UK legal and accounting and tax considerations in 2023
It is essential that our Clients understand the accounting and tax obligations before deciding whether the country will be an optimum choice to set up business. Healy Consultants will be able to assist our Clients if they require clarification regarding their annual reporting obligations.
Corporation Tax considerations
- Limited companies set up within UK are subjected to a Corporation Tax on profits, at a standard rate of 20%. If the company is based in UK, the Corporation Tax will be imposed on its worldwide profit;
- Earnings made by the branch office of a foreign company are subject to taxation at the standard rate of 20% for its profits gained from activities in UK;
- If the company’s taxable profit is below £1.5 million, it is required to pay the corporation tax 9 months and 1 day after the end of their accounting period. If the taxable profit is more than £1.5 million, corporation tax will be paid in installments;
- The corporation tax rate will decrease to 19% from the financial year beginning 1 April 2017 and to 18% from the financial year beginning 1 April 2018.
- The standard VAT rate in UK is 20% and it is chargeable on the supply of most goods and services found in UK. If the value of VAT taxable turnover exceeds £83,000, registration for VAT with HMRC will be compulsory;
- VAT returns must be completed at preset intervals. Smaller companies can apply for annual returns while bigger firms may be required to file monthly returns.
Withholding Tax considerations
- In UK, there is no withholding tax on dividends. However, the withholding tax for both interest and royalties is 20%, unless reduced by a double taxation treaty. This tax is applicable to payments to nonresidents and non-corporate residents;
- UK has signed double taxation treaties with numerous countries to reduce the withholding tax rates of dividends, interest and royalties. Some major countries involved include Australia, China, India, France, Singapore, and the United States. Full list of the countries.
Healy Consultants Compliance Department will assist our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparation of financial accounting records and iv) preparing forecasts, budget and sensitivity analysis.
Legal and compliance considerations
Before our Clients establish a business in UK, it will be beneficial for them to have a good foundation knowledge on the various legal and compliance regulations that are in place. If necessary, Healy Consultants will provide legal solutions for our Clients should they face any problems regarding these considerations.
- All employees are required to have an employment contract with their employer, with the contract clearly stating the i) employment conditions ii) rights iii) responsibilities and iv) duties;
- Employers are required to pay at least 1% of the employees’ gross salaries into their workplace pension;
- Employees who work 5 days a week are entitled to 28 days of paid leave;
- Employers are required to pay a minimum hourly wage of £7.20 to workers who are aged above 25 and this rate changes every October;
- When dismissing an employee, employers are required to have a valid reason such as i) incapability or poor conduct at work or ii) redundancy. The employee whose employment is terminated will usually be given a week prior notice;
- The government of UK bars discrimination in matters of employment on the grounds of personal characteristics such as gender, sexual preferences, ethnicity or race, religion and political or union affiliation. Discrimination can include i) not hiring someone due to personal characteristics preferences ii) selecting a particular person for redundancy and iii) paying someone lesser for no apparent reason.
- Under the Consumer Protection from Unfair Trading Regulations, it is against the law for traders to use misleading actions such as i) convincing consumers to make transactions which they would not have made in the first place or ii) giving false information about the characteristics of their product and services;
- Similarly, traders are also not allowed to make misleading omissions such as i) hiding material information in an unclear or ambiguous manner or ii) omitting material information that will prevent an average customer from making an informed decision;
- Under the Unfair Commercial Practices Directive, consumers are protected from a blacklist of 31 practices that are presumed to be unfair trade practices;
- The UK government allows a transfer pricing adjustment only if it increases taxable profits or reduces a tax loss. You will be exempted if you are a i) small firm with less than 50 staff and an annual turnover of less than €10 million or ii) medium firm with less than 250 staff and an annual turnover of less than €50 million or a balance sheet total of less than €43 million.
- All UK companies are required to file annual returns to maintain their “good standing”. Our Clients will be required to produce certificates of good standing when opening a corporate bank account. This document will contain information re i) directors ii) company secretary iii) incorporation date and iv) registered address;
- Companies are required to file annual financial statements which are delivered to Companies House;
- A branch office in UK is required to notify Companies House as and when the following changes occurs: i) company details, ii) directors and iii) branch details.
Other company regulation
- The Data Protection Act 1998 prevents companies from using personal information about individuals without their permission.