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Tax efficiency opportunities

Q: I am setting up a small UK company to partner with UK universities and other education institutions, to develop UK accredited education programmes to 'sell' to sister companies to deliver in Africa and the Middle East. What tax 'efficiency' opportunities are available to my UK hub company?

Answered by: Chas Roy-Chowdhury, Q&A expert on SmallBusiness.co.uk

What you’re proposing sounds like it will keep you quite busy enough simply complying with all the right regulations and servicing your client companies spread across two or three continents.

It’s hard to know what might help you operate tax efficiently in the UK without knowing the set up. Will you be operating as a formal joint venture with the universities, or simply contracting with them as an independent supplier? What sort of turnover will the UK company have? Is it acting as an actual seller of programmes, or simply a paid commission agent? You should think about whether you will need to register for VAT, and with educational services that can be a nightmare, although as it sounds like all your supplies are being exported it may be less of an issue. Will there be a royalties flow from the overseas services provider back to the accrediting body, and if so will it go through your company?

The one tax break you can qualify for (if you are setting up in the right part of the country) is the “Regional employer NICs holiday for new business" The details are at http://www.businesslink.gov.uk/bdotg/action.

Broadly, if you’re setting up outside London or the southeast, you will be be entitled to a rebate of the first £5,000 of Class 1 NICs on your first 10 employees in the first year, so it could be worth up to £50,000. The relief isn’t automatic, so you need to apply for it, but all the details are set out on the Businesslink site.

Beyond that, the only tax efficiency advice I can give for sure is to keep your books and records up to date, and have a paper trail ready to back up all the entries that go onto your UK tax return. It’ll be quicker to complete your tax return (and accounts), and if the worst should happen, and HMRC do investigate your tax affairs, you will at least be able to answer their questions quickly.