTSIDE THE UK

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• UK tax rates amongst the lowest in the EU

Look beyond the headline rate

• Favourable social security rates and employment law

30% not uncommon elsewhere

• Before granting stock options to UK hires:

consider EMI approved scheme and joint NI elections

• Buy/sell or cost plus – where are sales made?

• PE risk and payroll obligations caused by employees

• Obtain VAT advice for UK, possibly all countries selling into

• Consider work permits early on

SUMMARY/OVERVIEW

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ANY QUESTIONS?

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CONTACTS

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NIS Global 100 Spear Street, Suite 1115San Francisco, CA 94105

Telephone: (415) 250-3818

NIS Global Headquarters nortons

Highlands House, Basingstoke Road, Spencers Wood, Reading, RG7 1NT

United KingdomTelephone: + 44 (0)118 976 8980

www.nisglobal.com

Christopher Owens (Tax Partner)c.owens@nortonsgroup.com

Pete Doyle (Nortons Partner, Global Business)p.doyle@nortonsgroup.com

Carmen Oliver (VP HR)c.oliver@nortonsgroup.com