1. Expansion into Europe with an Emphasis on the UK By James Oury Salt Lake Chamber of Commerce Salt Lake City, Utah January 24 th 2011 www.ouryclark.com

2. Understanding the UK Marketplace Corporation Tax Business Structure Intellectual Property Employment Market Diligence

3. Corporation Tax UK Competiveness Research & Development Patent Box Transfer Pricing

4. Tax Rates Corporation Tax rates are falling – 28% to 24% by 2014 for large companies – 21% to 20% by 2012 for small companies VAT has increased to 20% but only suffered by end users who are not VAT registered Substantial Shareholding Exemption means no capital gains on the profits from the sale of subsidiaries companies

5. Research & Development – Significant tax incentives for co’s undertaking R&D in the UK 2 schemes SMEs get 75% tax credit: < 500 Employees and, eitherTurnover <€100 million; orBalance Sheet <€86 million Large cos get 30% tax credit Cash payments if the company is making a loss Must spend >£10,000 on R&D in the year

6. Patent Box Special corporation tax rate of 10% for royalty income from intellectual property For patents filed in the UK after November 29 th 2010 Includes “embedded” income included in the cost of products sold to other companies

7. Transfer Pricing Management charges Royalties Interest on loans Treaties between USA and UK but may need to apply for exemptions from with-holding tax

8. Business Structure Trade directly with the UK Agency UK establishment Subsidiary – Limited Company

9. Trading directly with the UK Advantages Can be effective if you only have a few large customers. You are not liable to any UK corporation tax. Disadvantages Many UK Corporations will want to see a UK presence. Loss of control of customer relationships? Customers may not want the paperwork issues. Cost effectiveness of shipping?

10. Agent Advantages Not taxable in the UK! Gives some recognition in the UK if other more permanent options are impossible or impractical. Disadvantages More cumbersome set up. Publicity of parent results. Not able to transact on its own behalf – ‘showroom’. Less popular as seen as temporary

11. UK Establishment Advantages Can be effective if you only have a few large customers. Automatic “loss” relief Disadvantages Must make the parent company’s reports public along with UK results. Cumbersome registration process. Will be taxable in the UK. May be taxed at a higher rate depending on the size of the parent.

12. Limited Company Advantages Well recognised and respected structure. Tax efficient if you are setting up a UK subsidiary of a corporate entity. Quick & inexpensive to set up. Provides legal protection for the directors & shareholders. Can only lose what you put in. Disadvantages Accounts do have to be filed & are available publicly, but UK results only. We use UK GAAP or IFRS! Details of the shareholders & directors of the business will be public.

13. Intellectual Property Brand Protection 1 filing can provide trademark protection in all 27 EU member states License to operate barriers Copyright Primary protection for computer programs Confidentiality/Trade Secrets

14. Employment Status - Are Your Consultants your Employees? Advantages of Employing Staff Examples Visa may require individual to be employed (e.g. Tier 2 Visa) Individual is required to make themselves available for work Individual is required to perform their work for the company personally Company has more control over the employee i.e. “master and servant” relationship Individual is not free to work for other organizations without the express permission of the company Disadvantages of employing staff Examples Employees have statutory rights under UK employment law that consultants do not share (e.g. unfair dismissal (£68,400 compensation), entitlement to paid holidays, entitlement to statutory sick pay) An employee is entitled to a written statement of terms (often in the form of an employment contract) Tax negative consequences for both the Company and Employee (PAYE)

15. Employment Status Key Problem – When the Milk Turns Sour!!!! – UK Courts more readily determine that individuals are employed even if parties agreed to appoint as a consultant from the outset – Written terms pointing towards consultancy are irrelevant if they do not reflect the reality of the relationship between the parties Key Action Points Take legal advice from the outset and on a regular basis!

16. Immigration The Correct Visa Temporary Visits – Business visitor More Permanent – Tier 2- skilled workers – Sole Representative Visa Get advice before you apply

17. Market Diligence Where? M4 Corridor- “Silicon Alley”- Telecommunications and IT services Cambridge- “Silicon Fen”- Software, Biotech and Electronics London- “Silicon Roundabout”- Internet, Creative Tech and Design Terms & Conditions – UK Considerations Localise terms & conditions of sale Implied Terms Unfair Terms Risk/Title

18. Further Information Feel free to visit our website: www.ouryclark.com For more complementary ‘How to…’ guides on European expansion

19. Thank you James Oury Oury Clark Solicitors Oury Clark Chartered Accountants james.oury@ouryclark.com US Office 101 California Street Suite 2450, PMB 058 San Francisco, CA (415) 946 8984 London Office 10 John Street London WC1 2EB If you would like a copy of the slides please contact toby.smith@ouryclark.com