UK taxation provisions:
The United Kingdom is not an offshore jurisdiction. Tax legislation sets conventional (medium to high) tax rates applicable to income of corporations and private individuals.
Corporate tax is imposed on income of resident companies derived in the UK and in any other country, net of tax paid abroad. Corporate tax is charged on taxable income from trading operations, provision of services and capital gains net of expenses incurred during the course of business. The prevailing rate of corporate tax is 20% (applicable from 1st April 2015).
Dividends distributed to UK companies are generally tax exempt. Dividends paid to UK companies by other companies (local or foreign) are tax exempt irrespective of minimum ownership period requirements and/or size of interest.
Capital gains generated from control of an interest (over 10%) is tax exempt subject to certain legal conditions. Capital gains generated from ownership of material interest (over 10%) in the capital of the company is tax exempt subject to certain conditions.
Corporate tax is imposed on non-resident companies that are subject to income derived from their operations within the UK.
Tax withholding at source:
Dividends distributed by UK companies are tax exempt at source.
Interest paid by UK companies to non-residents is taxed at source at the rate of 20% except when reduced rates are applied by Double Tax Treaties or where EU Interest and Royalties Directives provide exemption.
Royalties paid by UK companies to non-residents are taxed at source at the rate of 20% except when reduced rates are applied by Double Tax Treaties or where EU Interest and Royalties Directives provide exemption.
Value Added Tax (VAT):
The standard rate is 20%. In some cases a reduced rate of 5% or exemption is applied according to provisions of the VAT Law. VAT registered companies must be registered by the UK Tax Office.
Companies must register if:
- the value of transactions subject to VAT exceeds £82,000 in any 12 month period;
- the company ships EU goods to the UK of a value in excess of £82,000;
- the company expects turnover in excess of £82,000 within 30 days.
Voluntary VAT registration is applied to companies with a turnover below £82,000.
The maximum rate of personal income tax is 45%.
Taxation of LLP:
Profit derived by a partnership from operations outside of the UK is tax exempt, except when members of the partnership are UK residents. Members of the partnership are liable to pay taxes on income derived from participation in the partnership.
Taxation of LP:
Scottish partnerships are not subject to UK taxation. Partners are liable to pay personal tax at their place of residence, physical persons pay income tax and legal persons pay corporate tax.
Double Tax Treaties:
The United Kingdom maintains Double Tax Treaties with over 100 countries including Germany, France, the USA, Poland, Cyprus, China, Russia, Kazakhstan, Ukraine, Latvia, Estonia, Moldova, etc. Double Tax Treaties do not apply to dormant companies. LLP and LP partnerships comprised of non-resident partners and LTD companies submitting dormant accounts are not eligible to use the Treaties signed by the UK.
For more information on the incorporation and administration of companies in the UK or companies registered in other jurisdictions, please contact us.