Incentives for Incorporating in the United Kingdom

Forming a company in the United Kingdom (UK) is a popular way for many entrepreneurs to gain access to the European markets whilst also adding a reputable jurisdiction to its name. The UK provides many benefits and incentives to entrepreneurs and it is important to properly evaluate the relevance of each factor to a business and the entrepreneur, before deciding where to incorporate.

 

Location

 

Located in the western side of Europe, an island country submerged between the North Atlantic Ocean and the North and Celtic Seas, the United Kingdom is a sovereign state that provides an ideal link to the world's biggest market, Europe. At the same time, the UK allows a reach to both East and West, with Asia and the United States.

 

Despite being a small state of only 244,820km2 the UK remains a world leader in business, with an outstanding amount of global companies holding their European head quarters in London. As a result, the UK provides a market, linked to Europe and the world, where major players in the global markets are both present and easily accessible.

 

Located in the northern hemisphere, with GMT time zone, major nations are all accessible within a normal business day. Time differences reach at highest 8 hours, for China and Singapore, and 5 hours for New York. The only nation that may be considered out of reach in a business day is Australia, with a time difference of almost 12 hours.

 

Transport

 

Entrepreneurs who choose to not only incorporate in the UK but also undertake business from the nation, will have access to a vast array of transport options, both for people and for products.

 

All business cities, and even small villages, are interlinked by railways which are serviced by three major rail companies, and allow business people to travel quickly from city centre to city centre. If doing business from Manchester, for example, where office space and costs are generally cheaper than the capital city, London, a business remains accessible internationally. Whether by the train linking London and Manchester directly in two and a half hours or by Manchester's International Airport, that services flights to the US, Asia and evidently Europe, the UK's key cities are well equipped to provide all the transport needs required.

 

Furthermore, if operating in London, there are 2 international airports to choose from -Gatwick and Heathrow- which are of the biggest and most interconnected airports in the world. Beijing is a ten hour flight away, New York and Dubai are both 7 hours, and most European cities are within 1 to 4 hours flight.

 

If undertaking business in trade, being an island the UK benefits from ample access to the sea and has over 100 different sea ports which allow important trading with surrounding nations from all areas of the UK, and is the busiest seaport in Europe. Many companies service these ports, ensuring competitive pricing and timely deliveries, as major European ports can be reached within the same day or at latest the next day. Similarly, road systems are developed and can link to anywhere in Europe through the Channel Tunnel. Paris, Brussels and Amsterdam are within 6 hours drive away, excluding time spent in the tunnel, which means that trucks can typically collect, deliver and return items within a same day.

 

Culture

 

With a population of over 61 million, the UK is one of the most densely populated nations, with a massive workforce concentrated in the London region. The population is ethnically and culturally diverse, with statistics showing that 90% of the population see themselves as British, depicting the openness of the UK to the global community. This enhances the UK both culturally as well as business-wise, in being a nation where the understanding of many world cultures can be grasped rapidly or accommodated within a business. Being ranked as the 10th freest economy in the world, further supports this claim.

 

As an added bonus, the UK's national language is English, which is also known as being the language of business around the globe, and therefore gives the United Kingdom communication advantages in relation to other nations where English may be the workforce's second language, if at all.

 

The UK workforce has been ranked as the second best in Europe after Denmark, by the World Bank's analysis of where it is best to employ workers. This may result from the top quality education system provided in the UK, which is world renowned, having many of the top universities in the world located around the UK, such as famous names like Oxford and Cambridge (Times Good University Guide). Furthermore, UK universities are sought after and attended by students from around the world (British Council). In this way, entrepreneurs in the UK can expect a workforce of internationally educated and multiculturally aware candidates.

 

The skills of the workforce do not stop at university education but are followed on in the business culture of enhancing each and every employee throughout their career, which is supported by the United Kingdom's high Human Development Index.

 

Policy and Taxes

 

The UK is a stable jurisdiction in which to conduct business (Transparency International), and has a secure legal and regulatory system through which changes must be consulted on various levels. In this way, changes in business policies are duly processed so that businesses do not face surprise changes in how they are expected to function or the legal regulation they face. Companies are governed by the UK Companies Act of 1985 and 1989.

 

In terms of tax, the UK tax policies are comprehensive and relatively low considering it is a developed country. There is a maximum corporate tax rate of 28%, and companies with taxable profits under GBP50,000 have 0% charged on the first GBP10,000 and 23.75% on the next GBP40,000. Small enterprises are charged at a rate of 19% on income below GBP300,000 so long as profits are below USD1.5million. In terms of personal taxes, the highest rate taxed is 40%, one of the lowest rates in Europe. Value Added Tax (VAT) exists and is charged between 0% and 17.5%.

 

International companies that incorporate in the UK benefit from the 33 Double Tax Treaties they have established with other nations such as Germany, China, Japan and the US. Double Tax Treaties ensure that companies are not taxed twice on the same set of profits, by 2 separate nations' tax systems.

 

As a general rule, companies in the UK must file annual accounts that are submitted at the end of ever financial year to the Companies House and the Inland Revenue.

 

Current Business

 

Business in the United Kingdom is thriving, with a total GDP of about USD2.3 trillion in 2008 (International Monetary Fund), despite the financial crisis. The United Kingdom prides itself in prestigious rankings such as being the easiest place in Europe to set up and run a business (World Bank). It takes approximately thirteen days to incorporate a company in the UK, which is significantly lower than the 32 day European average (World Bank). This may explain why the majority of companies have their European headquarters in the United Kingdom.

 

Technology and innovation play major roles in the UK economy and the United Kingdom has claimed over twenty Nobel prizes in life sciences, which may be attributed to the excellent research culture and facilities in British universities. The UK also boasts having the most 'efficient' research base, delivering about 16 research papers for every USD1 million spent in the field, almost double that in the US. Despite this, the United Kingdom comes 2nd worldwide, after the US, for being a productive place for innovation.

 

With the world's biggest financial center and Europe's best city for business (European Cities Monitor) as its capital city -London, it is no surprise the UK reaps investments from overseas, and in 2008 hosted 501 new investments. Such foreign trust is enhanced with a British culture of entrepreneurship as the OECD notes that the United Kingdom has the least barriers to entrepreneurship in the world.

 

The United Kingdom's currency is the Pound Sterling (GBP), which is one of the most traded currencies in the world, and an extremely stable foundation for business, as various other currencies follow the trend of the GBP.

 

There is significant potential for business in the UK in the coming years, with the Olympic Games 2012 being held in London, the UK's capital city. There are important contracts open which add to billions in budget, and with the significant influx of tourists expected, business will be thrilled with the newly accessible market.

 

Company Incorporation

 

As previously stated, it is extremely fast and easy to set up a company in the UK, and the average incorporation time is 13 days (World Bank). Furthermore, it is also easy to open a corporate bank account in top international banks after incorporating a UK company, as UK companies are well-respected globally and highly trusted.

 

Companies incorporated in the United Kingdom are governed by the UK Companies Act of 1985 and 1989 and must register their directors and shareholders on a public registry. It is a general requirement for incorporation to have a minimum of one director who is ordinarily a UK resident. Often entrepreneurs who wish to incorporate overseas do not have a director from the country of incorporation and do not wish to introduce new members to their board or staff. However, there are professional services firms who offer offshore company incorporation and can provide a proxy director, who will legally be names director but will not, by contract, act as director in the firm. In this way, incorporating a company in the United Kingdom is accessible to most entrepreneurs.

 

Living

 

It is well-known globally that the United Kingdom provides an extremely high quality of life. Infrastructure for housing is developed and available at all levels, from budget to luxury living. The education system is world renowned, with some of the top schools in the world in the UK. Furthermore, there is an abundance of boarding schools with top education systems, which make privileged education accessible no matter where in the UK a family may live.

 

The health system is publicly-funded, but private institutions exist as well for those who may have private insurance or are happy to pay. From a financial perspective, the personal taxes to which UK residents are liable are considerably lower than some other European counterparts, such as France.

 

 

Overall, people expatriating to the United Kingdom will enjoy a unique and abundant cultural heritage whilst also benefitting from many modern and exciting entertainment options. London is a centre for arts and theatre, and this culture spreads throughout the UK as most museums are publicly-funded and provide free entry for the public.