permanent establishments | Oxwich Accountancy | Ceri Williams

Permanent Establishments – and why they can be a problem for uk tech start-ups and scale-ups.

What is a permanent establishment?

Permanent Establishments are a feature of the international tax system. They allow a country to charge tax on revenues ๐Ÿ’ฐ that have been generated there, even if that revenue comes from a multinational company that’s incorporated elsewhere.

You’ll still need to pay UK corporation tax, but there’s (usually) a tax treaty between the UK and the other country. The tax treaty (usually) ensures that one of the two countries refunds, or partly refunds, the tax you’ve paid in the other country.

However, you’ll have to deal with a lot of additional paperwork (and accounting fees). What’s more, if the tax due in the other country is higher than that in the UK you’ll usually pay the higher amount overall. Whereas, if the other country charges you less tax, you’ll not see that benefit – the total tax you’ll pay in that situation is usually the UK amount.

Why’s this a problem for tech start-ups and scale-ups?

Well, international tax law is complex and slow moving, whereas the tech industry in particular is very dynamic. Which is an accident waiting to happen ๐Ÿš‘.

The problem is that even very new tech start-ups can quickly be generating international revenue. No problem there …

… except that the tech industry is also a trailblazer at flexible and remote working. And increasingly this means looking for global solutions at finding the talent you need.

It’s this confluence that can find you getting unexpectedly caught up in the Permanent Establishment rules.

[meanwhile, those originally meant to be targeted ๐Ÿน spend a fraction of their swag ๐Ÿ’ฐ on clever tax structuring].

So, what can be done about it?

If you’re aware of the problem there are plenty of things you can do to ensure you aren’t caught up in this unfairly. On the other hand, if creating a Permanent Establishment is what your business needs, it’s important to be on the front foot in managing the situation and making sure you’re using all the available tax reliefts. As with most things tax related, those steps can’t be applied retrospectively, so it’s important you’re getting the advice and support you need on an ongoing basis.

Why your budget is your lodestar | Ceri Williams | Oxwich Accountancy

Budgetting is boring and pointless (and other myths)

Budgets…they’re boring…a waste of time…never pan out…they’re just for big corporates, not owner managed businesses…

Just some of the excuses I hear when I ask why budgeting doesn’t get the loveโค๏ธ it deserves. In fact, budgetting is one of the most powerful tools around for developing your business ideas and increasing the probability of turning your ideas into reality.

๐Ÿ‘Ž๐Ÿป Budgets are boring

Is developing your business ideas and goals boring? Budgeting crystallises your thinking by forcing you to focus on and quantify the ยฃ financial impact of your ideas. It moves your strategic planning from v1.0 to v.2.0

๐Ÿ‘Ž๐Ÿป They’re a waste of time … and never pan out

Firstly, they aren’t supposed to be accurate. If you need absolute certainty in your life, you shouldn’t be a business owner.

However, if the exercise is too painful, or the results grossly inaccurate, that’s probably because you don’t have a solid grasp of your business’s financial mechanics. In that case you’re not wasting time, you’re investing it to deepen your understanding of your business.

How do you do this? By putting together a budget, even if it’s time consuming and you aren’t confident it’s robust enough, then monitoring how things actually turn out and analysing the variances. The lessons you learn during that analysis will be invaluable and lead to genuine insights into your business.

๐Ÿ‘Ž๐Ÿป It’s just for big corporates

Budgets bring direction to your entire team, so you’re all pulling towards the same clear, unambiguous, goals. That’s just as true for a smaller owner managed business as it is for a FTSE 100 PLC.

If anything smaller businesses need that clear lodestarโญ๏ธ more than a large corporate does. Growing a small business is tough, you’re buffetted by market forces far more than larger businesses, and, typically, founders have a 100 things on their to-do list that they aren’t experts in and don’t have anyone to delegate to.

Your budget helps provide clarity and focus about what you need to do to stay on track.

๐Ÿ‘๐Ÿผ Convinced it’s worth the effort?

If I’ve changed your mind, and you want to give budgetting a try – here are two things you can do to create a better budget:

1. Check out my free guide to cashflow forecasting. Budgetting and forecasting are very similar activities, so a lot of the steps I outline there can be applied here.

2. Get in touch for a free strategy session. I’m always happy to discuss people’s business plans and give some tips about how to turn them into a fully fledged budget for the year ahead. Or, if it turns out we’re a good fit, you can always become a client and get much more substantive help!