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International Trade Business Surgery Wednesday 18th May 2011 Jim Fanshawe, Suffolk International Trade Group and UKTI Alex Davey, Birketts LLP Gordon Hopkins,

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Presentation on theme: "International Trade Business Surgery Wednesday 18th May 2011 Jim Fanshawe, Suffolk International Trade Group and UKTI Alex Davey, Birketts LLP Gordon Hopkins,"— Presentation transcript:

1 International Trade Business Surgery Wednesday 18th May 2011 Jim Fanshawe, Suffolk International Trade Group and UKTI Alex Davey, Birketts LLP Gordon Hopkins, PKF LLP Graham Coker, NatWest

2 International Trade Business Surgery Wednesday 18th May 2011 Should I be an exporter Developing you export business

3 Exporters Enhanced innovation

4 Am I ready to export?

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8 Developing your export business vs Consider your time and personnel resources

9 Developing your export business

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18 Are Your Contracts Watertight? Alex Davey - Partner

19 About Birketts Corporate Private Client Property WillsTax & Trust AgricultureCommercialResidential Corporate/ Commercial Shipping and Logistics Banking/ Finance Health & Safety/Transport Regulatory Employment Litigation Corporate Immigration Contentious Support Construction Competition Law

20 Topics 1.Why is a contract important? 2.Contents of Contracts 3.Incorporation of Terms 4.Conclusions and Tips

21 Why is a Contract Important? Relationships change Regulates rights and responsibilities in law Risk management Time and costs

22 International Trade Contracts Sale Contracts Payment - Letters of Credit - Guarantees - Factoring/invoicing Agreements Transport contracts Insurance contracts

23 What sort of Contract? Full bespoke signed contract Signed Agreement and signed T & C’s Signed Agreement plus T & C’s Quote plus T & C’s Quote Verbal Agreement No Contract

24 A “good” contract? Clear written record of the deal Should be relevant to the transaction Easily understood Record essential terms to minimise risk of dispute

25 Potential Pitfalls Identify Parties Liabilities/Limits and Exclusion of Liability Terms and Termination Law and Jurisdiction Agents & Principals (Carriers and Forwarders) Incorporation of Terms and Conditions

26 Agent or Principal Customer (a) Principal (b) Sub- Contractor (c) Customer (a) Agent (b) Contractor (c)

27 Incorporation of Terms Introducing your contract at the right time in the transaction (i.e. the beginning) Making sure your terms, not the other party’s, apply Individual onerous or unused provisions.

28 Conclusions Why a contract is important? Contents of a contract Incorporation of terms Tips -make sure you understand your contract and standard terms -amend stationery

29 Alex Davey 24-26 Museum Street Ipswich Suffolk, IP1 1HZ Tel: 01473 406234 Fax: 01473 416915

30 Insert client logo here (or delete box) www.pkf.co.uk © PKF (UK) LLP Maximise Your Tax Efficiency Cross Border Gordon Hopkins Senior Manager PKF (UK) LLP gordon.hopkins@uk.pkf.com

31 www.pkf.co.uk © PKF (UK) LLP Trading Overseas Will the profits be taxed overseas? –What triggers this? Can the profits be taxed overseas and in the UK? –Relief for overseas taxes? Business structures Losses – any relief? Repatriating profits to UK Other taxes? Changes in taxation of cross border activities

32 www.pkf.co.uk © PKF (UK) LLP Will the profits be taxed overseas? Key is whether the activities give rise to a taxable presence in the overseas country Has a ‘Permanent Establishment’ been created? –First consider domestic tax law; then –Double tax agreement

33 www.pkf.co.uk © PKF (UK) LLP Permanent Establishment (PE) Relevant Double Taxation Agreement will usually say what does and does not amount to a PE. –Often specifically included Place of management – ability to conclude contracts Branch Office Factory/workshop –Common exclusions Facilities solely for –Storage and/or Delivery –Display –Purchasing of stock or goods –Advertising –Activities of preparatory nature Business carried on through an independent broker/agent

34 www.pkf.co.uk © PKF (UK) LLP Permanent Establishment (PE) Definitions of a PE vary so always check relevant DTA Advantages & Disadvantages of having a PE –Vary from country to country –No PE then subject to UK corporation tax only – good if UK tax rate lower but does this override commercial considerations? –If no PE it can mean that other taxes apply instead i.e. withholding tax, state taxes say in US

35 www.pkf.co.uk © PKF (UK) LLP Structures (1) What vehicle to operate through? –Branch –Subsidiary –Other Others might include: –Partnerships –LLCs How treated in UK? –UK look for similarities in structures e.g. share capital –Does not have to be consistent with overseas treatment

36 www.pkf.co.uk © PKF (UK) LLP Structures (2) Profitable? –If tax rate lower than UK may favour company Loss making? –Losses of a branch available for offset against UK profits –Losses of a company potentially ring fenced in that company subject to residence status –Could incorporate the branch once profit making

37 www.pkf.co.uk © PKF (UK) LLP Company Residence Where is the company resident for tax purposes? –Central management and control High level decisions rather than day to day Not automatically where the parent company is resident –HMRC taking an increasing interest – think they are missing out!

38 www.pkf.co.uk © PKF (UK) LLP Future Intentions What are the longer term objectives – possible sale? Where do you want the proceeds to go? Ownership –By individual shareholders Gain potentially taxable at 10% –As a subsidiary of the UK company Gain potentially exempt under Substantial Shareholdings Exemption

39 www.pkf.co.uk © PKF (UK) LLP Measuring overseas profits Pressure on respective governments to maximise tax take Can lead to differences of opinion as to the profit made by the business in the overseas country –Apportionment of profit margin –Level of deductible management charges –Finance cost (whether more appropriate to view loan as share capital) Mutual agreement clause in DTA

40 www.pkf.co.uk © PKF (UK) LLP Measuring the profit Anti avoidance –Transfer Pricing Documentation requirements depending on size of business –Controlled Foreign Companies Low tax jurisdictions Attribute profit back to UK

41 www.pkf.co.uk © PKF (UK) LLP Repatriation of profits Dividend from overseas company potentially exempt from UK –Rules different depending on size Withholding taxes –On exempt dividends = permanent tax cost

42 www.pkf.co.uk © PKF (UK) LLP VAT Recent changes to the Place of Supply rules have reduced the risk/potential cost of compliance in the overseas country on some transactions. B2B – now falls on the customer to reverse charge & account for VAT. B2C – Supply of goods in EU country - subject to normal UK VAT charged under Distance Selling rules but watch for the limits (eg France €100,000). B2C – Supply of services in EU country – subject to normal UK VAT. Exceptions – land related supplies

43 www.pkf.co.uk © PKF (UK) LLP Other taxes Payroll –Short term visitors Different rules for tax & NI –Check local requirements Withholding taxes –Not just applied to dividends –On management charges, services etc Admissable taxes –Not all taxes can be offset against UK tax e.g. tax on sales

44 www.pkf.co.uk © PKF (UK) LLP Changes to tax rules Foreign branch exemption –New rules coming in that will allow a company to elect for its foreign branch to exempt from UK tax –Forego relief for branch losses (includes those for earlier years) Controlled Foreign Companies –Complex rules to be simplified

45 www.pkf.co.uk © PKF (UK) LLP PKF International - Publications Number of Doing Business in … publications –Cover more than just Business Tax including: Types of legal entities Imports and exports Grants etc www.pkf.com/publications/doing-business-in

46 www.pkf.co.uk © PKF (UK) LLP Summary Scale of overseas operations Awareness –Don’t let unforeseen tax eliminate your profit margin Getting the paperwork right Getting the structure right – maximise your return

47 www.pkf.co.uk © PKF (UK) LLP This document is prepared solely for the use and benefit of Suffolk Chamber of Commerce. Neither the authors nor PKF accept or assume any responsibility or duty of care to any third party.

48 RBS00000 Graham Coker Trade Director Global Transaction Services UK NatWest

49 RBS00000 High Risk Exporter Low Risk Open A/C D/A Collection D/P Collection Unconfirmed L/C Confirmed L/C Cash in Advance Low Risk Importer High Risk

50 RBS00000 Flowchart of a Typical Documentary Credit CONTRACT Paymen t Documents Payment Advising/Confirming Bank Issuing Bank Buyer/Importer Supplier/Exporter Sales Contract and Agreement to settle by L/C Requests L/C As stipulated by L/C Documents L/C Goods shipped L/C advised Payment Issuing Bank

51 RBS00000 Flowchart of a Typical Documentary Collection CONTRACT Payment Documents Payment Remitting Bank Issuing Bank Buyer/Importer Supplier/Exporter Sales Contract and Agreement to settle by Collection Goods shipped Paymen t Collecting Bank care D/P or D/A? Documents

52 RBS00000 BASIS OF PRICE INCOTERMS 2000 (www.incoterms.org) Ex-Works FOB CFR CIF DDP Who pays: transport? Insurance? Customs/duties/import taxes?

53 RBS00000 BASIS OF PRICE Sight no credit period offered payment upon presentation of documents is this what competitors offer?

54 RBS00000 BASIS OF PRICE Term credit period give e.g. 180 days from date of shipment payment not made until the end of the term high price if credit given? Possible to discount? Include discount costs in price?

55 RBS00000 WHAT ELSE? Pre-shipment finance Invoice Finance Open account debtor collection

56 RBS00000 HOW CAN BANKS HELP? Guidance and advice Letter of Credit country risk appetite Indication of deal specific pricing Letter of Credit Suggested terms proforma

57 RBS00000 QUESTIONS? Any Questions?

58 RBS00000 CONTACT Graham Coker NatWest Global Transaction Services UK 07789 922537 graham.coker@rbs.co.uk


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