Polish construction, industrial and service companies are increasingly choosing to expand into the UK market in search of new orders and growth opportunities. The attractive market, the large number of investments and the demand for specialists in various industries make the UK a desirable destination. However, despite the encouraging prospects, Polish entrepreneurs face numerous challenges related to the local tax system and regulations. What are the most common problems faced by Polish companies in the UK? And why do so many of them opt for the support of tax offices?
Table of Contents:
- Problem 1: The Construction Industry Scheme (CISM)
- Problem 2: Choosing the right VAT system
- Problem 3: The Permanent Tax Establishment
- Problem 4: Local tax regulations in the UK
- What could be the consequences of not knowing the UK tax rules?
- How can we support your construction company in the UK?
Problem 1: The Construction Industry Scheme (CISM)
The Construction Industry Scheme is a scheme that regulates tax deductions between contractors and subcontractors. It applies to companies operating in the construction industry. This means that businesses operating in this sector must be properly registered in order to be able to account to the UK tax authorities in accordance with local regulations.
The complexity of the CIS settlement system makes registration a sometimes difficult and time-consuming process. Particularly for Polish entrepreneurs who are not familiar with the local regulations in the UK. This, in turn, can lead to errors in calculating deductions, and incorrect submission of returns or inadequate documentation of construction work carried out may even result in the inability to obtain a tax refund.
Problem 2: Choosing the right VAT system
Businesses in the UK can choose different forms of VAT accounting. Flat Rate VAT is a simplified option, suitable for small businesses that do not incur large costs. It does not allow VAT to be recovered on purchases like the standard settlement. A construction company operating in the UK, therefore, needs to know whether it can use Flat Rate VAT at all, or whether it should opt for standard VAT accounting. And then decide which of these systems is more advantageous for it.
If a company provides services in the UK and outside the UK, VAT qualification can also be an issue. The business needs to assess which country can be considered as the place of supply of services in this case and therefore which tax rules will apply.
Furthermore, if the recipient of the service is not a foreign company with its Place of Belonging in the UK, VersChat applies. This means that if the foreign recipient of the service has its registered office, main management or permanent establishment in the UK then the service will be subject to UK VAT. Otherwise, the service may be exempt from VAT or subject to the reverse charge procedure.
Problem 3: The Permanent Tax Establishment
Permanent Estabilishment (PE) is a term used in international tax law to describe a situation where a company’s activities in one country entail an obligation to pay taxes in that country.
For Polish companies, it is important to understand what actions may lead to their company being recognised as a permanent establishment in the UK and thus what tax obligations may result.
Not all Polish entrepreneurs are aware that a PE is created if a company has a permanent place of business in the UK (for example: an office, production facility, warehouse) or employs staff who perform tasks related to the company’s business.
Problem 4: Local tax regulations in the UK
Polish entrepreneurs who decide to do business in the UK often also encounter difficulties related to local tax regulations. And this applies not only to the already mentioned CIS.
The differences in company taxation in the UK and Poland are such that understanding UK regulations can be challenging. The main discrepancies relate to tax scales and rates, types of tax or administrative procedures. And although UK tax law is generally simpler than the intricate Polish regulations, a lack of knowledge of these regulations generates problems in settling taxes or fulfilling official obligations.
In order for a Polish construction company to operate successfully in the UK, it must understand and comply with local tax regulations and use accounting systems adapted to UK standards.
What are the consequences of not knowing UK tax laws?
Lack of knowledge or misunderstanding of local tax regulations can lead to serious consequences. First and foremost, mistakes in accounting will in some situations lead to high financial penalties. In the UK, as in Poland, such penalties are imposed on companies that do not comply with tax regulations and fail to meet their obligations.
In the case of repeated misconduct or attempts to avoid tax obligations, HMRC may even take steps that will result in the business being blocked. The consequences of improper tax returns, under-reporting of income or deliberate tax avoidance can also result in criminal liability.
How can we support your construction company in the UK?
As you can see, unfamiliarity with local tax regulations can be very damaging to your construction company. This is why many Polish entrepreneurs choose to take professional tax advice. This way, they do not have to delve into the UK tax system on their own, delegate most of the tax formalities, and with all this, they can avoid costly mistakes and ensure the smooth operation of the company.
At Complex Accounting, we have been supporting Polish companies operating in the UK for many years. As part of our services:
- We are here to help you with your tax affairs and with your understanding of the complexities of the UK tax system;
- We assist Polish companies in the CIS registration process;
- We advise on the choice of the appropriate VAT regime, including flat rate and reverse charge issues;
- We analyse the risk of tax establishment and help to avoid unnecessary burdens;
- We provide comprehensive accounting and tax support tailored to the specific needs of Polish companies operating in the UK.
Focus on growing your business with an accountancy service in the UK!
Avoiding problems and focusing on growing your business starts with professional support to guide your business through the complexities of the UK tax and administrative system.
Instead of worrying about filing returns on time or changing regulations, you can concentrate on developing your business in the British Isles. You can do so with the confidence that your business is operating in accordance with the requirements of the UK tax authorities. You will also avoid unnecessary costs and penalties associated with accounting errors.
Contact us for professional help with VAT registration, the CIS regime, tax risk and all other tax and accounting matters. Start a partnership to help you navigate the complex world of the UK tax system.
