Hello, I am a French hotel owner and I am thinking of buying…

Hi

VAT is currently at a reduced rate of 15% however this will revert to the standard rate of 17.5% from 01/01/10.

For income tax there is a tax free personal allowance of £6475 for the tax year 6th April 2009 to 5th April 2010. As a French national you will still qualify for this whether you are resident in the UK or not, the latter being due to the double taxation agreement between the UK and France.

The next £37400 is taxable at 20% and anything over that is taxable at 40%. As a self employed person trading in the UK this will apply to your hotel trading profits.

Self employed people also pay class 2 national insurance contributions (NIC) at a flat rate of £2.40 per week and class 4 NIC on profits over £5715 up to £43875 of 8% and 1% over £43875. However, you may wish to check whether there is a reciprocal agreement between the UK and France, if you continue to pay contributions in France.

If you are non-UK domiciled whilst resident in the UK you will need to consider after the end of each year whether to be taxed in the UK on worldwide income with credit being given for overseas tax paid or on the remittance basis ie on all UK income and overseas income remitted to the UK, again with credit for overseas tax paid on remittances. Remittances of capital are not taxable.You will therefore need to ensure that overseas income and capital are clearly segregated in separate bank accounts for clear identification to minimise your UK tax bill.

You will however not be able to claim the tax free personal allowance or the capital gains tax (CGT) annual exemption on the disposal of assets ie property, your business, currently, £10100. CGT is at a flat rate of 18%.

After being in the UK for the whole or part of 7 of the previous 9 tax years prior to the tax year of assessment, an additional annual £30000 becomes payable for the privilege of being taxed on a remittance basis, so it may not be beneficial to remain on the remittance basis thereafter.

For employees you will need to operate a Pay As You Earn (PAYE) Scheme to deduct tax and NIC from their earnings. You will be sent a PAYE tax code by HM Revenue & Customs (HMRC) for each employee and with the appropriate tax tables this will advise you of the tax to be deducted. The allowances and rates of tax are the same as advised above.

The first £110 per week is free of NIC, with the next £844 being charged at 11% being contracted into the state pension scheme (a reduced rate applies if you run a pension scheme and the employee is contracted out of the state pension scheme). Earnings over £844 per week are charged at 1%. You will also have to pay employers' NIC on top of this at 12.8%.

Here are some links to HMRC's website that you may like to look

www.hmrc.gov.uk/businesses/tmastarting-up-in-business.shtml

www.hmrc.gov.uk/paye/index.htm

www.hmrc.gov.uk/vat/index.htm

I hope this helps.

Kind regards

Andrew