FAQ's

Here are some questions that are regularly asked by Kevin Beare & Co clients :
Should I open a branch or set up a company? There are tax advantages to operating as a foreign branch in that branch losses can usually be offset against the parent company profits. However this does require filing of the parent company's accounts in the UK. Setting up a company is a better route commercially and is not as onerous as in say Germany. A company can be bought 'off the shelf' for a few hundred pounds with issued share capital of as little as £2.
 
How quickly can I set up my company's bank account? A new company bank account can be set up in the UK in as little as five days. There are certain formalities to be met but at least one major bank has a streamlined process utilising on-line application forms.
 
What is Value Added Tax? (VAT) VAT is similar to a US sales tax in that it is levied on sales (outputs). VAT suffered on purchases and expenses (inputs) is set off against output tax and only the net amount is paid to the government (i.e. tax on the value added). A trading entity must register if its turnover is expected to be more than £67,000 p.a. In a start up situation, or when trading as a branch operation and carrying out marketing activities only, there may be expenses but no sales. In this case (provided the company is VAT registered) the input tax can be reclaimed from the government. The standard rate of VAT is 155% so the additional cost (if not reclaimed) can be significant.
 
Name some aspects where UK employment differs from the US? Vacation - The UK standard is four to five weeks compared to two in US. Salary payments - are made monthly not bi-monthly. Sick pay - The UK Statutory Sick Pay scheme pays a minimal amount only, and can largely be ignored. Salaried staff in the UK expect their employer to pay at least one month at full pay in the first year of service, with perhaps three - six months on half pay after one year. This contrasts with the US practice of 5 - 10 days a year. Disability insurance is normally arranged to be effective after six months sickness. Pension contributions - the company's contribution is 6 -10% compared to a much lower (or nil) percentage in the US. Company cars - despite ever tightening tax penalties company cars are still common in the UK, although taxable car allowances are also common.
 
 What about tax on employee benefits? Individuals are taxed on employee benefits (such as company cars and private medical insurance). There are traps to be avoided in connection with reimbursement of expenses to employees. All these issues are best dealt with by an out-sourced finance function from day one rather than a payroll bureau solution.
 
 What is National Insurance/NIC? Anyone who is aged between 16 and state pension age – currently 60 for a woman and 65 for a man - may have a liability to pay National Insurance contributions. You may be liable to pay National Insurance contributions if you:
  • work for an employer (an employed earner), and pay Class 1 National Insurance Contributions
  • work for yourself (self employed), and pay Class 2 and Class 4 National Insurance contributions
The amount of contributions you have to pay will depend on whether you are an employed earner or self employed; and the amount you earn. There may be occasions when you may work for an employer and for yourself at the same time. In these instances you may have to pay more than one class of contribution. Someone who is not liable to pay National Insurance contributions may be able to pay certain contributions on a voluntary basis (normally Class 3 National Insurance contributions). These contributions are payable to safeguard or improve benefit entitlement for Basic State Pension and Bereavement Benefits. Anyone who is over State Pension age does not have to pay Class 1 or Class 2 National Insurance contributions, except on earnings that should have been paid before State Pension Age.
 
Are we liable for VAT on goods/services we export? If the goods are leaving the European Union, it is not necessary to include VAT on your international invoices. It is necessary, however, to ensure you retain a clear 'audit trail', so that you can prove to HM Revenue & Customs that the goods have clearly left the EU. For goods to countries within the EU, the VAT position will depend on the position of your client. It is sensible to talk through your precise situation (as each is different) regardless of B2B or B2C with us, or HM Revenue & Customs.
 
What is free circulation? For goods to be in "free circulation" they must originate from the EU. If the goods are imported into the EU all import formalities have to me complied with and all duties, levies or equivalent charges have to be paid and not refunded. Goods in free circulation can move within the EU Member States without Customs presentation or the payment of customs duties.