I run a UK LTD company. I am based in the Netherlands, and that's where most of my business is. So I get most payments in Euros. Can anyone give me some general advice as regards to the best accounting practices to use? I am trying to handle the accounting myself, as its a very small operation at the moment. I have many questions, such as:
Is it best to file my accounts in pounds or euros or the currency they are paid in?
Whats the best methods for paying corporation tax in this situation?
Is it advisable to have a business bank account in each country?
Any advice you can give me on these questions, or anything related would be greatly appreciated.
Replies (12)
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With regard to the question about currency -
http://www.companieshouse.gov.uk/about/policyDocuments/chEuro.shtml
Assuming the company is a small, UK, stand-alone company (ie. not a member of an overseas group) then the accounts could be prepared under FRSSE.
If the company forms part of an overseas group that prepares their accounts from iFRS, it may be advisable either to apply iFRS in preparation of the accounts, or to apply FRS101 and take advantages of the reduced disclosure available.
With regard to the banking, there are a number of factors in play
- Where do you buy your supplies?
- How often do you need to transfer funds overseas?
- Do you have staff/rent/overheads to pay, in the UK, in ££?
- Can you sustain daily fluctuations in exchange rates if you only have an overseas bank account?
- What are the bank transfer charges if you operate 2 accounts?
With regard to Corporation tax, HMRC will require payment, in ££, 9 months and 1 day after the year-end (Balance Sheet Date) - there are a number of methods available. Although, obviously, a number of them will not be available if you are based overseas (ie. Pay at the local post office)
http://www.hmrc.gov.uk/payinghmrc/corporationtax.htm
BMan
FRSSE
Financial Reporting Standards for Small Enterprises.
Although the contributors to this forum are wonderful, knowledgeable and generous people they are no substitute for bespoke professional advice. It would be a good investment if you were to obtain some. Otherwise you'll continue coming up against terms like FRSSE that are - ahem - double Dutch.
Have you really thought about tax
Have you really thought about the Corporation Tax implications in both the UK and Netherlands?
Advice
It is always best to seek professional advice before making business decisions. Why did you set up a UK company? The Dutch tax system may be more favourable and you could have limited your UK tax to the 25% profits arising here. I expect the Dutch tax authorities will want a slice if the UK company is operating out of the Netherlands. Now that you have started trading through the UK company then you will have to file UK accounts and tax returns and potentially deal with employee issues. Please engage UK and Dutch advice as soon as possible.
Curious
I was told for tax purposes, it was the same as a dutch person buying something from an British website...the tax and VAT is all handled from the UK end
I await nervously for you to tell me that im wrong... :/
Who told you this? Assuming that you are the sole director and you make all the business decisions then your presence in Holland would most likely create tax implications in Holland. Have you then thought about your personal tax implications in both countries?
My thoughts
A UK company only works if you follow the rules and the saving is national insurance. The effective tax rate if you withdraw all the profits as dividends is the same as UK income tax rates (20%/40%/45%). Directors would normally seek professional help to remain in compliance and optimise the position.
Please bear in mind you are a non-resident who also has to complete a Dutch tax return so please do not rely on the the answers on the other thread to make decisions on the salary level. The UK company may need to also address Dutch payroll taxes if you are an employee.
I think your biggest issue is that if you are running the company from the Netherlands then you are bringing the profits of that company onshore and so subject to Dutch tax.
What are you selling? Have you checked that there is no reverse charge payable by your Dutch clients so that VAT is in fact due, for example on services? I think you should address the local VAT issues since it is not usually as simple as just setting up an offshore entity to avoid VAT. And I would also be careful about Dutch anti-avoidance rules if you are doing everything there.
The likes of Amazon pay huge fees for their tax planning and there are probably complicated rules about web-based selling which you should have addressed before set up. However you asked for others' thoughts and mine are that if you are running the UK website in the Netherlands (so trading) then profits of the UK company could be taxable there and you should look at all Dutch and UK tax issues.
Hi
For preparation of financial statements and disclosures the income/Expenditure and Assets and liabilities are required to be converted/Translated in the entities reporting currency. Your case it is the £. What ever may be the nature of currency adopted for the purpose of business ultimately for reporting and tax purpose the amounts to be translated in £.
Make sure about the Holland taxations rule. You should not end up paying your tax in both the countries Holland being your residency and UK being the the business establishment place. Although foreign tax relief will be available if Holland is part of OCED member.
Have you considerd the terms of the double tax treaty between
UK & the Netherlands and Article 5 re 'Permanent Establishment' as it affects Article 7 and taxation of 'Business Profits'?
So:
Article 5Permanent establishment
(1) For the purposes of this Convention, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.
and
Article 7Business profits
(1) The profits of an enterprise of one of the States shall be taxable only in that State unless the enterprise carries on business in the other State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.
It sounds as if you might have a PE in the Netherlands for the majority of the business so that the Dutch tax authorities might have a claim on a large part of the income.