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Inormation on the investment environment andlegal, accounting and taxation ramework areessential to keep you on the right track.
Doing Business in the United Kingdom 2009
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The United Kingdom is one o
the worlds major trading markets.
It welcomes oreign investment and
is a relatively easy country in which
to do business. But even in the
United Kingdom you will be aced
with many regulatory, legal and
cultural dierences which could
ruin business ventures. We at
Grant Thornton can assist you.
Grant Thornton UK LLP is a
leading business and nancial
adviser with oces in 30 locations
nationwide. Led by over 250
partners and employing more than
4,000 o the proessions brightestminds, we provide assurance,
tax and advisory services to over
40,000 individuals, privately-held
businesses and public
interest entities.
Our market-acing business units
are supported by relevant sector
specialists who share their expertise
and insight across our rm,
resulting in an agile and innovativeenvironment. Were fexible to
respond to our clients increasingly
discerning requirements and meet
the challenges posed by our
rapidly changing marketplace.
Taking everything into account,
Grant Thornton UK LLP strives
to speak out on issues that matter
to business and are in the wider
public interest. We ocus on being
a bold and positive leader in our
chosen markets and within the
accounting proession.
We are a member rm within
Grant Thornton International
Limited, one o the worlds leading
organisations o independentlyowned and managed accounting and
consulting rms. Clients o member
and correspondent rms can access
the knowledge and experience o
more than 2,600 partners in over
100 countries and consistently
receive a distinctive, high quality
and personalised service wherever
they choose to do business.
I you require any urtherinormation, please do not hesitate
to contact our International
Business Centre in the United
Kingdom at the ollowing address:
London
Grant Thornton UK LLP
Grant Thornton House
Melton Street
Euston Square
LONDON NW1 2EP
UK IBC Director: Jatin Radia
T +44 (0)20 7728 2320
Ejatin.m.radia@gtuk.com
This guide has been prepared
or the assistance o those interested
in doing business in the
United Kingdom. It does not
cover the subject exhaustively but is
intended to answer some o the
important, broad questions that may
arise. When specic problems occur
in practice, it will oten be necessary
to reer to the laws and regulations
o the United Kingdom and to
obtain appropriate accounting and
legal advice.
This booklet includes legislationin orce at June 2009.
Foreword
Pictured on ront cover, let to right:
Jatin Radia, David White, Craig Burton, Paula Simpson,Amrish Shah, David Maxwell and Stephen Weatherseed
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Summary
stable government and economy
dependence on international trade
large consumer market
educated workorce
Geography and population
The United Kingdom is situated
on the continental shel o the
northwest coast o Europe and
covers an area o 243,000 square
kilometres with a population o
approximately 61 million and a
workorce o 30 million.
The United Kingdom consists o
Great Britain and Northern Ireland.
Great Britain includes England,Wales and Scotland. The UK does
not include the Channel Islands and
the Isle o Man, which have their
own laws and tax systems.
Political and legal system
Parliament is the supreme political
power. It consists o two houses, the
House o Commons and the House
o Lords. The House o Commons
is elected. The House o Lords ispresently being reormed and will
consist o appointed and elected
members. The party which
commands a majority o votes orms
the Government, led by the Prime
Minister. The eect o the system is
that there are ew eective checks
on the Governments power to bring
new laws into eect, except or
public opinion.
The main political parties are
Labour (present Government),
Conservative and Liberal
Democrats. There are additional
local parties in Scotland
(Scottish National Party), Wales
(Plaid Cymru) and NorthernIreland (including Democratic
Unionist Party, Sinn Fein, Social
Democratic and Labour Party,
Ulster Unionist Party).
Scotland, Wales and Northern
Ireland have their own elected
political institutions and there are
three separate legal systems in the
UK, one or England and Wales, one
or Scotland and one or NorthernIreland. Parliament passes laws or
the whole o the UK, but the
Scottish Parliament, Northern
Ireland Parliament and Welsh
Assembly also have some legislative
powers. Tax laws apply to the whole
o the UK but additionally the
Scottish Parliament has limited
tax-raising powers. There are
separate, but similar, corporate
laws or Great Britain and
Northern Ireland.
The UK is a member state o the
European Union. In some areas,
European Union (EU) law overrides
UK law.
The UK joined the EU in 1973(then the European Economic
Community). The completion o the
Single Market in 1993 largely
removed the remaining physical,
scal and technical barriers to trade
within the EU.
In 1993 the UK ratied the
Maastricht Treaty, which resulted in
the development o common
policies or international relations,and security and initiated moves
towards economic and monetary
union. The single European
currency (the Euro) was established
in 1999 and ully implemented
in 2002, but the UK (togetherwith Sweden and Denmark) is
not currently a member o
the Eurozone.
Britains external commercial
policy is now conducted primarily
through the EU.
Language
The population is diverse,
particularly in urban areas.
English is universally spoken and
understood, although many
minority languages are also spoken.
The UK also has a very large supply
o fuent oreign language speakers,
with London being cited as
Europes best city in terms o
languages spoken. British English
has some dierences rom American
English, but American English isusually understood.
Country prole
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Dates are written DDMMYY,
and the MMDDYY orm causes
conusion. A ull stop (period) is
used or the decimal point, and long
numbers are written with a comma(99,999,999.99).
Business hours/time zone
Normal business hours are 9.00am
to 5.30pm rom Monday to Friday.
Banks are generally open rom
9.30am to 5.00pm rom Monday to
Friday. Some retail banks are open
on Saturday mornings.
The whole o the UK observes
Greenwich Mean Time, which isone hour behind most o Western
Europe. Daylight Saving Time
(British Summer Time) is observed
rom late March to late October.
Public holidays
In England and Wales there are
eight public holidays, usually
known as bank holidays. Scotland
and Northern Ireland have theirown public holidays.
Economy
The UK economy is built on the
ree enterprise system. Historically,
the basis o the strength o the UK
economy was manuacturing
industries but this balance has
shited towards the provision o
services. The economy is
characterised by its dependence
overwhelmingly on international
trade, being the worlds largest
exporter o services (and 3rd largest
importer) and 8th largest exporter o
goods (5th largest importer).
Although the UK has less than
1% o the worlds population,according to the World Bank, it is
the th largest economy in the
world (second largest in the
European Union).
Economic growth
Although the country has had low
infation or several years, the level
o infation as at May 2009 was 3%.
The economy has also experienced
continuous economic growth sincethe early 1990s. Additionally, or
the majority o the current decade,
the economy has experienced
sustainable growth in the region o
2-3.5%. However, this level o
growth has signicantly decreased,
as a result o anti-infationarymeasures and the global recession.
Cost of living
The average cost o living in the
UK is relatively high by Western
European standards, although rents
and prices tend to be higher in
London and the South East than the
rest o the country. Purchased
housing is generally available in all
parts o the country, althoughsuitable accommodation may be
dicult to nd in major cities,
particularly in central London,
which ranked in 2008 as the third
most expensive city in the world.
Culture and customs
The ollowing link provides an
insight as to how others perceive the
British culture.
www.communicaid.com/
british-business-culture.asp
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Regulatory environment
Summary
UK Government promotes
investment rom overseas
ew restrictions imposed upon
oreign investment and ownership
tax incentives and grants available
or oreign investors
Restrictions on foreign ownership
There are very ew restrictions on
oreign ownership o businesses
or property.
Government approvals
and registration
No government approval is needed
or most businesses. An exceptionis the eld o nancial services,
where strict controls exist to protect
the investor.
A oreign corporation is required
to register a UK branch or place o
business. Registration is also
required or tax purposes.
Competition rules/consumer
protection
Mergers may be examined toprevent unacceptable monopoly
situations which could operate
against the public interest.
A monopoly position may exist
where 25% o any given type o
products or services is under the
same control.
The Competition Commission
conducts in-depth inquiries into
mergers, markets and the regulation
o the major regulated industries.
Every inquiry is undertaken in
response to a reerence made to it by
another authority: usually by the
Oce o Fair Trading (OFT) but in
certain circumstances the Secretary
o State, or by the regulators undersector-specic legislative provisions
relating to regulated industries.
The Commission has no power
to conduct inquiries on its
own initiative.
Financial Services and Markets
Act 2000
The Financial Services Authority
(FSA) is an independent statutory
organisation set up under theFinancial services and Markets Act
2000, with responsibility or
regulating nancial services in the
UK. The FSAs aim is to promote
ecient, orderly and air nancial
markets and help retail nancial
service consumers get a air deal.
The UK government is responsible
or the overall scope o the FSAs
regulatory activities and or
its powers.
The FSA regulates and authorises
most types o nancial services
rms, such as banks, building
societies, credit unions, insurance
companies, nancial advisers,
stockbrokers, mortgage andinsurance sellers. It sets the
standards that they must meet and
can take action against rms i they
ail to meet the required standards.
Import and export controls
The importation o all and any
goods is potentially subject to
prohibition and control. Generally
the importation o rearms,
ammunition, endangered species,live animals, meat, plants, vegetables
and drugs is prohibited without
authorisation and is subject to
strict controls.
Export restrictions are placed
on certain types o strategic goods
and materials, weapons o war,
atomic energy materials, diamonds,
live animals, endangered species,
antiques, works o art and
EU Common Agricultural
Policy products.
Provisions exist under which the
exportation o goods and services,
or their transportation within the
UK, without a licence, can be
prohibited depending in certaincircumstances on their destination.
HM Revenue & Customs is the
main Government Department
charged with controlling imports
and exports to and rom the UK,
or customs purposes and on behal
o other Government Departments.
All goods imported into the UK
must be declared to Customs on
arrival in one orm or another.Their involvement with exported
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goods starts at the time the goods
are declared or export. This could
be at business premises or the
Port or Airport when they leave the
country. The export cannot proceed
until clearance is given by Customs.
Price controls
There is no general control over
prices. Some utilities are subject to
pricing controls.
The Oce o Fair Trading
can investigate prices and price
increases o major public concerns i
competition appears to be threatened.
Use of landThe use o land is closely regulated.
It is generally necessary to obtain
planning permission rom local
government or real estate
development and or some changes
o use o existing property.
Exchange control
There are no exchange controls
and no reporting requirements or
transer o unds into or out othe UK.
Government investment incentives
The UK government actively
encourages investment rom
overseas; oreign-owned businesses
are eligible or the same benets as
local ones. Investment incentives
compare avourably with those
available elsewhere in Europe and
the EU.
Regional Selective Assistance
(RSA) is a discretionary scheme
available in certain parts o Great
Britain designated as Assisted Areas.
The scheme takes the orm o
discretionary grants to encourage
rms to locate or expand in theseareas. Projects must either create
new employment or saeguard jobs.
In England RSA is available or
projects involving capital
expenditure o at least 500k.
In Northern Ireland similar unding
towards the stimulation o new
enterprises and expansion o existing
companies is available rom the
Industrial Development Boardor LEDU.
Some grants are available or
research and development and
there are also tax incentives.
The Government provides
technical assistance or exports
and the Export Credit GuaranteesDepartment provides guarantees,
insurance and reinsurance
against loss.
Grants are also available or
agriculture, horticulture and orestry
and or tourism and leisure projects.
UK Trade & Investment is the
Government organisation that
supports companies both in the UK
trading internationally and those
overseas businesses seeking to set up
or expand in the UK.
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Finance
Summary
London is one o the worlds key
nancial markets
various nancial markets allow
organisations to raise nance
clearing banks supply a ull range
o nancial services
other nancial institutions supply a
ull range o specialist services
the UK has a large and developed
venture capital industry
no signicant restrictions on
oreign investors accessing
UK nancing
NoteThe comments below pre-date the impact othe current global fnancial crisis which has
seen a signifcant reduction in the availability o
loan fnance rom fnancial institutions.
Banking system
The Bank o England is the central
bank o the United Kingdom and
has two core purposes monetary
stability and nancial stability.
The Bank is perhaps most visible to
the general public through itsbanknotes and, more recently, its
interest rate decisions. The Bank has
had a monopoly on the issue o
banknotes in England and Wales
since the early 20th century. But it
is only since 1997 that the Bank has
had statutory responsibility or
setting the UKs ocial interest rate.
The banking system in England
and Wales is dominated by the our
clearing banks: Barclays, HSBC
(ormerly Midland Bank), Lloyds
TSB (which owns Haliax Bank o
Scotland) and The Royal Bank o
Scotland Group (which owns
National Westminster Bank).
Almost all banks oer currentaccount (cheque account) services.
Most business payments are made
by cheque, but direct deposits to the
payees bank account (known as
credit transers or bank giro
payments) are also common.
Wages are usually paid by direct
deposit. The larger banks also oer
internet banking. Cross border
payments are usually made bywire transer.
The larger banks also provide
accounts in US dollars, euros and
other oreign currencies.
Money laundering rules are
strictly enorced and banks require
evidence o identity to open anaccount. No tax identication
number is needed.
The clearing banks are also major
providers o nance. Such lending
usually takes one o two orms
either overdrat or term loan.
An overdrat is an extremely
fexible method o nance as the
amount borrowed can be varied on
a day-to-day basis. However, this
level o fexibility usually results ina signicantly higher rate o interest
than would be applied on a
term loan.
Details o term loans are agreed
when the business negotiates the
loan agreement with the bank.
As a result the term loan is more
rigidly structured than an overdrat
and can be changed only in
exceptional circumstances, normally
resulting in additional cost.
Over the years the divisions
between the various types o bank in
the UK have been largely eroded.
Clearing banks now oer a ull
range o nancial services.
Most major overseas banks arerepresented in the UK through
branches, subsidiaries or
representative oces.
Capital markets
There are two securities markets
available or overseas companies,
both operated by the London Stock
Exchange. These are the Ocial
List and the Alternative Investment
Market (AIM).The Ocial List (otherwise
known as the main market) is the
London Stock Exchanges principal
market or listed companies and is
the traditional market or larger
mature companies with a well-
established trading record.
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Approximately 1,500 UK
companies and 400 overseas
companies are currently on the
Ocial List. Companies applying
or a listing must:
demonstrate a three year
trading history
have a market capitalisation o at
least 700,000
maintain at least 25% o the share
capital in public hands.
Traditionally, within the Ocial
List investors have looked at stocks
rom two perspectives size and
sector. But increasingly they are
looking at a third dimension picking companies that possess
specic attributes, irrespective o
their size, industrial classication or
location. To address this issue the
London Stock Exchange has
introduced the techMARK, bringing
together listed technology
companies o all sizes rom FTSE
100 to FTSE Fledgling enhancing
every companys visibility andmedia prole and allowing the
long-term tracking o the companys
perormance.
Launched in 1995, AIM was
specically developed to meet the
needs o smaller, growing companies
that might not meet the ull criteria
or a listing on the main market or
or whom a more fexible regulatory
environment is more appropriate.
AIM is suitable or a wide range
o companies - rom young and
venture capital backed businesses
to long-established amily concerns.
Companies on AIM are active
in all sectors o commercial
activity, ranging rom leading-edgetechnology to distribution,
restaurants and leisure.
Approximately 1,600 companies
(including 350 overseas companies)
are listed on AIM. Unlike the main
market, there is no requirement or
a minimum % o shares to be in
public hands.
AIM has recently tightened its
rules. Issuers must now display coreinormation o board members,
announcements and nancial results
on a website. Nominated advisers
(Nomads) that companies are
obliged to retain while listed
on AIM, will have greater
responsibility or assessing the
suitability o companies and the
quality o their business plans
and management.
PLUS (ormerly known as Oex)
is a cost-eective market to enable
shareholders to deal in stocks that
might otherwise prove to be illiquid.
It is a market or dealing in
unquoted and unlisted securities.
Trading is undertaken betweenmember rms via a competing
market maker system.
Companies on PLUS tend to be
smaller than those that apply or
membership to AIM, typically
seeking to raise capital in the region
o 250,000 to 1,000,000. It also
suits those companies not seeking
to raise capital but who want to
create a dealing acility or theirshareholders without having the
burden and expense o meeting
the regulations o AIM or the
Main Market. It is viewed as a
source o retail venture capital
or young companies and as a
stepping-stone to a RecognisedInvestment Exchange or others.
The requirements o joining
PLUS are less onerous than those
o applying to the Main Market
or AIM.
Other sources of finance
Venture capital
The UK has the largest and most
developed venture capital industry
in Europe, accounting or 57%
o total private equity investment
and is second to the USA in
world importance.
Venture capital is the term used
or unsecured unding provided by
specialist rms in return or a
proportion o the companys shares.
Whilst bank loans will have a legal
right to interest and require
repayment regardless o success orailure, venture capitalists (VCs)
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Imports
Summary
importation restrictions maybe
applied in specic circumstances
common customs tari on goods
coming into EU rom outside
no customs duties between EU
member states
Value Added Tax (VAT) charged
on goods coming in rom
outside EU
Import restrictions
Most categories o goods can be
imported without restriction under
Open General Import Licences.
Individual import licences may be
required when importing a limited
number o goods such as textiles,
iron and steel. Licences or these are
issued by the Department o Trade
and Industry (DTI) through the
Import Licensing Branch and all
into the ollowing classes:
open unlimited importation o
particular goods rom specied
areas or a stated period
specic limits quantity or value
and limits the period o the licence
(quota restrictions)surveillance provides surveillance
into the trade in sensitive
commodities on the basis o which
action can be taken to manage the
trade in the commodity
embargo no imports allowed as a
result o international obligations
The Rural Payments Agency is
another Government department
and issues import licences oragricultural and horticultural
products as well as certain items o
ood and drink.
Further assistance is available
through the ollowing links:
www.dti.gov.uk
www.hmrc.gov.uk
Customs duties
Customs duty is assessed on the air
market value o imported goods at
the time they are landed in the UK.
The UK is a member o the EU,
which has a common customs
system. No customs duty or Value
Added Tax (VAT) is payable when
goods are imported rom other EU
member states.
In addition to customs duty, VAT
is payable on most goods imported
rom outside the EU. Most UK
businesses are able to reclaim the
VAT which they pay on goods
which they import. They cannot
reclaim customs duty.
Arrangements can be made or the
payment o customs duty and VAT
on imported goods to be deerred
until the goods are used, sold or
re-exported.
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Business entities
Summary
oreign investors may operate in
the UK through whatever entity
they choose
the most common entities used by
oreign investors in practice aresubsidiaries or branches
Corporations
The usual orm o business entity is
the private limited company.
The name o a private limited
company must end in Limited or
Ltd (or the Welsh equivalent).
A limited company need only have
one shareholder and it is thereore
a suitable entity or a whollyowned subsidiary.
Formation
Accountants and lawyers can assist
with the ormation o a company.
The process usually takes one to
two weeks but i a company is
required immediately a ready-made
company can be bought rom a
company ormation agent.
The name o the ready-madecompany can easily be changed.
There are a ew restrictions on
names. The name o a company can
be similar to (but not identical to)
the name o an existing company,
but an existing company can object
that the name o a new company istoo similar to its own name.
Total costs or the ormation o
a company are typically less
than 1,000.
Minimum capital/capital maintenance
There is no minimum capital
requirement and companies are
commonly ormed with a share
capital o only 1 or 2. Share
capital is oten divided into shareso 1 each, but shares o any
denomination can be used.
Shares are usually denominated in
sterling but need not be.
Zero value shares are not
permitted.
A company can issue shares
up to its nominal or authorised
share capital. The nominal capital
can be easily increased byshareholder resolution.
Capital can be contributed above
the nominal value o the shares
issued. The additional paid in capital
is known as share premium. It is
not normal practice to contribute
capital without an issue o shares,although it is possible.
A limited company can only
pay dividends i it has sucient
accumulated prots. It can only
repay share capital and share
premium i it ollows statutory
procedures designed to protect
the interests o the creditors.
A subsidiary company cannot hold
shares in its parent.Management and oicers
A company is managed by its
directors who are elected by the
shareholders. A director can
normally bind the company without
reerence to other directors.
Apart rom the directors the
only ocer required by corporate
law is the company secretary,
who is responsible or variousadministrative matters.
The minimum number o
directors is one, but i there is only
one director the same person cannot
also be company secretary.
Companies can be directors and
secretaries o other companies.
Filing requirements
Every company registered in the
UK must maintain a public le at
Companies House. This includes
copies o the latest set o signed
nancial statements, inormation on
directors, the company secretary
and shareholders. Failure to
maintain the le properly may result
in nes, penalties or in severecircumstances prosecution against
the directors.
Limited companies must le
their nancial statements within
ten months o their period end
(dierent rules will apply or the
rst accounting period). This time
limit is reduced to seven months or
Public Limited Companies.
Note that the fling
deadlines are due to
be reduced to nine
months and six months
or private and public
companies respectively,
or accounting periods
commencing ater
6 April 2008.
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Dissolution
A solvent company is dissolved
by a process known as members
voluntary liquidation. This requires
the shareholders to appoint a
liquidator, generally a suitablyqualied accountant, who takes
control o the company, discharges
its liabilities and distributes the
surplus to shareholders.
A ast-track process, which
avoids the appointment o a
liquidator, is also possible but this
process gives less protection to the
companys directors.
The directors o an insolvent
company should seek advice roman insolvency practitioner or a
lawyer on their options.
These include:
administrationadministrative receivershipcreditors voluntary arrangementcreditors voluntary liquidation
compulsory liquidation.
All these processes require the active
involvement o an insolvencypractitioner (generally an accountant).
Public Limited Company
A PLC (or Public Limited
Company) is a limited company
which is permitted by its
constitution to oer its shares to the
public. Its name must end in PLC.
The main dierences rom a private
limited company are:
beore a PLC can start to trade it
must have at least 50,000 worth o
shares issued and at least 25% o
the value must have been paid.
A private limited company can
have just one 1 share issued.
a PLC must have at least two
directors and a company secretary.
A private limited company may
have one director and a ormally
qualied company secretary
a PLC may be listed on the Stock
Exchange but does not have to be.
A private limited company cannot
be listed.
there is no exemption rom an
annual audit irrespective o size othe company (see page 25).
Branch
A oreign company that carries on
business in the UK through a
branch must register at Companies
House. It must le details o its
constitution, its directors, sharecapital and other matters. Each year,
it must le nancial statements (o
the whole company, not the branch).
These nancial statements can be
denominated in any currency.
I these documents are not in
English, they must be accompanied
by a certied translation.
All o these documents are on the
public record.Limited Liability Partnership
An LLP (or Limited Liability
Partnership) is a corporate body
with at least two members, each o
whom have limited liability. It is
subject to the same registration and
disclosure requirements as a limited
company, but is generally treated as
a partnership or tax purposes with
the tax liability alling on theindividual members, not the LLP.
Unlike members o ordinary
partnerships, the LLP itsel is
responsible or any debts that it runs
up, not the individual partners.
LLPs were introduced in 2001 and
although not common in the UK,they are expected to be increasingly
used or joint ventures.
Other entities
Other entities are not commonly
used by oreign businesses operating
in the UK. They include:
unlimited company: a corporate
body whose members have
unlimited liability
company limited by guarantee: acompany without a share capital
partnership: partners may be
companies or individuals and have
unlimited liability
limited partnership, which must
include at least one partner with
unlimited liability.
Useul websites
www.companieshouse.gov.uk
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Labour
Summary
the UK has a skilled workorce
traditionally in construction and
production but there has been a
long-standing shit towards
employment in the services sectorstate operated social security
system provides benets
during sickness, unemployment
and invalidity
all persons in employment,
including resident oreigners,
contribute to and benet rom
social security system
the UK enorces minimum wage
and working time legislation.
Average earnings
In April 2008, average ulltime gross
weekly earnings were 479, with
levels being highest in London at
613, 500 in the South East and
lowest in Northern Ireland at 418.
Social security costs
Employers social security costs
(known as National Insurance
Contributions) in the UK are muchlower than much o Continental
Europe and rom April 2008 are
12.8% o earnings (including taxable
ringe benets) with no upper limit.
The rate is slightly lower or those
who are contracted out o the state
pension scheme and with earningsbelow 770 per week (nil rate or
low earners).
Pension costs
Many employers pay pension
contributions or their employees.
The employers costs are generally
in the range o 4% to 15 % o the
payroll. Employer and employee
contributions are usually paid into
a pension und whose assets arekept separate rom the assets o
the employer.
Pension plans may be either
dened benet or dened
contribution plans, but dened
contribution plans are now
avoured. Pension contributions to
qualied plans are tax deductible.
The pension und pays no tax on its
income. Benets are not generallypayable until retirement age
which is generally 65 years o age.
A limited lump sum can be paid tax
ree, but other benets are taxable.
Employers with ve or more
employees are obliged by law to
oer access to a pension plan unlessthe employee is under 18 or earns
less than the lower national
insurance earnings limit (currently
105 a week).
Employers who are not exempt
must provide inormation to
employees on pension plans and
access to a plan. The employer is not
required to contribute to a plan,
but must collect contributions romemployees and remit these to the
plan within 19 days o the end o the
month in which they are deducted.
Healthcare and usual
fringe benefits
Many large employers provide
employees with private health care,
company cars, subsidised meals and
other ringe benets.
Most private healthcare insurancedoes not cover primary healthcare,
which is normally provided ree
to UK residents by General
Practitioners under the National
Health Service (NHS). Entitlement
to healthcare under the NHS does
not depend on insurance.
Paid holidays
There are eight statutory public
holidays a year, usually known as
bank holidays. Some holidays
are observed only in England
and Wales, Scotland or
Northern Ireland.
Under the Working Time
Regulations employees are entitled
to 4 weeks paid holiday. Providedprior notice is given, an employer
may speciy when this holiday can
be taken.
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Minimum wage
The statutory minimum wage is
5.73 (rom October 2008) per hour
or employees aged 22 or over;
4.77 (rom October 2008) per hour
or employees aged 18 to 21 and3.53 (rom October 2008) or
those between school leaving age
and 16-17.
The UK enorces working time
regulations which provide or a
maximum 48 hour working week.
However, a number o exceptions to
the rules exist and employees may
give their written consent to work
more hours.Recent surveys indicate that UK
employees work more hours than
their EC counterparts.
Employment protection legislation
Individual employee rights are
governed by the Employment
Rights Act 1996. The main issues
covered include:
the minimum period o notice
required or the termination ocontracts
entitlement to lump sumredundancy payments
protection against unair dismissalthe provision o written terms andconditions o employment and
establishment o appropriategrievance procedures
the minimum period o notice
required or the termination
o contracts.
There is also legislation to protect
employees rom discrimination
on the grounds o sex, race, age
and disability.
Under the Health & Saety at
Work Act 1974 employers are
responsible or providing suitable
health and saety arrangements.
Maternity leave or babies born
ater 1 April 2007, employees have
the right to leave o a year in total.
Employers may have their own
maternity pay schemes but all
qualiying employees will at least be
entitled to Statutory Maternity Pay
o 90% o earnings or six weeks
and up to 117.18 per week or aurther 33 weeks.
Paternity leave some employers
may have their own arrangements,
but providing certain conditions are
met, qualiying employees may take
leave o one or two weeks with a
maximum statutory pay o 117.18per week.
Unemployment levels
The number o people in
employment or the three months to
May 2009 was just under 29 million.
Following the recession in the
early 1990s unemployment hit
three million in January 1993.
The economic recovery gradually
reduced this level although inMay 2009 the level o
unemployment stood at 2.38
million. The Claimant count as at
June 2009 was 1.56 million people,
the highest level since June 1997.
Unions
Union power has been steadily
eroded since 1979. However, unions
still have special protection against
civil law proceedings raised againstactions taken or the urtherance o
a trade dispute. To protect these
immunities a union must conduct an
ocial secret ballot o its members,
inorm the employer o the ballot
and the result and give the employer
seven days notice o its intentions.Companies cannot discriminate
between employees on the grounds
o union membership.
Work permits
Nationals rom the EU do not
require permits to work in the UK.
Other oreign nationals generally
require work permits issued by the
UK Border Agency. A new points
based tier system has beenintroduced and specialist advice
should be sought by individuals or
route o entry into the UK.
Generally, oreign employees
contribute to and are eligible or
social security and health care.
However, in certain circumstances
they may be eligible or a limited-
period exemption rom social
security contributions.
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Financial reporting and audit
Summary
company nancial accounts are
prepared in accordance with
UK GAAP
company accounts must ollow
ormat prescribed by theCompanies Act
company accounts must be
submitted with Registrar
o Companies
company with subsidiaries must
generally prepare group accounts
Domestic corporations
Filing/publication requirements
All companies incorporated in the
UK, including Limited LiabilityPartnerships but excluding
unlimited companies, must le
annual nancial statements at
Companies House, where they are
open to inspection by the public.
The law prescribes the ormat o
the nancial statements. The law
does not prescribe the accounting
policies to be ollowed, but requires
that the nancial statements show atrue and air view. This eectively
means that they should comply
with UK generally accepted
accounting practices.
Accounting standards
UK GAAP diers rom US GAAPand international accounting
standards in a number o areas.
For example:
UK GAAP permits standards to
be overridden where it is essential
to provide a true and air view. US
GAAP does not permit standards
to be overridden
UK GAAP permits the revaluation
o assets and requires investment
properties to be held at marketvalue without depreciation. US
GAAP does not generally allow
revaluations
development costs may be
capitalised under UK GAAP
providing strict criteria are met,
those not meeting the criteria must
be expensed. US GAAP requires
most development costs to
be expensedUK GAAP requires goodwill to be
amortised over its estimated useul
lie (up to 20 years). US GAAP
does not require amortisation,
but requires an annual
impairment review
under UK GAAP changes in
accounting policies are dealt with
as adjustments to opening reserves
whilst under US GAAP a change
in accounting policy is recognised
by a cumulative change to current
year income
companies with subsidiaries are
generally required to le
consolidated nancial statements.
This does not apply to small andmedium sized groups, (medium
sized exemption ceases or
accounting periods commencing
on or ater 6 April 2008) and to
parent companies which are
themselves subsidiaries o
companies incorporated in the EU.
Small and medium sized companies
are permitted to le nancial
statements showing morelimited inormation.
International Financial Reporting
Standards (IFRS)
Under EU regulation on IFRS,
only consolidated nancial
statements o companies
incorporated in a Member Stateand which have securities listed on
a regulated market at their balance
sheet date, are required to be
prepared under EU adopted IFRS.
Other nancial statements issued by
UK companies may continue to be
prepared under UK GAAP
although a company may elect to
move to IFRS or its individual or
consolidated accounts.
IFRS applies to accounting
periods commencing on or ater
1 January 2005 or ully listed
companies and on or ater 1 January
2007 or AIM.
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Tax
Summary
The UK oers internationally
competitive rates o tax and tax
incentives. It is party to an extensive
international treaty network and
provides a avourable environmentin which to set up and carry
on business.
The main disadvantage is the
complexity o the tax legislation.
Appropriate proessional advice
should be sought prior to doing
business in the UK to ensure that
the most tax ecient structure
compatible with the commercial
requirements is achieved.
The Appendix at the end o this
section sets out more detail on tax
rates and compliance requirements.
Companies
What creates a taxable presence
in the UK?
UK resident companies are subject
to corporation tax currently at rates
o up to 28% on their worldwide
prots, with a credit oroverseas taxes.
A company is resident in the UK i
it is incorporated in the UK or i its
central management and control is
in the UK. I the company is dual
resident, the relevant tax treaty
may in some cases determineultimate residence.
Partnerships are transparent or
tax purposes, that is, partners are
taxed on their share o partnership
prots. Limited Liability
Partnerships, though corporate
entities, are generally treated as
transparent or tax purposes, ie you
would look through the partnership
and the members o the partnershipwould be taxed based on
their status.
Non-resident companies are
typically subject to corporation tax
(at rates up to 28%) on the income
and capital gains o a UK permanent
establishment (broadly, branch or
agency). They may also be required
to withhold income tax (at 20%)
on rental income, interest and
royalty income.
The UK has an extensive tax treaty
network, which can eliminate or
reduce the level o UK tax in
some circumstances.
What is the preerred
corporate structure?
Overseas companies may trade in
the UK through private limited
companies or branches. Partnerships
are sometimes used, particularly in
joint venture situations or with
proessional partnerships.
Operating through a UK
subsidiary company may result in
the prots being subject only to UK
corporation tax, whereas tradingthrough a branch may mean that
these prots are taxable in the
territory o residence as well as in
the UK. Where tax is charged on the
UK branch prots in the overseas
companys home territory, relie
rom double taxation may be
available under the terms o the
relevant tax treaty.
Planning
The choice between UK
subsidiary and UK branch will
oten depend on commercial
issues, as well as taxconsiderations in the territory
o residence o the overseas
company and the UK.
Operating via a subsidiary is
more common they are oten
easier to administer, as well as
oering better litigation
protection and commercial
advantages. However branches
can sometimes oer taxadvantages, particularly i
the operation is expected to
be loss-making in the
start-up period.
H F d C R l Fi I B i L b Fi i l i T C
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Overview o the tax system
and major tax relies
General
Corporation tax is assessed at
rates up to 28% on trading and
investment income and gains.All categories o income are taxable.
Trading income is reduced by
revenue expenses wholly and
exclusively incurred or the
purposes o the trade. Certain types
o expenditure are specically
excluded rom being deductible.
Tax depreciation
Accounting depreciation is not
deductible rom prots. Tax relieis provided on investment in
qualiying plant and machinery
through capital allowances.
The previous system o Industrial
and Agricultural Building
Allowances is being phased out over
a transitional period. From the tax
year 2011-12, no allowances will be
available on buildings. Relie is
given or the amortisation o
goodwill and intangible assets
created by the company or acquired
rom an unrelated third party on or
ater 1 April 2002, but equally gains
on such intangibles will be subject
to tax on disposal.
Dividend incomeFrom 1 July 2009, all dividends will
be taxable, subject to a range o
exemptions. Previously dividends
rom UK companies were exempt
and dividends rom oreign
companies were taxable, subject to
credit or oreign tax.
There is one set o exemptions or
small companies and a dierent
range o exemptions that apply to
medium and large companies.
Controlled foreign companies
The aim o the legislation is to
prevent the avoidance o UK
corporation tax on the prots o
low taxed oreign resident, but
UK controlled, companies, by
attributing those prots to the UK
parent company. There are a range
o exemptions although some o
these will cease to apply rom
1 July 2009 (subject to transitional
rules) owing to the introduction o
the dividends exemption.
Research and development relief
Enhanced relie is provided in
respect o qualiying research anddevelopment expenditure. Relie is
provided on qualiying expenditure
(consumables, sotware, sta costs,
externally-provided workers and
subcontract costs) incurred on
research and development activities
within the scope set out by the
Department or Business, Enterprise
& Regulatory Reorm and HM
Revenue and Customs (HMRC).
Dierent rules and rates o relieapply or large, and small and
medium-sized enterprises (SMEs),
with more generous relie available
under the SME scheme.
175% relie is available on
qualiying revenue expenditure
incurred by SMEs, or expenditure
incurred on or ater 1 August 2008
and 130% relie or expenditure
incurred on or ater 1 April 2008 onqualiying revenue expenditure
incurred by large companies.
Loss-making SMEs can elect to
surrender their R&D-related tax
loss in return or a repayable
tax credit.
Capital gainsCorporate capital gains are
chargeable to corporation tax at the
same rates as income. Gains are
computed by deducting the cost (or
market value at March 1982, i the
asset was held by the company at
that date) plus indexation allowance
rom sales proceeds. A range o
relies and exemptions may apply.
Capital gains on qualiying assets o
the trade may be deerred againstthe tax base cost o qualiying
replacement assets acquired within a
our year period commencing one
year beore and ending three years
ater the sale o the original asset.
Gains on the disposal o a
substantial shareholding (broadly,
greater than 10%) in a trading
company will qualiy or exemption
i certain conditions are met.
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The tax eects o various capital
extraction methods are set out
as ollows:
Interest Withholding tax at 20%
applies to payments, though this
may be reduced or eliminated underthe terms o the relevant tax treaty.
Clearance rom the UK taxation
authorities is required beore treaty
relie can be claimed. A corporation
tax deduction should in principle be
available or the UK interest-paying
company, though this is subject to
complex anti-avoidance rules,
especially in the ollowing areas:
deerral o relie or late paid
interest between connected parties(although this has been relaxed in
many cases rom 1 April 2009)
permanent denial o relie under
thin capitalisation rules where
debt nance is provided on a
non-arms length basis between
related parties
denial o relie or interest on loans
or unallowable purposes
rom 1 January 2010, the tax
deduction or intra-group interest
costs in the UK or large
enterprises will generally be
restricted to the groups net
external interest.
Dividends No withholding tax
is applied to dividends rom UKcompanies and no tax deduction
is available to the dividend-paying
company.
Management charges
No withholding tax applies.
Commercially justiable, arms
length management charges
should provide a tax deduction
or the paying company, provided
the relevant transer pricing rules
have been considered as
previously mentioned.
Royalties Withholding tax at
20% applies, which may be reduced
or eliminated under the relevant tax
treaty. A corporation tax deduction
should be available or justiable
arms length charges, subject to rules
relating to the deerral o relie or
late paid royalties.
Indirect taxes and duties
Value Added Tax
VAT is a transaction tax. The
majority o transactions involving
the supply o goods, the provision
o services, and importations
will be subject to the tax.
Broadly, VAT is levied on the
value added at each stage o the
production and distribution supply
chain. Registered businesses act as
collection points or HM Revenue
& Customs, paying over the VATlevied on their customers ater
deducting a credit or the VAT they
pay to suppliers. Complications
arise because not all transactions are
subject to the tax, and those that are
may be subject to dierent rates. In
addition, not all o the VAT incurred
by a business can be reclaimed.
Making taxable supplies
A business will have a liability toregister and account or VAT i the
value o its taxable supplies exceeds
the prevailing registration limit. For
these purposes a business can be an
individual, a partnership (including
a limited liability partnership),
a trust, an incorporated business,
or a branch o an overseas
corporate entity.
The establishment o either a place
o business or an operation that has
Planning
A key question is to determine
the optimal nancing route or
a subsidiary. This will depend
on a number o actors,
including the rates o tax in
overseas territories. There are
no minimum capital
requirements in the UK,
and companies will oten seek
to use debt nance to und the
subsidiary, due to the fexibility
this oers. Anti-avoidance
will however require careul
consideration, and this routemay not always maximise
tax eciency.
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the technical and human resources
necessary or making and receiving
supplies in the UK will, generally,
indicate a potential liability to
register. However, a complex set o
place o supply rules mean that
even without such an establishment,transactions can still be liable to
VAT in the UK. These rules dier
depending upon whether the supply
is one o goods or services.
It is thereore possible that an
overseas company, which does not
have an establishment or any other
presence in the UK or corporation
tax purposes, may nevertheless have
a liability to account or UK VAT
by virtue o the transactionsundertaken in the UK or with
UK customers.
VAT RegistrationRegistration is compulsory or any
businesses whose taxable supplies
have exceeded the registration limit
in the last 12 months (or less i the
taxable supplies have been made or
a period o less than 12 months),
or at any time i the business has
reasonable grounds or believing
that the limit will be exceeded in
the next 30 days. The current
registration limit is 68,000.
It is possible to deregister or VAT
where the value o taxable supplies
all below a deregistration threshold.
The threshold is currently 66,000.
Administration
VAT returns are generally led on a
quarterly basis, although it is
possible to do so each month. The
VAT returns, together with any tax
due, must be submitted within one
month o the relevant period end.
Additional declarations may have
to be made i goods are acquired
rom or despatched to other
European Union (EU) countries.
Such reporting is required in all EU
Member States. It is anticipated that
similar reporting will be required
rom 2010 throughout the EU or
certain services.
Special anti-avoidance reporting isalso required i certain electronic
goods are supplied in the UK.
Applicable rates
With eect rom 1 December 2008
the standard rate o VAT has been
temporarily reduced rom 17.5%
to 15%. The current intention is
that it will remain at 15% until
1 January 2010, at which point it
will revert back to 17.5%.
Planning
Simplication measures exist
which are intended to minimise
the VAT burden on overseas
businesses. However, these
measures oten relate to speciccircumstances and so may not
have general application.
An early review o the nature
o the intended supply can
potentially avoid a VAT cost,
or a liability to register or
VAT in the UK.
PlanningWhere a new business
operation or branch has yet to
reach the registration threshold,
there may be situations where it
will be benecial to consider
registering or VAT voluntarily.
This would assist with cash
fow as it would enable VAT
incurred on set-up costs to
be recovered.
Planning
Monthly accounting or VAT
is o particular relevance i the
net position will be a repayment
o VAT. In order to speed the
repayment process up, you do
not have to wait or the duesubmission date.
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A reduced rate o 5% exists or
certain supplies which are generally
regarded as having a social benet.
The zero-rate is applicable to
certain goods and services, such as
ood (not catering), books,the construction and sale o private
housing, public transport, childrens
clothing and certain charitable
activities. However, this list is
not exhaustive.
Some supplies are exempt rom
VAT. These are typically nancial
and insurance transactions, as well
as certain supplies o land.
Also included are most supplies o
education, health, and welare.
As with the zero-rate, no VAT is
levied on these transactions.
However, unlike the supply o
zero-rated goods and services,
exempt transactions preclude the
recovery o VAT on related
purchases (subject to a de minimis
limit). As such, exempt transactions
can lead to a restriction o VAT
recovery and result in an absolutecost or businesses.
Importation
Goods which are imported rom
outside the EU are subject to VAT
at the rate which would be
applicable i they were sold in the
UK. Relie rom import VAT maybe available where goods are
temporarily imported, with the
intention o being removed rom the
UK within a specic time. The
payment o import VAT is due at
the time and place o entry into the
UK. However, payment can be
delayed until the 15th day o the
ollowing month i a duty deerment
account is used. In addition todeerring the payment o VAT
(and Customs Duty), the deerment
account helps to ensure that goods
awaiting clearance are not delayed
pending the payment o taxes.
In order to obtain such an
account, a nancial guarantee will
have to be provided to HM Revenue
& Customs. The required level o
guarantee is related to the expectedlevel o imports.
A credit or VAT paid at
importation can be claimed by the
business on its VAT return, subject
to the normal rules.
Customs Duty
Along with import VAT, CustomsDuty is levied on goods brought in
to the UK rom outside the EU.
The level o duty is determined by
the Customs tari classication and
will vary subject to what is being
imported and the origin o the
goods. This is a common tari
across the EU, and as such goods
alling within the same tari
classication will be taxed at thesame rate regardless o the EU
Member State into which they are
imported. Once Customs Duty has
been paid, the goods are in ree
circulation within the EU, and no
urther duty is payable on any
subsequent movements withinthe EU.
Valuation
The value on which duty is based
should be the open market export
price o the goods rom the supplier
(as i between unrelated businesses),
plus insurance and reight charges to
the EU border. This is commonly
known as the CIF value.
Planning
A simplied import VAT
accounting scheme (SIVA) can
be used to reduce the level o
nancial guarantee. The scheme
is available to businesses with a
good compliance history.
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Excise Duty
Certain items such as tobacco,
alcohol, and oils are liable to Excise
Duty. Generally, the duty liability
is due prior to the goods being
released or retail sale. Businesses
that trade in excisable goods can
apply or an excise duty and VAT
suspension arrangement, aording
the business a potentially signicant
cash fow or absolute benet.
In contrast to the EU governed
Customs Duty, Excise Duty is a
national tax. It is due on imports
rom outside the EU and on the
intra-EU movement o goods into
the UK, unless they are deposited in
an approved excise warehouse or a
specic relie is available.
Stamp Taxes
Stamp Duty is charged on transers
o shares at a rate o 0.5%.
Stamp Duty Reserve Tax (SDRT)
is charged on agreements to transer
shares and is cancelled by thepayment o Stamp Duty on
completion o the transer.
Stamp Duty Land Tax (SDLT) is
charged on documents transerring
real estate at rates between 1%
and 4%, depending upon the
consideration and status
(commercial or residential) o the
property, and is charged at a rate o
1% on the net present value o
rentals payable under a lease.
Individuals
UK resident individuals are subject
to UK tax on their worldwide
income and capital gains, with some
important exceptions. There are
separate taxes on income and
capital gains.
The tax year or individuals is the
year ending on 5 April.
When is an individual liable to
UK tax?
An individuals exposure to
UK tax is dependent on whether
the individual is resident, ordinarily
resident and/or domiciled in
the UK.
Tax treaties can aect theresidence position o impatriates,
and the UK tax liability o
non-residents.
Individuals not previously
resident in the UK will generally be
treated as resident where:
they are physically present in the
UK or 183 days or more in any
tax year (ending 5 April)
their visits to the UK have become
substantial (an average o 91 days
per year, measured over our years)
and habitual.
Days o arrival and departure are
counted or the purpose o these
tests i the individual was present in
the UK at midnight on that day.
Ordinary residence is mainly
relevant to individuals coming to the
UK or employment. Individuals
will be regarded as ordinarily
resident in the UK i they come to
the UK to take up employment
expected to last three years or more,
or with the intention o taking up
permanent residence.
Domicile is relevant to individuals
with oreign income or gains.Establishing the domicile o an
individual is not a simple matter,
however broadly speaking
individuals are domiciled in the
country in which they regard as
their permanent home, or example,
the country to which they
eventually intend to return, even i
in the distant uture.
Planning
Customs duty is generally an
absolute cost to the importer
and as such it is imperative to
consider the tari classication
and, in particular, the value o
the goods to which the tari
will be applied prior to
importation and, preerably,
prior to the creation o the
supply chain. Whilst the
classication is subject to very
rigid rules, the legislation
relating to valuation allows or
certain costs to be removed or
added, so planning is importanti unnecessary duty costs are to
be avoided.
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What are the administrative
requirements on arriving in or
departing rom the UK?
HM Revenue & Customs (HMRC)
must be notied by individuals
arriving and leaving the UK. Failure
to le the appropriate orms in thecorrect ormat and manner may lead
to penalties being charged.
How is the oreign income o
impatriates taxed?
Some oreign income o impatriates
is not taxed in the UK unless it is
remitted to the UK, even i the
individual is resident.
Non UK resident individuals are
subject to income tax on incomearising rom sources in the UK.
For example, employment income
in respect o work perormed in the
UK is potentially subject to UK
income tax. Relie may be available
under a double tax treaty in
some circumstances.
From 6 April 2008, UK resident
but non-domiciled or not ordinarily
resident individuals are taxed or
any given tax year on their
worldwide income and capital gains
unless they meet certain exemptions,
or they make a claim to be taxed on
the remittance basis (paying an
annual charge o 30,000 i they are
long-term resident). The remittance
basis is extremely complex withuncertainty over how the legislation
is applied in certain circumstances.
Thereore advice should be sought
on claiming the remittance basis.
Overseas earnings o remittance
basis users will not be subject to UK
taxation provided certain criteria are
met and the earnings are not
remitted to the UK.
What are the employers
responsibilities in relation to UK tax?
Wage withholding tax (Pay As You
Earn or PAYE) applies to all wages
and salaries paid in the UK and also
to wages and salaries paid outside the
UK i the individual is employed bya UK company. Employed by is
not the same as working or. The
test is whether the UK company
bears the risks and rewards o the
individuals labour.
It is the employers responsibility
to account or all necessary
withholding taxes and to make
all relevant returns o the same
to HMRC. There are set orms and
procedures which must be adheredto, and penalties may apply i this is
not done.
In certain circumstances it is
possible to enter into modied
payroll arrangements with HMRC
or companies using oreign
employees in the UK. These
arrangements can lessen the
administrative burden on
the company. A separate option
available in limited circumstances is
voluntary PAYE. This process
allows the individuals to account or
withholding taxes themselves (rather
than their employer).
In both modied and voluntary
arrangements, this is a complex area
and we suggest that appropriate
advice is sought.
In addition to withholding taxes
on cash remuneration given to
employees in the UK, withholding
taxes also apply to expenses and
non-cash benets provided to
employees. There are also specic
complex reporting requirements
which must be met.
Please reer to the Appendix or
rates o withholding tax.
There is a national minimum wage
which applies to legally employed
individuals in the UK, and this is
policed by HMRC. Furthermore
there are complex rules regarding
other pay, benets and legal
entitlements, and it is recommended
that legal advice is sought
concerning any o these matters.
Planning
The tax status o the individuals
should be careully reviewed,
in particular non-domiciled
individuals, as this may give
opportunities to manage their
liability to income tax.
Full advantage should be
taken o concessions under
double tax treaties.
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NICs or the rst 52 weeks that the
employee is in the UK.
An individual who is liable to
make National Insurance
Contributions (NICs) must register
or a National Insurance number.They can obtain this by contacting a
Jobcentre Plus. Please reer to the
Appendix or contact details.
Work arrangements may be
structured to enable certain expense
payments to be provided to
employees without tax charges
arising, or example, or
certain accommodation andsubsistence payments.
Tax returns
Most employees whose income is
mainly wages subject to PAYE
should not have a balance due at the
end o the tax year and are not
required to le a tax return. This is
unlikely to apply to oreign
personnel working in the UK.
Individuals, including employees,
with more complicated aairs are
generally required to le a tax
return. Tax returns can either be
led on paper or electronically.
Tax returns led by paper are dueby 31 October ollowing the end o
the tax year, and tax returns led
electronically are due by 31 January
ollowing the end o the tax year.
Social security taxes
Employees are liable to social
security taxes (National Insurance
Contributions) on their earnings.
Please reer to the Appendix
or rates.Employees sent to work in the
UK or limited periods rom other
countries in the EU or rom
countries with which the UK has
Social Security Agreements may
continue to pay social security taxes
in their home countries, and not UK
social security taxes.
In certain circumstances, oreign
employers sending employees to the
UK may not be required to pay
Planning
The structuring o employee
benets should be careully
considered to ensure that they
are provided on the most
tax-ecient basis, or example,
through the use o share
incentive schemes orpension payments.
Planning
Assignments o individuals
should be reviewed to
determine whether they can be
engaged on a sel-employed
basis to achieving SocialSecurity savings.
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Detailed acts on the UK tax system
A Companies
Tax rates (2009-10)
The large company rate o
corporation tax is 28%
A reduced rate o corporation tax
o 21% applies to smallercompanies. This will increase to
22% rom 1 April 2010
The large company rate applies to
stand-alone companies with
taxable prots o 1.5m. The small
companies rate applies to stand-
alone companies whose taxable
prots are below 300,000.
Prots between 300,000 and
1.5m are eectively taxed at amarginal rate o 29.75%
The prot limits are divided by
the number o active worldwide
associated companies and are
pro-rated or accounting periods
o less than 12 months.
Payment and tax return dates
Companies are required to le
returns 12 months rom the end o
the accounting period.
Companies paying tax at the large
companies rate must pay
corporation tax by quarterly
instalments on the 14th day o
the seventh, tenth, thirteenth and
sixteenth months rom the start
o the accounting period.Other companies must pay
corporation tax nine months and
one day ater the end o the
accounting period.
Capital allowance rates (2009-10)
Allowances are available on
qualiying plant and machinery at
the ollowing rates:
annual writing down allowance
(standard rate) 20%annual writing down allowance
(special rate) 10%
annual investment allowance
(AIA) (on rst 50,000 o
qualiying expenditure) 100%
rst year allowance on balance
ater AIA (qualiying plant &
machinery) 40%
energy saving or
environmentally benecial plant
and machinery 100%
new electric cars and low
carbon dioxide emission
cars 100%
The special rate is applicable to
long-lie assets, specied integral
eatures within buildings, andexpenditure on cars with CO2
emissions over 160g/km. Writing
down allowances are available on a
reducing balance basis.
Small and medium-sized enterprise size limits or R&D relie
The limits are:
From 1 August 2008
Employees ull-time equivalent 500
Turnover 100 million
Balance sheet gross assets 86 million
For a company to qualiy as an SME, the employee condition must be met together with
either the turnover or balance sheet condition.
Small and medium-sized enterprise size limits or transer pricing
The limits are:
Employees ull-time equivalent 250
Turnover 50 million
Balance sheet gross assets 43 million
Research and development enhanced
relie (2009-10)
Large enterprises 130%
Small and medium-sized
enterprises 175%
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B Indirect Taxes and Duties
VAT thresholds
Registration threshold 68,000
(taxable supplies)
De-registration limit 66,000
(taxable supplies)
VAT rates
Standard rate 15% (until 1 January
2010, 17.5% thereater)
Reduced rate 5%
Zero rate 0%
Certain goods and services are
exempt rom the tax
SDLT rates
Residential property transers:
up to 125,000 0%
125,000 to 250,000 1%
250,000 to 500,000 3%
over 500,000 4%
Commercial property transers:
up to 150,000 0%
150,000 to 250,000 1%
250,000 to 500,000 3%
over 500,000 4%
The threshold or SDLT on
residential property transers has
been increased rom 125,000 to
175,000 or a period beginning
3 September 2008 and ending on
31 December 2009 to provide a
stimulus to the UK housing market.
C Individuals
Tax rates
For the tax year 2009/10, each
individual has an exemption
(personal allowance) o 6,475.
This exemption is not available to
individuals who claim the
remittance basis o taxation.
From the tax year 2010/2011 it
has been proposed that the personal
allowance is withdrawn orindividuals with income over
100,000. Any basic personal
allowance will be reduced by up to
100%, at the rate o 1 or every 2
o income above 100,000. Based on
the current personal allowance o
6,475, this would mean the ull
allowance would be extinguished at
an income level o 112,950.
The tax rates on income over that
amount are:up to 37,400 at 20%
over 37,400 at 40%.
Husband and wie are taxedseparately. From the tax year
2010/2011 it has been proposed that
a new rate o 50% will be introduced
or income over 150,000.
Capital gains are taxed at 18%,
but with a lower rate o 10%
applying to the rst 1m o certain
gains. The rst 10,100 o gains in a
tax year is tax-ree.
Social security ratesOn earnings rom 5,715 to
43,875 per year at 11%
On earnings over 43,875 per year
at 1%
Employers pay 12.8% with no
upper limit
Sel-employed individuals pay social
security taxes at a maximum o
3,178 per year, plus 1% on income
above 43,875 per year.To obtain a National Insurance
number, individuals should
telephone Jobcentre Plus to arrange
an interview on T +44 845 600 0643.
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28 D i b i i h U i d Ki d
ContactsI you require any urther inormation, please do nothesitate to contact a member o our International
Business Centre in the United Kingdom:
UK IBC Director
Jatin Radia
T +44 (0)20 7728 2320
Ejatin.m.radia@gtuk.com
National Leadership Board
David Maxwell
T +44 (0)20 7865 2109
E david.maxwell@gtuk.comIBC Assistant
Anabela Goncalves
T +44 (0)20 7865 2147
E anabela.goncalves@gtuk.com
Birmingham
David White
T +44 (0)121 232 5272
E david.p.white@gtuk.com
Cardiff
Geraint Davies
T +44 (0)2920 347528
E geraint.davies@gtuk.com
Gatwick and London
Stephen Weatherseed
T +44 (0)207 728 3001E stephen.weatherseed@gtuk.com
Glasgow
Andrew Howie
T +44 (0)141 223 0697
E andrew.howie@gtuk.com
Ipswich
James Brown
T +44 (0)1473 298815
Ejames.r.brown@gtuk.com
Leeds
Tim Lincoln
T +44 (0)113 200 1521
E tim.lincoln@gtuk.com
Liverpool
Carl Williams
T +44 (0)151 224 7203
E carl.williams@gtuk.comLondon Thames Valley
Amrish Shah
T +44 (0)1753 781198
E amrish.shah@gtuk.com
Manchester
Nick Farr
T +44 (0)161 953 6305
E nick.arr@gtuk.com
Milton Keynes
Paula Simpson
T +44 (0)1908 359503
E paula.e.simpson@gtuk.com
Oxford
Tracey James
T +44 (0)1865 799953E tracey.d.james@gtuk.com
Sheffield
Craig Burton
T +44 (0)114 262 9709
E craig.burton@gtuk.com
Southampton
Stephen Mills
T +44 (0)2380 381180
E stephen.mills@gtuk.com
2009 Grant Thornton UK LLP. All rights reserved.
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a limited liability partnership.
Grant Thornton UK LLP is a member irm within
Grant Thornton International Ltd (Grant Thornton International).
Grant Thornton International and the member irms are not
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irms independently.
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