The tax lawyer and the accountant at pre-incorporation

There is a wealth of possibilities at the pre-incorporation stage in regard to the creativity of a tax lawyer or consultant, on being consulted about tax planning before a business is registered. This is before the investor commits to the relevant statutory laws and the subsequent penalties on default.

At the planning stage before a company or any other business is registered, the accountant will be consulted to give an up to date state of the investor’s finances. The accountant at this stage, is also is entrusted to handle all the monetary transactions that will arise at pre-incorporation. It is safe to say that if one is not an accountant, they will definitely need an accountant if not at the onset to pay stamp duties, later to prepare the accounts.

Sometimes, a person with an MBA, and other industry experts are also consulted for their take on the most efficient way to start and run the business. At this stage it is safe to say that the accountant is necessary

A tax lawyer or consultant would at pre-registration be able to advise the investor about the most tax efficient form of business enterprise to set up. Whereas a business can not be established purely with the goal of tax avoidance, it is prudent to consult on the onset about the most tax efficient establishment to set up for that particular form of business in order to maximise profits.

Sometimes it is more prudent to set up a partnership in lieu of a limited liability company with the tax rate of income tax for a partnership sometimes being 15% lower than that of a company for example in Uganda.

A possible joint venture between businesses in two countries with a ratified tax treaty would take advantage of the reduced tax rate.

As there are endless possibilities in the derivatives market, consultations with a tax lawyer particularly in drafting the derivatives instrument would be helpful in determining the amount of stamp duty paid on the instrument and other taxes that might arise for example, Value Added Tax on the sale of the underlying assets.

Russell Cockburn, an independent tax consultant, wrote an article titled Consultation, consultation, consultation , published in this year’s October issue of the Chartered Secretary magazine and outlined the details of current tax consultations, highlighting parties who may wish to get involved. He wrote “ On 27 July the Government published a consultation document with proposals for the reform of the taxation of foreign branches of UK companies. The main proposal is the possible introduction of a UK tax exemption for the profits of such branches, which sounds quite attractive.

UK companies with foreign branches will need to pay close attention to these possible changes. Where they have a significant interest in the outcome, they should consider actively participating in the consultation process, which closes on 15 October 2010.

The consultation process for the reform of taxation of foreign branch profits is now closed but the article also highlights other areas in tax planning, for example the pension tax regime, anti avoidance provisions in the UK (United Kingdom) corporate tax code, taxation of investment trust companies, entrepreneurs relief, remuneration planning, capital gains tax that should be considered at incorporation or when already running a business in the UK.

And it is not just in the UK that tax planning should be considered, it is at the pre-incorporation stage of any business that the tax lawyer or consultant has an unhindered advantage over the tax collector.

A view of Kampala from Karoli Ssemogerere's Law Chambers at Workers' House

Special thanks to Karoli Ssemogerere for the idea.

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