At the National Financial Directors’ Excellence Awards, Broadcaster Peter Sissons commented:

“...with a score of nearly nine-out-of-ten for quality of service, the highest marks ever for an audit firm in ten years.”

Francis Clark LLP, National Auditor of the Year – Mid Tier 2011

International Tax Matters

For SMEs

Stuart Rogers

#stuartrogerstax

Agenda

• Background & Context

• First Steps Abroad

• International Tax Checklist

• Q&A

Current State of Play

• Global recession – tax revenues down

• G20 April 2009 – increasing focus on tax

• OECD expanding their role

• Proliferation of TIEAs (tax information exchange

agreements)

• Headline tax rates politically sensitive

Net result = tax compliance is becoming tighter

Tighter Compliance – Common Issues

• Stricter application of permanent establishment rules

• Closer monitoring and audit of cross border movement of staff

• Transfer pricing / thin capitalisation continues as an issue

• Share transactions between non residents now being

attacked

Examples

Examples

• Vodafone (UK) purchased shares in Hutchison

Whampoa (a Hong Kong entity) from a third party. HW

held underlying Indian trading assets and so the Indian

tax authorities argued withholding tax was due and have

pursued Vodafone for CGT of £1.6bn (c.US$2.6bn)

• UBS’ ongoing fight with the IRS was a prelude to the

2011 UK – Switzerland withholding tax agreement. The

IRS owed UBS a large tax refund but refused to pay it

unless UBS shared bank account information

Major Legislative Change in UK

UK transfer pricing (2004) Foreign dividends (2009)

Worldwide debt cap (2010) Patent Box (2013)

CFC Reform (2012) R&D (under consultation)

Foreign branch exemption (2012) Non domiciliary taxation (2008 and againunder consultation)

Statutory residence test (under consultation) Accrued interest deductions (2009)

Introduction of SSE (2002)

Reduction in CT rate to 23% Offshore disclosure facility

First Steps Abroad

First Steps Abroad

Are you trading „in‟ or trading „with‟ a

foreign jurisdiction ?

First Steps Abroad

• Payroll obligations

• Permanent establishment

• VAT obligation

• Personal tax residency issues

Payroll Obligations

• Where are the employment duties ?

• Are they temporary or long term ?

• Is there a double tax treaty in place ?

• The sting in the tail – social security rates

Permanent Establishment

• Fixed place of business

• Need not be your own premises

• OECD commentary – 6 months

• Dependent agencies

VAT Obligations

• Place of business establishment

• Distance trading regulations (retail)

• Place of supply principles

• VAT equivalents – sales tax, GST etc

Personal Tax Obligations

• Ceasing to be UK resident ?

• Becoming tax resident abroad ?

• Tax equalisation

• Who is responsible

International Tax Checklist

International Tax Checklist

Permanent Establishments Corporate Tax Residency

Payroll Obligations Withholding Taxes

VAT – place of business Controlled Foreign Companies (CFCs)

Foreign dividends receivable Transfer Pricing

Thin capitalisation Accrued interest deductions

Business Travel Transfer of Assets Abroad

s.13 TCGA Patent Box and R&D

EU law / ECJ cases OECD

Foreign branch exemption Non domicile rules

Statutory residence test Foreign entity classification

Checklist – DTCs

• DTC = double tax convention / treaty

• UK has over 100 DTCs in force

• Some jurisdictions do not enter in to full DTCs

• No DTC = tax issues

Checklist – Withholding Taxes

• Responsibility of the payor

• Often driven by DTC provisions, or EU law

• Reduced rates available

• Creditable against domestic tax liability

Checklist - Residency

Companies are generally tax resident where :

a) They are incorporated

or

b) They are managed

DTT usuallly provides a tiebreaker – jurisdiction

of mgt wins

Checklist – Dividends Received

• 1 July 2009 – foreign dividends received

exempt

• ‘Small’ companies have additional requirement

• Payor’s jurisdiction must be a jurisdiction with

which UK has a full DTC

Checklist - Transfer Pricing

• The act of moving group profits from a high tax

jurisdiction to a low tax jurisdiction using

various mechanisms such as management

charges

• SME exemption – unless counterparty

jurisdiction is one with which the UK does not

have a full DTC

Checklist - Foreign Branch Exemption

• Pressure from banking industry

• SMEs need DTC in overseas jurisdiction

• Anti profit diversion test

• Other wrinkles for SMEs

Checklist - CFCs

• Controlled Foreign Companies regime

• Applies where foreign company controlled by UK companies, and foreign tax is low

• Apportions unremitted profit to UK company

• Changing regime - 2012

Checklist – R&D plus Patent Box

• R&D tax credits changing – current consultation

• Patent Box from 2013 - gradual transition

• 10% tax rate on qualifying profit - formula to

determine qualifying profit

• Future widening of box content?

Checklist – Interest Deductions

• Formerly, accrued interest on loans from non

residents – only deductible when paid

• From 2009 accrued interest is deductible......

• ........as long as counter party jurisdiction has a

full DTC with the UK

Checklist – ToAA and s.13

• ToAA = transfer of assets abroad

• Where assets held offshore if tax planning

motive, HMRC can apportion offshore income

to individual

• S.13 essentially the same but for gains –

however no motive test, treatment is automatic

Checklist – Business Travel

• Stealth workers - Do you know where your staff are and for how long ? PE ?

• Is there a DTC in play ?

• NICs – Form E101 – A1

• Travel & subsistence – all allowable ?

A Complex World

#stuartrogerstax

At the National Financial Directors’ Excellence Awards, Broadcaster Peter Sissons commented:

“...with a score of nearly nine-out-of-ten for quality of service, the highest marks ever for an audit firm in ten years.”

Francis Clark LLP, National Auditor of the Year – Mid Tier 2011

Stuart Rogers

Corporate Tax consultant

A Chartered Tax Adviser and a commerce graduate from The University of Birmingham, Stuart is a tax consultant who specialises in international tax

matters and advising complex corporate entities.

Stuart trained with KPMG in London and Bristol, passing the ATT and CTA examinations and gaining invaluable experience with large foreign owned

subsidiaries and listed businesses. In 2002 he joined a specialist tax firm in Bath as a corporate tax consultant and developed a senior advisory role across

the South of England, latterly based in the firm’s London offices. He was involved in a wide spectrum of work, ranging from advising start ups and niche

businesses, through to leading complex projects for clients such as Mulberry Group Plc and Crabtree & Evelyn Group.

In May 2011 Stuart joined FC as a tax consultant specialising in corporate and international tax matters, based in Salisbury but with a cross-group

brief. He also has experience in complex leasing tax matters, share schemes and employment related securities, due diligence and vendor tax

planning, de-mergers and corporate reconstructions, capital allowances, R&D tax claims, VAT and other general owner managed business issues

Tel – 0044 7330 220138 Email – sar@francisclark.co.uk

A local team with the right mix of experience

At the National Financial Directors’ Excellence Awards, Broadcaster Peter Sissons commented:

“...with a score of nearly nine-out-of-ten for quality of service, the highest marks ever for an audit firm in ten years.”

Francis Clark LLP, National Auditor of the Year – Mid Tier 2011

Francis Clark is the largest independent

firm of business advisers and chartered

accountants in the South West. We are

larger than the regional offices of the

“Big 4” and considerably larger than any

other independent firm operating in the

South West.

In the Accountants’ national league table Francis

Clark is ranked 29th largest firm in the UK. (Source:

Accountancy Top 50 UK Firms 2011, ranked by fee

income).

We have over 250 staff and 38 partners across 6

offices, whose continued achievements are fuelled by

their dedication, knowledge and enthusiasm. We

have offices in

Exeter, Torquay, Plymouth, Tavistock, Salisbury and

Taunton. We are about to expand into

Cornwall, merging with Winter Rule, which will give

us a further 7 partners and 100 staff.

This means we are large enough to provide genuine

in-house specialists with industry sector and

technical expertise but also small enough to provide

a high level of individual client care. This combination

enables us to offer real added value service to our

clients.

Francis Clark was awarded the UK’s Best General

Tax Practice accolade in the prestigious 2009

LexisNexis Taxation Awards.

In the last month we have also been voted Auditor

of the Year for mid-tier firms in the FDs' Excellence

Awards 2011. The results were determined by an

independent annual satisfaction survey, which was

completed by 1,000 finance directors and finance

decision-makers. We were nominated by our audit

clients, without us even knowing about it.

We have a team of tax experts unparalleled in the

South West and over 300 accountancy firms

nationwide use us to advise on complex tax issues

for their own clients.

Francis Clark is a member of ‘The Leading Edge

Alliance’ – a professional association of the world’s

leading independently-owned accountancy

practices, covering 90 countries, 430 offices and 145

firms. This enables us to link into a network of like

minded firms and support those clients with overseas

operations.