Monthly Archives: March 2013

The world is getting smaller

We often hear that the world is getting smaller, thanks to opening of borders and faster communication. Many businesses are currently taking advantage and many more are thinking of doing so. However, for all the opportunities, there are challenges and pitfalls.

In recent years, we have seen that more clients are coming to us for advice on the business, accounting and taxation challenges facing them in their dealings overseas. We are also seeing an increased number of overseas businesses contacting us requiring assistance in setting up operations in the UK. The laws in the UK that regulate businesses and taxes are numerous and complex and so before any overseas business invests, they have to properly consider the best structure.

For any client considering expanding operations overseas, there are almost certainly going to be a significant number of challenges. This is often daunting and can put businesses off from making the commitment that could lead to increased profits and success.

Through our membership of HLB International we have access to experts around the world who, in conjunction with ourselves, will help expanding businesses overcome these challenges. HLB International is a fast-growing, dynamic network of independent accounting firms and business advisers. Formed in 1969, HLBI is a mid-tier international accounting network, servicing clients through its member firms in over 100 countries. Through this network Hawsons provide strategic, business and taxation advice relevant to the countries in which businesses are operating or considering operating.

Undoubtedly one of the biggest challenges anyone will face is trying to get a thorough grip of tax legislation in different countries. Through our own expertise and that of our network partners, we are able to advise on taxation issues and solutions throughout the world.

As part of our membership of HLB International we put a lot of time in increasing our knowledge and understanding of issues and in developing network contacts. Tax Partner Peter Kennan attends tax meetings in Europe and further afield in his role as Chair of the HLB UK tax group.

Peter Kennan – Tax Partner
pjk@hawsons.co.uk

Peter answers here some of the more common questions regularly asked of him.

What are the challenges companies doing business globally face in the tax area?
“There are many minefields and companies need to be aware both of local requirements and internatioanl rules. We have a checklist of the issues to be dealt with when doing international business including international structuring, choice of entity, tax treaties, and withholding tax rates, capitalisation, transfer pricing, VAT, permanent establishment rules, immigration, and employment, and state vs provincial rules in some countries”.

What Tax challenges do global businesses face today
“The main challenge lies in the increasingly aggressive attitude of tax authorities around the world to protect their tax base – on transfer pricing for instance. Also there is a tendency for authorities to make unilateral decisions, often ending in potential for double taxation.

Another challenge is to get good advice, and this is something HLB can help companies with: we are more than a directory, we are a network. We know – personally know – our HLB colleagues in the major economies and elsewhere and they can help us solve problems for our clients”.

What are currently the main tax challenges in the UK?
“There is a lot currently going on in UK tax legislation and we need to make sure that all our firms in the UK have up-to-date knowledge and expertise. To give an example, the UK tax authorities are introducing for the first time statutory residence test as well as a general anti-abuse rule against tax avoidance. These are the big changes and should be explained.

For more details Peter can be contacted at pjk@hawsons.co.uk

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Real Time Information

Real Time Information (RTI), the biggest shake up to payroll procedures since PAYE was introduced in the 1940’s, will become a reality for the majority of employers from April 2013.

Look out for a letter from HMRC inviting your PAYE scheme to join RTI, an invitation you cannot refuse! Let us know as soon as you have received your invitation so we can help you make the necessary transition.

The principle behind RTI is simple, HMRC want to know which employees are being paid, together with details of the deductions being made ‘on or before’ the payment is made to the employees.

Here we primarily concentrate on the key submissions but do contact us regarding any questions concerning RTI.

Key submissions What the submission contains and ‘top tips’
Employer Alignment Submission (EAS) – preparing for RTI Although this submission is only compulsory for large employers or those with a complex payroll system, it is advisable for all employers. It provides HMRC with details of all employees employed in the current tax year including:

  • full employee name
  • date of birth
  • national insurance number (NINO)
  • full postal address (this is a mandatory field where the NINO is unknown)
  • gender
Full Payment Submission (FPS) – operating RTI Used to report details of employees being paid for a particular pay period and provides details of their:

  • pay
  • statutory payments, such as Sick, Maternity and Paternity Pay
  • income tax deductions
  • national insurance contributions (NIC) (both employees and employers)
  • student loan deductions
  • starter and leaver information
Employer Payment Submission (EPS) – operating RTI This submission is used:

  • where no employees were paid in the tax month
  • where the employer has received advance funding to cover statutory payments
  • where statutory payments are recoverable (such as sick, maternity and paternity pay) together with the NIC compensation payment if applicable
  • where a NIC holiday is being claimed or
  • where CIS deductions are suffered which could be offset (companies only).
Paying at the lower earnings limit for owner managed businesses

One of the issues that has been identified is that of owner managed businesses taking salaries to establish an earnings record for state pension and benefits purposes. It is important to ensure that employees are paid ‘at’ the lower earnings limit (LEL) or above.

Under RTI it will not be possible to put wages through the payroll at the year end of the business where these have actually been, or need to be, paid throughout the year, for example to utilise a family member’s LEL. Wages should instead be paid regularly and details provided to HMRC through the RTI system on a timely basis.

Where directors are paid annually, due to the special NIC annual earnings period which applies to directors, this salary may be paid in one lump sum at the year end.

We will keep you informed of developments but if you would like to discuss any aspect of this Briefing in more detail, please do get in touch with Stephen Charles at sac@hawsons.co.uk.