UK LTD operating from the netherlands best accounting practices

UK LTD operating from the netherlands best...

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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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By User deleted
20th May 2014 14:46

.

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

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By RedFletcher
20th May 2014 15:05

Hi,

Thanks for your reply. Its a standalone company, not part of a group.

Its a design to print company, but we outsource the printing, So as for supplies (the printed media), they will be bought wherever the client is based. This will usually be within the Eurozone, but occasionally in the uk (up to 25% of business)

I'm hoping to keep transfers to a minimum, but I will have to transfer money when it comes to paying corporation tax. (I was thinking of letting any UK based turnover sit in a UK account and then topping it up from my NL account for when it comes to paying corporation tax) Although my start up capital is low, so I might need to transfer funds from the UK at some point if necessary.

I have one unpaid official secretary in the UK to take care of any official business in the UK, so there's no overheads/rent/etc in the UK

I dont know what FRSSE is, i'll have to look into that....please excuse my ignorance, I'm rather new to this game!

Red

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By andrew.hyde
20th May 2014 15:22

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.

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By RedFletcher
20th May 2014 15:31

Yep, googled it already and busy going through the document now. I would love to be able to invest in bespoke professional advice, but sadly right now that isnt an option for me, hence why im trying to learn as much about it as I can.

So coming up against double dutch is no trouble, I'm a fast learner ;)

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By paras007
20th May 2014 15:51

Have you really thought about tax

Have you really thought about the Corporation Tax implications in both the UK and Netherlands?

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By RedFletcher
20th May 2014 17:39

As far as Im aware I only have to deal with the UK system. Its a UK company, I just happen to be living and operating the company from overseas, and most of my clients happen to be from where I operate.

 

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... :/

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Replying to Peter-S:
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By Minnie136
20th May 2014 18:12

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.

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Replying to David Gordon FCCA:
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By RedFletcher
20th May 2014 19:34

My reason for not "going dutch"

Thanks for your replies.

My reason for not "going dutch" is that in Holland:

I would have to be a sole trader in the dutch system, Me and the business would be treated as the same entity, and in the dutch system, you first pay your corporation tax, then you pay income tax on top of that. Their income tax is 30% so that's 50% of your profit down the pan

They have no VAT threshold. As soon as you start trading, you start paying dutch VAT. I my business model, it is most advantageous to remain not registered for vat for as long as is legally possible.

You cant do the sneaky trick of paying yourself a low wage and drawing a dividend to top it up, as you're a sole trader

 

I looked into both systems, and the UK LTD system for me at least, won hands down.

Only problem is, our HMRC is impossible to get any guidance or answers out of, at least by email :(

....and the dutch system's all in dutch (I do speak a bit of dutch, but not enough to tackle legal documents!)

As far as I'm aware, me picking up dutch clients for my UK business is no different to a dutch person purchasing something from a UK website, which incidentally is how I actually get most of my clients.

If anyone knows any different, I'd love to hear your toughts.

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Replying to Peter-S:
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By paras007
21st May 2014 08:37

Curious

RedFletcher wrote:

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?

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By Minnie136
21st May 2014 07:47

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.

 

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By EXCEL
23rd May 2014 13:11

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.

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By Paul D Utherone
18th Jun 2014 21:20

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.

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