Doing Business in UK - June 2009

8/3/2019 Doing Business in UK - June 2009

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1 Doing business in the United Kingdom

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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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Tax Contacts

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

[email protected]

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
mailto:[email protected]:[email protected]


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Tax Contacts

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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Tax Contacts

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
http://www.communicaid.com/http://www.communicaid.com/


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Tax Contacts

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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Tax Contacts

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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Tax Contacts

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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Tax Contacts

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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Tax Contacts

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.
http://www.dti.gov.uk/http://www.hmrc.gov.uk/http://www.hmrc.gov.uk/http://www.dti.gov.uk/


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Tax Contacts

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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Tax Contacts

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
http://www.companieshouse.gov.uk/http://www.companieshouse.gov.uk/


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Tax Contacts

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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Tax Contacts

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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Tax Contacts

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 Contacts

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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Tax Contacts

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.


19/28

H F d C t R l t Fi I t B i L b Fi i l ti T C t t


20/28






Tax Contacts

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.

Home Foreword Country Regulatory Finance Imports Business Labour Financial reporting Tax Contacts


21/28






Tax Contacts

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.



22/28






Tax Contacts

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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Tax Contacts

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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Tax Contacts

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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Tax Contacts

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.



26/28






Tax Contacts

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%



27/28






Tax Contacts

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.



28/28

28 D i b i i h U i d Ki d

yprofile

g yenvironment

pentities

p gand audit

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

[email protected]

National Leadership Board

David Maxwell

T +44 (0)20 7865 2109

E [email protected] Assistant

Anabela Goncalves

T +44 (0)20 7865 2147

E [email protected]

Birmingham

David White

T +44 (0)121 232 5272

E [email protected]

Cardiff

Geraint Davies

T +44 (0)2920 347528

E [email protected]

Gatwick and London

Stephen Weatherseed

T +44 (0)207 728 3001E [email protected]

Glasgow

Andrew Howie

T +44 (0)141 223 0697

E [email protected]

Ipswich

James Brown

T +44 (0)1473 298815

[email protected]

Leeds

Tim Lincoln

T +44 (0)113 200 1521

E [email protected]

Liverpool

Carl Williams

T +44 (0)151 224 7203

E [email protected] Thames Valley

Amrish Shah

T +44 (0)1753 781198

E [email protected]

Manchester

Nick Farr

T +44 (0)161 953 6305

E [email protected]

Milton Keynes

Paula Simpson

T +44 (0)1908 359503

E [email protected]

Oxford

Tracey James

T +44 (0)1865 799953E [email protected]

Sheffield

Craig Burton

T +44 (0)114 262 9709

E [email protected]

Southampton

Stephen Mills

T +44 (0)2380 381180

E [email protected]

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Documents

Doing Business in UK - June 2009