RT writes: For the past four years I have been running the UK branch of an overseas company. The business has been making losses and so the decision has been made to close the branch. Can you explain what needs to happen to shut it down? Also, will there be any tax problem if the overseas company writes off the money owed by the UK branch?
Closing the UK branch is very straightforward, writes Chris Lane, a partner at Kingston Smith LLP. All that needs to be filed at Companies House is a completed form OS DS01. This has to be signed by someone in authority on behalf of the overseas company. The form simply details the date on which the branch ceased to trade, along with its registration numbers.
You will also need to submit a final corporation tax return for the branch to determine its tax position at the date of closure. As losses have been incurred, it is highly unlikely there will be any final tax liability.
In terms of the money due by the UK branch to the overseas company, this will not cause a problem for the branch if the amount is written off in the overseas accounts as long as the underlying transactions are simply the movement of funds to pay for the losses.
If the UK branch has been paying wages, it will have a PAYE scheme and this will need to be closed. Finally, if the branch is registered for Vat, it will need to deregister. This will involve completing a final Vat return to the date of closure.
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Pension must be available to all
DS writes: My business is expanding from four to nine employees. Will I be affected by any new employment laws?
These days there aren’t many employment laws that depend on a minimum number of employees, writes Peter Done, managing director of Peninsula.
The only extra obligation resulting from this growth is that you will have to offer your employees access to a stakeholder pension. This requirement is triggered once a business has five employees. Although you need to offer access to a pension, you do not have to set up, run or make contributions to the scheme. However, you must offer a facility whereby deductions are made from employees’ pay and passed to the relevant scheme. You must also provide details of this access in employees’ contracts of employment.
Even though the trigger point is five employees, only those of your nine employees who are eligible will have to be offered access. There are various eligibility criteria, including a requirement for the employee to have worked for you for three months or more in a row.
New pension rules are being introduced from October 2012. Under these, employers will have to automatically enrol their employees in a qualifying pension scheme and will have to make contributions to it. However, only large businesses are affected from October. A business of your size will not have to begin automatically enrolling employees until June 2015 at the earliest, although this date may change. This approximate date will still apply even if your company were to triple in size before then.
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The law on unfair dismissal changed on April 6, 2012. Anyone whose employment began on or after that date will have to work for you for at least two years before he can claim unfair dismissal.
In the media there has been some discussion about “compensated no-fault dismissal”, where an employer may dismiss an employee simply by paying him a sum of money. If this is adopted by the government, then as it currently stands it will be an option for you because it will apply to businesses with fewer than 10 employees.
Kingston Smith LLP, the chartered accountant, and Peninsula, the employment law firm, can advise owner-managers on their problems. Send your questions to bizdoc@kingstonsmith.co.uk or write to Business Doctor, The Sunday Times, 3 Thomas More Square, London E98 1ST, or fax to 020 7782 5765. Advice is given without legal responsibility.