Up until now my wife has run the vintage business trading as self employed only, so setting up a company is a new undertaking and we would need to seek advice about this. Do you think a group of companies is necessary or beneficial? Could the UK company be completely independent of the Portuguese one?
Regarding the DTT, my Portuguese advisor has written the following, which seems to suggest that the fact of us living in Portugal wouldn't automatically make any UK company liable for Portuguese Corporation Tax:
Article 5 Permanent Establishment
"(4) A person acting in a Contracting State (UK) on behalf of an enterprise of the other Contracting State (PT) --other than an agent of an independent status to whom paragraph (5) applies--shall be deemed to be a permanent establishment in the first-mentioned State (UK) if he/she has, and habitually exercises in that State, an authority to conclude contracts in the name of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise.
(5) An enterprise of a Contracting State (PT) shall not be deemed to have a permanent establishment in the other Contracting State (UK) merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status where such persons are acting in the ordinary course of their business."
--> brief analysis: if contracts are concluded (selling goods or others) in the UK in the name of the company. It is deemed to be a PE in the UK and therefore being liable for UK corporation tax. If the contracts are concluded by an independent person in the scope of his activity, there is no existence of a PE.
"(6) The fact that a company which is a resident of a Contracting State (UK) controls or is controlled by a company which is a resident of the other Contracting State (PT), or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other."
--> If a company is set up in the UK (to buy and sell vintage clothes), even if owned by the Portuguese Company or by the same individual holders, it is not automatically a PE of the PT company due only to the fact that the holders live in Portugal.
I know what you mean and I am taking Portuguese tax advice too, I suppose I'm asking what the rules are from the UK end of things!
Yes, I'm concerned about "centre of control", it seems clear that for VAT it is certainly the UK. I'm not so sure regarding CT.
The section called 'claiming part expenses' here seems to suggest it can be done on a pro-rata basis:
Many thanks for the advice. Apologies for the incorrect terminology and I am referring to self employment losses. There have been no capital purchases so unfortunately not relevant in my case, though useful to bear in mind for the future.
Just to clarify then. I had a loss of £9,837.00 in 2014/2015 and a profit of £1,448.00 in 2015/2016. So I must use £1,448.00 of the loss this for 2015/2016, but does that mean I can still carry forward £8,389.00 to 2016/2017?
I use the cash basis so I understand that I can only use this loss against self-employed income and not anything else.
It's interesting that you say that, but on the face of it for us it would be much simpler. Under cash basis I believe we can claim for stock purchases when they are paid for, not only once they are sold? Otherwise we need to account for the value of stock held at the end of our accounting period?
In addition we're planning to
Great, thank you. In addition we're planning to use Cash Basis from now on. I understand that this now means she can't set the loss off against any income from PAYE but can against future profits?
To answer my own question should anyone else come across this. I have just noticed in the notes to the form I already posted a message about receiving a link to register the LLP once the form has been sent.