| Here are some questions that are regularly asked by Kevin beare & Co clients :
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| 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. |
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| 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. |
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| 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 £61,000 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 17.5% so the additional cost (if not reclaimed) can be significant. |
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| 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. |
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| 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. |
