DOING BUSINESS IN UNITED KINGDOM

Posted By Romain Ponsot on Oct 6, 1907 in Doing Business


Date de publication : 06-10-1907

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The following information are for the sole purpose  of providing a general overview of  the local taxation of the Corporate tax aspects of the country. In any case, the information provided below cannot be considered as comprehensive or deemed to constitute specific legal advice.

 

Yes we tax in United Kingdom

 

Flash News

New tax reform:

  • CIT tax rate is progressively reduced to 17% until 2020.

New tax treaties:

  • Tax treaty between United Kingdom and Estonia, eliminate the WHT on royalties.
  • Tax treaty between United Kingdom and Kyrgystan, WHT rates are updated.

 

Local tax advisors

No specific information on the local tax advisors.

Useful links

Website for tax guidelines: Click here

Website Tax administration (HMRC): Click here

Permanent Establishment

The definition of Permanent Establishment follows the wording of article 5 of the OECD Model:

  • Dependent agent who habitually concludes contracts in the name of a non-resident company (except if the activity is limited to purchase of goods);
  • Fixed place of business, building site, construction, assembly or installation and any related supervisory activity.

Resident companies are taxed on their worldwide income (« worldwide principle »). However, non-resident companies are only taxed on their revenues derived from United Kingdom sources (« source principle »).

Entities are considered to be resident for tax purposes in United Kingdom if their place of management & control is in United Kingdom.

Note: the definitions of permanent establishment and place of residence are subject to the relevant provisions of any applicable double tax treaty, if any.

Corporate Income Tax

The general CIT tax rate is 20%.

Note: CIT tax rate is progressively reduced to 17% until 2020

Non-taxable income includes the following:

  • Dividends received from qualifying participations
  • Certain capital gains deriving from qualifying participations

Non-deductible expenses includes the following:

  • Dividends benefiting from the participation exemption
  • Interest in excess of the thin-capitalization threshold

Carry forward: Yes indefinitely, but some restrictions may apply.

Carry back: No

Annual tax returns are established by the company on a self-assessment system.

Companies shall pay 4 advance payments.  and the balance must be paid 9 months after the end of the end of the accounting period.

Whithholding Taxes (payment to foreign companies)

The local tax rates in United Kingdom are the following, subject to the provisions of an applicable double tax treaty, if any.

There is no WHT on the profits paid from a branch to its foreign head office.

The general rate of WHT on dividends is 0% of the gross amount.

The general rate of WHT on interest is 20%.

The general rate of WHT on Royalties is 20%.

The general rate of WHT on management fees is 0%.

The general rate of WHT on technical services is 0%.

Capital gains

Generally, capital gains are taxed under the regular CIT as general income.

Note: capital gains deriving from qualifying participations are exempt under the participation exemption.

VAT

Standard VAT tax rate is 20%

Zero-rated supplies include, subject to certain conditions:

  • exports of goods;
  • passenger transportation
  • intra-Community supplies of goods;

Exempt supplies include, subject to certain conditions:

  • Certain financial services
  • Certain insurance services
  • Training and education

Note: exempt transactions differ from zero-rated transactions in that the input VAT associated with exempt transactions is not deductible.

EU taxable companies may claim a VAT refund to their own tax authorities through on the basis of the 13th EU Directive.

In case where for a tax period, Input VAT exceeds Output VAT, certain non-resident companies (which are not required to register and incur United Kingdom-VAT in the course of their business activities in United Kingdom) may apply for a refund.

No other specific information of VAT in United Kingdom.

Miscellaneous

The general statute of limitation is 4 years starting at the end of the year in which the tax return had to be filed.

The statute of limitation could be extended to 20 years for negligent tax fraud and for wilful tax fraud.

There is no foreign exchange control in United Kingdom. Income and capital could be freely repatriated.

There are thin capitalization rules in United Kingdom. However, the interest deductibility is limited under the transfer pricing regulations.

 

 

 

Do not hesitate to share your experience in United Kingdom with us in the comments below. Any comments are welcome !

 

Romain Ponsot

Romain est conseiller en fiscalité au sein d’un leader mondial du shipping. Grâce à son expertise tant en matière de TVA, fiscalité internationale, problématiques intragroupe qu’en matière de fiscalité des particuliers, Romain vous guidera au travers d’articles professionnels et humoristiques. 

Romain, poète dans l’âme, aime particulièrement le couscous et passe beaucoup de temps à glacer ses souliers. Profil LinkedIn
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