It’s a question of culture

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In the latest UK200Group blog post David Macdonald, Managing Partner The Martlet Partnership discusses the importance of understanding different cultures when it comes to business

David Macdonald
My daily practice life is probably somewhat different from many of my fellow partners in UK200 and elsewhere in that my firm specialises in dealing with people who have come to the UK to set up businesses and we deliver our services in our clients’ native language whether that is French, Spanish, Italian or Catalan.

One of the challenges that my work presents is not the language barrier but the cultural differences between our country and others.

Where we are suitably professionally trained, we take the way our system works be it HMRC or Companies House for granted, warts and all, but I find above all when people come to this country, they expect that the system here will operate exactly the same as it does in their native land.

The variation in practices of Company Law, Tax Law and Accountancy, although less so the latter, are enormous and one of our principal tasks is to ensure that our clients do not spend time drawing comparisons with their own country and this one and that for the main part, they actually disregard their knowledge of their own country.

Major mistakes can occur when assumptions that everything is the same in every land are made. The first challenge and main challenge I have with French clients is to make them understand that business lunches when entertaining third parties is not a tax deductible expense. This is a common practice in France and providing that you have a “business case” for the person you are taking out to lunch or dinner, all these expenses are deductible. Our French clients are horrified to learn that these expenses have to be added back in their tax computations.

In the main, we are far less constrained by red tape in this country than in Western Europe and in particular insofar as being able to start up a business without even needing to notify the authorities in the first instance is concerned.

In France, you cannot set yourself up as a self-employed person without registering at the local Town Hall first. I am anecdotally advised that this will involve waiting for a long period and parting with some money to register any form or document whatsoever. So it is when making changes to any company register – you simply cannot do it without paying money for it whereas we file nearly all documents directly with Companies House electronically without batting an eyelid.

We were recently asked to set up a PAYE scheme for a Quango of a Western European country which has an office in London. The employee had been resident here for several years but paying National Insurance in her homeland due to reciprocal arrangements, which had now come to an end.

Quite apart from having the devil’s own job to get out the UK tax authority to understand that a foreign government institute might require a PAYE reference (it has taken two months to move this forward with HMRC), it is of course possible to take on employees and deal with the PAYE aspects of it officially slightly later. This is total anathema to my new found clients. The employee has gone back to her homeland whilst waiting for an official document authorising that she may be employed in the United Kingdom. It is very difficult to persuade people from another country that no such document exists and that she is free to be employed here as they can only operate when there is an official authorisation.

So it is in Spain for any employee or self-employed person, you have to obtain a national identification number first.

However, other countries would regard our attitude to administration as laissez-faire or downright lax. I have recently been asked to comment on the tax status of a Western European company that purchased a freehold property in the United Kingdom in 2014 which has been receiving rent since that time. This only came to light when the lawyers representing the freeholder in their own country asked local lawyers here to review the lease which is due for renewal and the local lawyers then asked me if there was any tax implication.

I doubt any other country would have allowed any foreign landlord to receive rent for five years without even realising they were doing so, so our relaxed approach comes at a price and I am now faced with dealing with a potentially tricky arrears case.

On the other side of the coin, whilst Companies House allows the easy formation of companies and filing of documents, there is no scrutiny of those documents and there is some complete rubbish filed on Companies House.

Sometimes also, our laws are too rigid. A UK200 colleague recently asked how he might get round the problem of relocating a company with registered offices in Scotland and within the United Kingdom, it seems absurd that there is no mechanism to allow a company registered in Scotland, Northern Ireland or England & Wales to relocate its registered office to either of the other two jurisdictions – but you simply cannot. It is therefore fairly evident that it is totally impossible to transfer a company which has a legal personality from one country to another when the United Kingdom is involved. This is not so elsewhere and we are acting for a case where a registered office of a company has been changed from the British Virgin Islands to France.

Nor do we allow mergers in the correct sense of the term in the United Kingdom whereas in other countries this is considered standard and straight forward.

So culture brings a huge amount of challenges and highlights good and bad practices and errors and omissions in our own country and others which if we all learn from each other would make everybody’s life a lot easier.

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