VAT & Duty Planning for International Companies

Value Added Tax (VAT) is charged on the taxable supply of goods and services in the UK and on their import into the UK.

Any trader who expects turnover to exceed £83,000 (as at 1 April 2016) a year has an obligation to register for VAT. The main rate is currently 20% and VAT returns are generally prepared quarterly.

It is the place of supply that governs whether there is an obligation to register for UK VAT and there are a few exemptions, which means VAT can often be a complex area. It is, therefore, important to establish where you stand before your business embarks on any sales of goods or services, either in the UK or to the UK.

Transfer pricing, including thin capitalisation

Increasingly, governments around the world are investigating cross border transactions between connected parties. Their aim is to ensure that an ‘arm’s-length’ pricing policy is used so that no artificial advantage is taken of lower tax rates or exchange control restrictions.

For general merchandise, where open market price is readily available, transfer pricing is unlikely to cause problems. However, where there is no comparable product or service in the market place, establishing what the authorities will accept as fair open market value is not always straightforward and detailed workings should be kept to resist any challenge from the relevant authorities in the UK or elsewhere.

Double tax treaties

The UK has the largest double tax treaty network in the world and its key aim is to prevent the same income and gains being subject to tax in more than one jurisdiction. Relief under tax treaties must normally be claimed so it is important to ensure that your UK business entity is eligible for relief under the treaties.

Diverted profits tax

This affects large multinational enterprises with business activities in the UK that enter into arrangements to divert profits from the UK by avoiding UK taxable presence or exploiting their position with connected entities.

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Download ‘Tax and VAT’.