United Kingdom

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The UK is the leader of foreign investment in Europe. The UK is a hotbed of activity for foreign investment in Europe, especially from American companies. The UK offers vast business opportunities for investors. Low labor costs and high returns make it an attractive investment destination.

  • The easiest place to establish and run a business is Europe: According to a World Bank study, it takes only 13 days to establish a business in the UK. The World Bank has ranked the UK first in Europe and sixth in the world to operate business
  • An internationally competitive tax environment for foreign investors: the UK has the lowest corporate tax at 28 percent which is the lowest in the G7. The highest personal tax bond at 40 percent is also the lowest in the EU.
  • Most Flexible market in Europe: According to a World Bank report, the UK stands at second place to employ workers.
  • Least barriers to entrepreneurship: OECD has identified the UK as second in the world for Product Market Regulation. It also ranks second for the least barriers to entrepreneurship and third for the least barriers to trade investment in the world.
  • Stable Political Environments: Transparency International rates the UK high on the transparency list. The UK is the country with the least corruption in the world. It achieves a higher rating in comparison to the US, Japan, Germany and France.
  • Leading Financial Center: London which is world’s largest financial center is situated in the UK.
Population: 60.8 million
Form of government: Unitary parliamentary constitutional monarchy
Official & spoken languages: English (spoken Scots, Welsh, Cornish, Gaelic)
Currency: Sterling Pound £
Time zone: UTC 0
GDP (PPP): $ 2.548 trillion
GDP (PPP)/per capita: $ 39,762
Public debt: £1.56 trillion (82% of GDP)
Average salary: £26.500/year
Unemployment: 5.2%
Major trading partners: US ($66.5 billion), Germany ($46.4 billion), Switzerland ($32.2 billion), China ($27.4 billion), France ($27 billion), Netherlands ($26.6 billion)

 


Advantages

  • Company law – UK company has an excellent reputation worldwide, with English law forming the basis for company law in many countries worldwide. Incorporating in the UK couples legal flexibility with clear governance rules in one of the world’s largest and most reputable trading economies
  • Taxation – Dividends received from an EU resident underlying company will be free of withholding tax under the EU parent/subsidiary directive. UK has over 100 double taxation treaties including the US, Japan, China, Germany, France, Singapore and Canada. These treaties provide several advantages to support business with UK headquarters, particularly the reduction of withholding tax on dividends.
  • Simple to manage – Foreign entrepreneurs wishing to register a UK company can easily handle the administration remotely as Companies House allows many fillings made online. A UK private companies requires only one director and one shareholder.

Disadvantages

  • No more corporate directors – UK companies may only appoint individuals as directors from October 2015. Previously, corporate directors were permitted as long there as at least one individual director on the board. All existing corporate directors must be removed from boards of UK companies by October 2016
  • Privacy – Companies registered in the UK are required to keep a list of “people with significant control” (PSCs), which effectively makes beneficial ownership information public. The threshold for considered a PSC is 25% beneficial ownership. There is also a public register of directors and shareholders.
  • VAT –  Value added tax (VAT) is charged on the value of supplies of taxable goods and services made in UK, including some exports to European Union countries.

Business Friendliness Environment Index (EUROPE) by Novasigma – 2017

Novasigma has published an annual BFE-E (Business Friendliness Environment – Europe) -index for 2017. European economies are ranked from  1-51 based on their business friendliness. The rankings are determined by sorting the aggregate distance to frontier scores on 20 topics each consisting of several indicators, giving equal weight to each topic. The rankings for all countries and economies are bench-marked to January 2017

UNITED KINGDOM – OVERALL RANK 2017: 1st (Europe) 81/100 points
1. Ease of incorporation process (bureaucracy, costs, time frame) 5/5 points
2. Privacy level of shareholders and investors 5/5 points
3. Privacy level of company directors and signatories 3/5 points
4. Availability of the private equity funding 5/5 points
5. Availability of the public and / or bank sector financing instruments 3/5 points
6. Reputation of the country (trading across borders with a company registered in this country) 5/5 points
7. Easiness of recruiting professional staff (professionalism, average pay, protection against dismissal) 4/5 points
8. Easiness of getting business premises (price, availability) 4/5 points
9. Suitability for production of physical products 3/5 points
10. Suitability for producing services 5/5 points
11. Size of the home market B2C (population and purchasing power) 5/5 points
12. Size of the home market B2B and public sector purchasing services from local businesses 4/5 points
13. Exporting physical products (markets nearby, logistics and toll) 3/5 points
14. Exporting services 5/5 points
15. Immaterial rights (compared to other countries) 5/5 points
16. The level bureaucracy or corruption during business operations 3/5 points
17. Company taxation 4/5 points
18. Dividend taxation, withholding taxes and tax treaties 5/5 points
19. Easiness of selling a business 3/5 points
20. Easiness of closing down a company 2/5 points

The World Banks “Ease of doing business ranking”: United Kingdom

Overall rank 2016: rank 6th (change in rank: 0)
– Starting a business: rank 17 (average processing time 4.5 days)
– Dealing with construction permits: rank 23 (average processing time 105 days)
– Getting electricity: rank 15 (average installation time 79 days)
– Registering property: rank 45 (average processing time 21.5 days)
– Getting credit: rank 19
– Protecting minority investors: rank 4
– Paying taxes: rank 15 (average company tax from profits 32%, average time used for taxation 110 hours per year)
– Trading across borders rank 38
– Enforcing contract: rank 33 (average 510 days, average cost from standing amount 43.9%)
– Resolving Insolvency: rank 13 (Average time processing bankruptcy: 1.0 years)

New businesses registered in 2015: 537,658 new limited liability companies

Who can start a new business in the UK:

  • Any person or legal entity who can provide documentation required by the law for incorporation

Who can own property or shares of the UK company:

  • Any legal entity (Companies, private individuals, trust or fund)

Who can act as a director or member of the board:

  • Any person who can provide documentation required by the law for incorporation

Business entities in the UK

  • Private company limited by shares (Limited tai Ltd)
  • Public limited company (PLC)
  • Property management company
  • Company limited by shares
  • Unlimited company
  • Limited Liability Partnership (LLP)
  • Community Interest Company (CIC)
  • Charitable Incorporated Organization (CIO)
  • Right to manage company (RTM)

Opening a bank account for a UK company:

  • Incorporation documents and articles of association (Certificated in UK)
  • Registration certificate (Certificated in UK)
  • Board of directors meeting minutes
  • Proof of identity, address and skills of signatories
  • List of shareholders and directors (Certificated in UK)
  • Certificate of Good Standing (if company is older than 1 year)

Public register of shareholders, directors or signatories:

  • Directors: Yes
  • Owners: Yes
  • Signatories: Yes

Accounting and reporting regulations in the UK:

  • companies must file all records
  • companies must file seperate tax returns
  • audit requirements for large companies

How funds can be withdrawn from company

  • Company may transfer money to another company based on sales of services and goods.
  • Company can lend money to another company and / or person given that loan agreement with minimum interest and payment terms have been made. Owners cannot owe money for the company in the end of the book year.
  • Company can pay dividends from it´s own capital to shareholders after end of the book year
  • Company can pay salary to it´s employees given it has registered in the Tax Administration´s employer register. Employer is obliged to pay tax withheld at source from all wages paid to employees, along with making employer´s social security contributions.
  • Company can pay tax free allowance, such as kilometer allowance for using they own car, per diem and meal money, to owners in order to cover their temporary business travel expenses as defined in the official Decision of the Tax Administration on Allowances for Travel Expenses
  • Company can pay meeting allowances for its directors, members of the board and owners
  • Profits may be transferred (if certain requirements are met) between group companies through group contribution system
  • Company can invest in shares, funds or real property.

Can you transfer UK company to another jurisdiction?

  • No

How to terminate business in UK?

  • Company may be sold
  • Skipping renewal of company yearly registration
  • Filing bankruptcy
  • Company liquidation

Expats moving to the UK do so for various reasons. Whatever your motivation may be, your move to the UK holds the advantage that you won’t need to learn a new language from scratch. InterNations has lots of useful information on moving to the UK, from life in London to UK visa regulations.

Many of its characteristics make moving to the UK an attractive option. As a business destination, the United Kingdom, composed of England, Scotland, Wales, and Northern Ireland, has one major asset which outweighs its counterparts in other European countries with similar living standards and working conditions: the language. After all, English is the international language of business and trade taught in schools across the globe.

The UK is a densely populated country, with a considerable share of its roughly 64.5 million people living in the south of the UK. Just over 80% of the UK’s population consists of city dwellers. Great parts of Scotland and Northern Ireland are less urbanized and less affluent leading to people leaving for the UK’s southern regions.

London — The Center of Everything

The country’s capital, with 8.6 million inhabitants being by far the largest city in the UK, is the seat of the national government. It is also the leading financial and commercial center of the EU: in 2014 London hosted 40 percent of the European headquarters of top companies worldwide.London is truly multi-cultural with people moving to the UK’s capital from all over the world, and generally an exciting place to be. Its vibrant arts and entertainment scene caters to all tastes, from classical to popular, mainstream to fringe, and from retro to avant-garde. Needless to say, the party animal in you will not be disappointed.

Despite its size, London’s green spaces make it quite a pleasant place to live. The soaring prices for property, however, are one of the reasons why many families — even those with an above-average income — prefer to live in the suburbs of Greater London when moving to the UK.

Freedom Index: United Kingdom

Overall rank 2016: 35th (64/100 points)
– Property rights: 90/100 points
– Freedom from taxes: 57/100 points
– Freedom of speech/religion: 94/100 points
– Limited government: 30/100 points
– Gun rights: 15/100 points
– Drug rights: 45/100 points
– Freedom from corruption: 76/100 points
– Freedom from inflation: 74/100 points
– Business freedom: 92/100 points

Corporate taxation in UK 2016

Residence – A company is UK resident if it is incorporated in the UK or its place of central management and control is in the UK

Basis – A UK resident company is subject to corporation tax on worldwide profits and gains, with credit given for overseas taxes paid. Foreign profits and losses (including those from certain capital assets) arising from a permanent establishment (PE) of a UK resident company may be excluded by making an irrevocable election. The effect of the election may be deferred where the PE has incurred a loss. Anti-diversion rules based on the CFC rules may restrict the profits that can be excluded from the charge to UK tax by virtue of the election. A non-resident company is subject to tax only in respect of UK-source profits, which include the income of a UK PE of the nonresident, income and certain gains from UK real estate, certain UK-source interest income and gains on assets used for purposes of a PE’s trade.

Taxable income: 20% / 25% / 28%
Taxation of dividends: 0%/20%
VAT registration: Registration is mandatory for all taxpayers that carry out transactions in the UK VAT territory
– VAT Rates: 20%, reduced rates of 5% and 0%
Withholding tax (general): 0%
– From Dividends 0%
– From Royalties 0% / 20%
– From Interests 0% / 20%
– Technical services
Transfer tax: See stamp duty
Capital gains tax: Treated as ordinary business income taxable by rate 20% (Exemption available)
Real property tax: The national non-domestic rate is payable by occupiers or business premises.
Social security: “General risk” contributions represent 28.3% of an employee’s wages, with the employer paying 23.6% and the employee paying 6.35%
Payroll tax: No
Stamp duty: 0.5% applies on the transfer of UK shares and is payable by the transferee
Capital duty: No
Tax treaties: Up to 100 countries
CFC (Controlled Foreign Company) rule: Yes
Other: The ATED is an annual tax charge that applies where companies and certain other entities own UK residential property valued more than GPB 1 million. Shipping companies may elect to pay tonnage tax in lieu of the normal corporation tax.

Compliance for corporations:

  • Tax year – The tax year is the shorter of 12 months of the period for which the accounts are prepared
  • Consolidated returns – All companies file separate tax returns. However, losses may be “group relieved” between UK group companies (broadly, where one is a 75% subsidiary of another or both are 75% subsidiaries of the same corporate parent in terms of share ownership, rights to income and rights on a winding up, taking account of direct and indirect holdings). There are other group rules that apply to capital gains allowing, for example, the intragroup transfer of assets at no gain/no loss for tax purposes or the transfer of gains/losses between group members.
  • Filling requirements – The UK operates a self-assessment regime. Large companies pay tax in quarterly installments starting in month seven of their financial year (as from April 2017, the first quarterly installment will be due in month three of the financial year). The tax return is due to be filled within 12 months of the period. Electronic filling is mandatory for all company tax returns.
  • Penalties – Companies are liable to a fixed penalty of £100 for failure to file a tax return by the due date, plus an additional £100 if the return is not submitted within three months of the due date. Further penalties may apply to returns filled at least six months late. Tax-geared penalties can be sought for matters such as tax returns that are carelessly or deliberately incorrect. Interest is paid on late paid tax.
  • Rulings – UK tax legislation includes a number of anti-avoidance provisions for which advance statutory clearance may be sought. Also, under a non-statutory clearance procedure, the UK tax authorities’ view of the tax consequences of specific transaction can be sought, on a named basis, with full disclosure, where there is both commercial significance and material uncertainty.

Tax authorities: HM Revenue & Customs

Personal taxation in the UK 2016

Personal taxation basis:

  • Individuals who are resident and domiciled in the UK are subject to tax on their worldwide income and gains.
  • Different treatment may apply where a person is UK resident but not UK domiciled

Tax Residence:

  • A statutory residence test (SRT) applies that is based on a combination of physical presence and connection factors with the UK and other jurisdictions
  • Domicile is a concept distinct from residence. An individual’s domicile status may be determined by the domicile of his/her parents or can be acquired by choice.
  • UK resident but not non-UK domiciled taxpayers can enjoy favorable tax treatment in respect of income and assets outside the UK.
  • New rules are expected to be introduced as from 6 April 2017 that restrict non-domiciled status for tax purposes, including a “deemed domicile” rule for income tax, capital gains tax and inheritance tax purposes after 15 years of residence, and individuals born in the UK and UK domiciled at birth will be UK domiciled for tax purposes whenever they are resident in the UK.

Filling status:

  • Individuals file tax returns separately, irrespective of marital status

Income tax rates in the UK

  • Income tax is charged at progressive rates. For 2015-2016, the rates are as follows:
Income: Rates:
up to GBP 31,785 20% (effective rate on dividends of 0%)
up to GBP 31,786 – 150,000 40% (effective rate on dividends of 25%)
 over GBP 150,000 45% (effective rate on dividends of 30.6%
  • As from 6th April 2016, a new annual dividend tax allowance of GBP 5,000 has been introduced. The new rates of tax on dividend income exceeding the allowance will be between 7.5% – 31.8%
  • Currently, dividends from UK companies and many non-UK companies attract a non-payable tax credit. (The credit is not available where the individual’s holding in a non-UK company is 10% or more and the company is located in a jurisdiction that has not concluded an appropriate tax treaty with the UK). No credit will be available as from 2016-2017.

Social security payments in the UK:

  • National Insurance Contributions (NIC) are payable by employers, employees and self-employed individuals. For example, for 2015/16, weekly paid employees pay NIC at a rate of 12% on weekly income between GPB 155 and GPB 815 and 2% on income exceeding this amount. For employers, NIC is payable at a rate of 13.8% on all income excess of GPB 156 per week for 2015/16.
  • Self-employed individuals pay NIC at a rate of 9% on annual income between GPB 8,060 and GPB 42,385 and 2% on the excess, together with a fixed charge of GPB 2.75 per week for 2015/15 (GPB 2.80 for 2015/16)

Inheritance/estate tax in the UK:

  • Inheritance tax is charged on property passing on death, certain gifts made within 7 years of death and some lifetime transfers (e.g. to most trusts).
  • Where due, inheritance tax is payable on assets in excess of GPB 325,000 (2015/16 and 2016/17) at a rate of 40% (20% for certain lifetime transfers).
  • As from April 2017, a family home allowance will be introduced, provided the property is left to descendants. This will be added to the existing GPB 325,000 threshold, meaning the total tax-free allowance for a surviving spouse/civil partner will be GPB 1,000,000 by 2020/21. The allowance gradually will be withdrawn for estates worth more than GBP 2 million.
  • Transfers between spouses and civil partners, during life or upon death, generally are exempt from inheritance tax unless only the donor spouse has a UK domicile.
  • For non-UK domiciled individuals, only UK property is subject to inheritance tax, although long-term residence (17 out of the last 20 tax years, reducing to 15 years as from 6 April 2017) can result in deemed UK domicile (for inheritance tax purposes only).

Net wealth/net worth tax in the UK:

  • No

Compliance for individuals in the UK:

  • Tax year is 6th April to the following 5 April
  • Tax on employment income is withheld by the employer under the Pay As You Earn (PAYE) system and remitted to the tax authorities. Tax on income not subject to PAYE and capital gains tax is self-assessed. If an individual is required to file a tax return, it must be filed by 31 October (or 31 January, if filling online) after the tax year. Payment of tax is due by 31 January after the tax year. Payments on account of tax may be required on 31 January in that tax year and 31 July in the following tax year.


Services for corporations interested in UK

  • Consultation and advisory (business, tax, legal) services before incorporation / during your business operations in UK
  • Assistance in incorporation process: Tailor made company formation or shelf companies available
  • Administration services available for new companies incorporated through Novasigma

For corporations operating in UK

  • Banking and financial solutions for an UK company
  • Accounting and Audit services for an UK company
  • Legal services for an UK company

For individuals and families interested in UK

  • Consultation and advisory (tax, legal) services before re-located to UK
  • Assistance in immigration process when moving to UK (residency permanent, work permit, tax residency)
  • Incorporation and administration services for your privately held UK holding company

For individuals and families who hold the UK residency

  • Banking services in UK for private persons
  • Local and international accounting services for UK tax residents
  • Local and international legal services for UK residents

Interested in UK? Please leave us a message and we will come back to you shortly.

In cases KYC or/and Due Diligence process required Novasigma requires a personal meeting with all its new clients before proceeding any assignment

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Available services

  • Consulting & Professional Advisory Services
  • How to register a company in United Kingdom
    Incorporation & Administration Services
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