Kloud Smart Blog

When a UK company aims to expand its operations overseas, a variety of options come into play. Photo by   Kyle Glenn   on   Unsplash Permanent Establishment Definition: A Permanent Establishment (PE) arises when a company has a place of management, a branch, an office, a factory/workshop etc, in another country, even if it's not formally registered as a company overseas. It functions as an extension of the parent company and is not a separate legal entity. Considerations: Double Taxation Relief (DTR) : Profit from an overseas PE is subject to UK corporation tax. However, double taxation relief is available if the profit is also subject to taxation overseas. The amount of DTR for this profit is the lower of the tax payable in the UK and in the overseas country. Electing to Tax Overseas : A company can choose to have the PE taxed only overseas. This election is irrevocable and applies to all future PEs of the company. If the election is made, the company may lose relief and...

For Anyone Considering Renting Out Their Place If you are considering renting out your property in the UK, it is important to understand the tax differences between repair expenditures and capital expenditures. Some money spent on your rental property will be categorized as repairs, while other expenses would be considered capital improvements. Repair expenditures are costs associated with restoring your property to a usable condition. This includes things like repainting, fixing appliances, or repairing damage. These expenses can be fully deducted in the tax year they occur. Capital expenditures are investments that improve your property, prolong its useful life, or adapt it to new uses. Examples include building an addition, installing central heating, replacing a roof, or renovating a kitchen. These expenses cannot be fully deducted in one tax year. Instead, the costs are deducted through capital allowances over several years (although in most cases, most expenditures would be ful...

AI chatbots are becoming more popular and useful in various domains and applications. One of the advantages of AI chatbots is that they can provide factual information quickly and accurately. This can save time, money and resources for both the users and the providers of the information. Application of AI in Accounting and Taxation One of the domains where factual information is crucial is accounting and taxation. There are many rules, regulations and standards that accountants and tax professionals need to follow and apply in their work. However, finding and understanding these rules can be challenging and time-consuming, especially when they change frequently or differ across jurisdictions. That is why we have created a basic IFRS and UK Tax chatbot (experimental) to help answer questions related to these topics. IFRS stands for International Financial Reporting Standards, which are a set of accounting standards used by many countries around the world. UK Tax refers to the tax syst...

If you are self-employed, you need to pay income tax on your trading profit. This is the amount of money you make from your business after deducting allowable expenses. Allowable expenses are costs that are necessary and exclusively for your business, such as rent, utilities, equipment, advertising, etc. However, not all expenses are deductible from your trading profit. In this blog post, we will discuss some of the common expenses that are NOT deductible and why. Expenses that are not deductible Personal expenses : These are costs that are not related to your business, such as food, clothing, entertainment, hobbies, etc. You cannot deduct personal expenses from your trading profit because they are not incurred for the purpose of your business. As a rule of thumb, expenses must be Wholly and Exclusively for business purposes in order to be deductible.  Capital expenses : These are costs that are related to buying or improving fixed assets for your business, such as land, bui...

If you are self-employed in the UK, you may wonder which accounting method is best for your business: cash basis or traditional (accrual) accounting. In this blog post, we will explain the differences between these two methods and help you decide which one suits your needs. Cash basis of accounting  Cash basis accounting is a simple way to work out your income and expenses for your Self Assessment tax return. You only need to record money when it comes in and out of your business, and you only pay Income Tax on money received (after deducing expenses already paid) in your accounting period. This means you do not have to deal with invoices, bills, or debts that are not paid yet.  For example, if you invoice a customer on March 25th 2023 and they pay you on April 18th 2023, you would record this income in the 2023/24 tax year, when you actually received the money. Cash basis accounting is suitable for small businesses with simple transactions. It also gives you a clear picture...

We have created this basic UK tax guide for the benefit of self-employed individuals. However, if you find yourself in a more complex tax situation, we recommend seeking the assistance of an accountant to ensure that you receive tailored advice. They can help you navigate the intricacies of the tax system and guide you toward making informed decisions that are best for your business. Being self-employed and tax If you are self-employed in the UK, you have to pay taxes on your income after allowable expenses. This can be a daunting task, especially if you are new to running your own business. In this blog post, we will explain everything you need to know about being self-employed in the UK and how to file your tax returns correctly and on time. What is self-employment? Self-employment (also known as sole trader) means that you work for yourself and not for an employer. In most cases, if you work for yourself and you have not formed a limited company to carry-on the business, you a...

The generally accepted rules : The tax treatment for mobile phone costs can be confusing. Many companies are unclear about whether work phones costs are taxed as a benefit-in-kind and if they need to be reported as a benefit-in-kind on form P11D.  It is commonly accepted that the company can provide an employee with one phone and/or sim card and that would be tax-free, including any personal uses in addition to business calls. Things get tricky depending on whether the contract is under the company’s name or the employee’s name. This expense has caused problems for many employers, and many accountants would advise following these general rules: If the employer provides an employee with one mobile phone, there is no tax or NIC to pay. If the employer pays the bill on the employee’s behalf, the employer must report the benefit on the employee’s P11D and deduct Class 1 NICs via the payroll. If the employer reimburses the cost of the employee’s mobile phone, the employer must deduct ...