starting a small business in the UK to trade in Europe?

Question

Hi,

I'm a US citizen working in the US as an IT consultant. Recently, through a friend, I was approached to do some consulting for a German and an Italian company. The work would be in the form of strategic advice (a "non tangible" product) that I would give from the USA. The rub is that these companies want to be invoiced from an EU business (with an European VAT id, etc) not from the US.

(1) What is the simplest way of invoicing a Euro company from Europe?

If I understand correctly, I could establish *one* UK limited co, from which I could bill for *all* future EU work. If it matters, the proposed UK ltd would have no employees at all and no UK clients.

(2) What would be the tax implications of setting up a UK ltd?

Would I collect VAT and remit it to HMRC? Would the UK company's turnover be taxed according to company tax in the UK or would the revenues pass through untaxed and I would then pay tax on them in the US?

(3) Would it make any difference if the director and share holder of my proposed UK ltd were me (a natural person) or my US company through which I trade?

Any pointers to useful documentation would be much appreciated, as well as recommendations for accountants who understand this kind of situation. (I prefer DIY, but I recognize that paid advice is certainly useful for bootstraping the process!)

Many thanks.

Jonathan Bryce · Accepted Answer

Type it out in MS Word. It would be taxed in the UK.  You may also have to pay tax in the US on the profits, depending on the rules there. Not in the UK.  US rules may be different.

davide.lapin · Answer

Hi Jonathan,

Thanks for your reply.

There's something unclear to me about your answer. Are you assuming that the putative UK company would keep all the profits?

Would it be possible for my US company to rebill my UK one since the US one would actually be carrying out the service?

If I did this, the profits on the books of the UK one would be minimal, as it would be just a "reseller" of my services.

Thanks again for your comments.

-D

Peter Saxton · Answer

Did you ask them why?

Being a self employed business.

You don't need a UK limited company. Unless your German and Italian clients wish you to be. Check if they want you to wear a pink suit with a pizza in one pocket.

You'd have to pay corporation tax of 19%.

Yes.

The former.

No.

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If you plan on DIY then spend ten years learning before setting up the business or expect to get it wrong and pay for the consequences.

An alternative is to use a UK accountant.

davide.lapin · Answer

to wear a pink suit

8-) still giggling... Best of Usenet?

OK. Can the US company rebill the UK one for all but say 5% of the turnover, thus reducing the UK one's booked profits to almost nil? (The whole purpose of the UK company is to be a pink-suited pizza-pocketed *reseller*.)

I reckon I'd better take the hint.

Ta,

-D (who lived for many years in the UK once upon a time and still has fond memories of real *irony*)

Peter Saxton · Answer

to wear a pink suit

Yes, as long as it's unreasonable, but presumably you work for the US company and the UK company is using your services.

You'd have problems preparing the accounts without an accountant.

Tim · Answer

"Peter Saxton" wrote !!!!! You think HMRC will be OK about it, as long as it's UNREASONABLE!! Tee hee...

Peter Saxton · Answer

It was late! :-)

starting a small business in the UK to trade in Europe?

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