Published on and written by Cyril Jarnias
The UK offers an attractive tax environment for businesses, with competitive tax rates and a stable regulatory framework. Here is a comprehensive overview of British corporate taxation, from registration formalities to reporting obligations, including international agreements.
A Favorable Tax System for Corporations
The British tax system includes several taxes and levies applicable to businesses:
Corporation Tax
Corporation Tax is the main tax for businesses in the UK. The current rate is set at 25% for profits exceeding £250,000, and 19% for profits below £50,000. A marginal rate applies between these two thresholds.
VAT (Value Added Tax)
VAT applies to most goods and services, with a standard rate of 20%. Some products benefit from reduced rates (5% or 0%). Businesses with turnover exceeding £85,000 must register for VAT.
National Insurance Contributions
Employers must pay National Insurance contributions on their employees’ salaries. The main rate is 13.8% above a certain threshold.
Business Rates
This local tax applies to commercial premises occupied by the business. The amount depends on the rental value of the property.
Registering with the British Tax Authorities: How-To Guide
To operate legally in the UK, every business must register with the British tax authority, HM Revenue & Customs (HMRC). Here are the main steps:
1. Company registration with Companies House
2. Obtaining a tax identification number (UTR – Unique Taxpayer Reference)
3. Corporation Tax registration within 3 months of starting operations
4. VAT registration if turnover exceeds the mandatory threshold
5. Registration as an employer for National Insurance contributions
These procedures can be completed online through the UK government website. It is recommended to seek assistance from a local accountant to ensure proper completion.
Tax Obligations: A Schedule to Strictly Follow
UK businesses must comply with several reporting and payment obligations:
Corporation Tax Return
To be filed within 12 months of the end of the fiscal year. Tax payment is due 9 months and 1 day after closing.
VAT Returns
Generally quarterly, to be submitted and paid within one month after the end of the quarter.
National Insurance Returns
Monthly or quarterly depending on the size of the business.
Annual Accounts
To be filed with Companies House within 9 months of the end of the fiscal year.
Failure to comply with these obligations can result in significant financial penalties. Therefore, it is crucial to anticipate and plan for them carefully.
Tax Treaties: Avoiding Double Taxation
The UK has signed tax treaties with many countries to avoid double taxation for businesses operating internationally. These agreements notably allow:
– Determining in which country profits are taxable – Reducing or eliminating withholding taxes on dividends, interest, and royalties – Facilitating information exchange between tax authorities
For example, the Franco-British treaty stipulates that profits of a French company are only taxable in the UK if it has a permanent establishment there.
These treaties are particularly advantageous for international groups, allowing them to optimize their overall tax burden.
The UK Compared to Other Offshore Jurisdictions: A Strategic Choice
Compared to other jurisdictions known for tax attractiveness, the UK offers several advantages:
– A transparent and stable tax system – An extensive network of tax treaties – A strong international reputation – Access to the European market (despite Brexit) – A favorable business environment
While tax rates are not the lowest, they remain competitive compared to many developed countries. Moreover, the UK offers legal security and credibility that some tax havens lack.
However, other jurisdictions like Ireland (12.5% CT) or the Netherlands (favorable tax treatment for intellectual property) may prove more attractive in certain specific cases.
The choice of location will therefore depend on the company’s overall strategy, beyond just tax aspects.
Good to Know:
The British tax system is constantly evolving. It is recommended to stay informed of legislative changes and regularly consult with a local tax expert to optimize your situation.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
