UK companies

The United Kingdom despite being a relatively small Island was once the largest empire in history encompassing almost a quarter of the world’s land surface until the late nineteenth and early twentieth century’s. This domination has left its mark worldwide in the form of language, culture and legal systems.

Historically the UK has a very rich history filled with battles and wars both at home and abroad. Internal disputes helped to develop the parliamentary system, in particular that unlike much of the rest of Europe Royal Absolutism did not prevail and the British constitution would develop on the basis of constitutional monarchy and parliamentary systems. Britain’s strong military (for which it retains a reputation today), along with its large navy and interest in discovery led to the acquisition and settlement of numerous overseas colonies particularly in North America. The North America colonies broke away from Britain during the American War of Independence and went on to become the USA. The UK through its military conquests became the principal navel and imperial power of the 19th century with London being the largest city in the world. It was not until after 1875 that the UK’s monopoly became challenged by the likes of Germany and the USA. Britain still posses fourteen Overseas Territories including Bermuda, the British Virgin Islands, the Cayman Islands and Cyprus all well know jurisdictions for company offshore formation. The UK also has three crown dependencies being Jersey, Guernsey and the Isle of Man each with strong reputations in the offshore business environment.
Britain has always been a major force in Europe. After the end of the Second World War the UK was one of the Big Three Powers and was an original signatory to the Declaration of the United Nations. The UK then became one of the five permanent members of the United Nations Security Council. In 1973 the UK joined the EEC (European Economic Community) and was one of the twelve founding members in 1992 when this became the EU (European Union). The UK plays leading roles in the EU, UN and NATO as well as being an influential member of other European organizations such as G7, G8, G20, the OECD, the WTO, the Council of Europe and the OSCE. In addition to this Britain also has a close relationship with both the United States and France and shares weapons and technology with both countries.
As well as world domination physically, the UK has also dominated intellectually. Many of the world’s modern technologies including the telephone and computer can be attributed to British inventors. Britain remains at the forefront of this industry coming after only the United States and China for scientific research papers. Britain has also contributed largely to the world through theology and literary works with many world renowned writers that continue to impress today giving the UK the right to be described as a ‘cultural superpower’. The universities of England are among the top universities in the world repeatedly having four rank in the top ten and Cambridge and Oxford continually battling for the top spot.
London is the capital city of England and along with New York and Tokyo is one of the three command centres of the global economy. New York and London are the world’s largest financial centres and London has the largest city GDP in Europe. Heathrow airport which is one of three major airports located in London has the most international passenger traffic of any airport in the world. Edinburgh which is the capital of Scotland is also one of the largest financial centres in Europe.
The UK’s economy is the sixth largest in the world and the third largest in Europe. Despite pressure from Europe Britain refused to bow down and did not adopt the Euro as its national currency instead choosing to remain with Pound sterling which is the world’s third largest reserve currency after the US Dollar and the Euro. Tourism is very important to the British economy with London being one of the most visited cities in the world. The industrial revolution started in the UK and it dominated international trade well into the 19th century and manufacturing remains a significant part of the economy today. Areas of particular importance to the UK economy are the automotive industry, the aerospace industry and the pharmaceutical industry. Agriculture is intensive and efficient by European standards. The UK is rich in a number of natural resources.

Corporate Advantages of the UK

As the UK is one of the major powers in Europe and has a very respected business infrastructure it makes this a popular choice when considering company formation when a certain degree of respectability is required. The UK is not considered a tax haven like some of the other more popular destinations for Incorporating an offshore company, however the UK has been reducing its corporate tax and introducing more favorable regimes when it comes to attracting foreign investment including formation of UK companies. – Read more regarding the UK tax and other advantages to UK offshore formation 
The Capital Gains Tax regime in the UK is quite complex. There are also introducing new regimes concerning Capital Gains Tax and Stamp Duty Land Tax. Assistance should always be sought when dealing with UK tax planning– for further information on capital gains tax please follow this link – for further information on Stamp Duty Land Tax 

Another distinct advantage to the UK is its double taxation treaties network. The UK has over 120 existing double taxation treaties with more under negotiation. This makes it one of the widest double taxation networks in the world. – Click here for further information on double taxation treaties with the UK 

UK Registry and Laws
Companies formed in the UK are registered with Companies House under the Companies Act 2006 Law. The UK has had its company registration system since 1844. Companies House has developed a modern system and this can be used electronically for speed and efficiency. Companies can be registered within the day.
There are numerous filing requirements for companies and property in the UK which can be daunting, but Chesterfield can take the burden and ensure that everything is filed correctly. – for more information about company or property registration please follow this link

UK Banking

Banking in the UK has been around since the 17th century. The Industrial Revolution and England’s dominance of the seas led to London’s early domination of world banking. This has continued to the modern day with London being an important financial hub. 

UK Banking has robustly coped well with the global crisis. Britain also boasts of many international banks on its shores.
The UK is a popular choice for banking due to its reputation and expertise. – Read more about UK banks 

UK VAT
 
The UK is the world’s sixth largest economy and has a reputation for a modern and respected tax regime. VAT returns can be done and paid online therefore it is a very current system in line with advancing technology.

VAT was introduced to the UK in 1973 after the UK joined the European Economic Community. Registration is compulsory for businesses whose taxable turnover exceeds £77,000. This is the highest VAT registration threshold in the world. Businesses that do not exceed this threshold may choose whether or not to register. – More information about UK VAT 

UK Structures

The usual choices when it comes to setting up a UK business are as follows;
  • Sole Traders 
  • Business Partnerships 
  • Limited Company 
  • UK Trusts
Read here more information about UK structures
 
The Limited company is the more popular choice as this offers limited liability and the other two choices do not. Sole Traders and Business Partnerships are liable principally to income tax whereas a Limited Company pays corporation tax .
A Limited company can also be used for several purposes such as a UK Holding Company, UK Royalty Company or a UK Agency Company. These have various advantages. Please note though that the rules concerning UK taxation are very complex. Chesterfield are on hand to give expert structural advice prior to the incorporating of your offshore company in order that you may use your company to its full advantage.

UK Intellectual Property

Intellectual Property Law or IP law as it is more often referred to is the Legal entitlement in connection with creative ideas and works such as literary works, artistic works, designs and inventions. 

The UK are seeking to expand Intellectual Property growth and have introduced a Patent Box which is a regime which is specifically designed to give tax relief to profits made from Intellectual property. – More information regarding the Patent Box please follow this link.

UK Intellectual Property Law is in line with the European Union and the UK joined the World Intellectual Property Organization in 1970 and is party to numerous treaties. A recent decision that London should host a new patent court shows an exceeding amount of confidence in the strength of the UK’s Intellectual Property regime. -  More information regarding UK Intellectual Property

Residency in the UK

The rules concerning residency in the UK are changing . The government is in the process of introducing a series of conclusive tests to determine UK residency. – for further information regarding the UK residency test please follow this link

Chesterfield and the UK

Chesterfield have had an office in London for many years. Our staff are expert at UK Corporate Services and related services and are able to assist on many facets including dealing in UK property acquisition and management .
Chesterfield can help you every step of the way from initial structuring including UK Company tax structuring and UK Company Asset Protection. To Incorporating a UK Offshore Company, Opening a Bank Account, Providing UK Corporate Services including dealing with the UK Companies House and any UK VAT Registration

Capital Gains in the UK

Capital Gains is a tax on any gain or profit made usually when an asset is sold.

Typically in the UK if you pay Income Tax on the gain or profit you make from an asset generally you may not have to pay Capital Gains Tax.

Overseas assets may be liable to Capital Gains Tax if your resident in the UK, and you may be liable to gains arising both in and outside the UK. Typically these would include property abroad or shares in a foreign company.

In the UK you do not usually have to pay Capital Gains Tax when you sell your main residence.

Currently the UK Capital Gains Tax regime applies to UK residential individuals or companies, however due to an increasing amount of pressure on the government to deal with tax avoidance they have introduced measures as part of their 2013 Finance Bill to extend the UK Capital Gains Tax regime. Gains made on the disposal of UK residential property by non UK resident non natural persons may now be subject to Capital Gains Tax. Non natural persons will include companies. This is hand in hand with new proposals concerning Stamp Duty Land Tax measures to be introduced for residential properties worth in excess of two million – for further information on the SDLT proposals

For gains made on or before 22 June 2010, Capital Gains Tax is charged at a rate of 18%. From 23 June 2010 onwards, the rates are:

  • 18% and 28% for individuals although there is an annual tax-free allowance (the Annual Exempt Amount), which for 2012 to 2013 is £10,600 for individuals and £5,300 for most trustees
  • 28% for trustees or personal representatives of someone who has died
  • 10% for gains qualifying for Entrepreneurs’ Relief

Entrepreneurs' Relief allows individuals and some trustees to claim relief on qualifying gains. The relief applies for the years 2008-09 onwards. There is a maximum lifetime limit of Entrepreneurs' Relief you can claim. This relief can be made on the disposal of any of the following:

  • all or part of a business
  • the assets of a business after it has stopped trading
  • shares in a company

Typical UK Structures

The UK Government has taken steps such as lower corporate tax rates and simplifying rules and regulations in order to attract investment into the UK financial sector. The usual three choices when it comes to setting up a UK company are as follows;

  • Sole Trade
  • Business Partnership
  • Limited Company
  • Each have their own various advantages and disadvantages.

Sole Trader

This generally means that you are running your business as an individual, although you are allowed to hire staff. The advantages of this are that you can keep all the business profits after the tax has been paid on them and any decisions will be instant. However, a distinct disadvantage of Sole Trader companies is that there is no limited liability, this means that you will be responsible for any losses that the company makes, also the business will discontinue in the event of the owners retirement or death.

From a tax point of view a sole trader will initially qualify for tax benefits such as a write off of expenses. However profits on Sole Traders are taxed as income so on £35,000 you may be paying 40% and this may increase to 50% when this becomes above £150,000.

Business Partnership

The business partners share responsibility for the company. Profits are shared between the partners and each partner must pay the tax on their share of the profits. Again this does not have limited liability and therefore you will be responsible for any losses and debts of the company. Perhaps more importantly you will also be responsible for any debts that have incurred due to your partner(s) and so it is important that you have financially sound partners and that you have trust in the person(s) that you are doing business with. Again profit will be taxed as income and there are various other aspects to consider such as National Insurance.

Limited Company

A limited company is run by the directors. There are numerous legal and accounting responsibilities and paperwork involved in being a director of a UK company which can be off putting, but Chesterfield will be able to completely take care of this for you. The main advantage to a Limited company is that it does have limited liability, this means that the wealth of the company is separate from the wealth of the owner and they will not be accountable for the company’s debts unless any wrong doing can be proven. Limited companies are liable for corporation tax in the UK which in a recent announcement is planned to be reduced to just 21% by April 2014 which is the lowest rate of any major western economy and significantly lower than the US, France and Germany. Income tax is only paid if the company pays you a salary so this has much more attractive tax appeal than Sole

Traders or Partnerships.

Limited Companies can be used for specific purposes such as the following;

- UK Holding Company

This is where a UK Holding Company is established to hold shares in one of more other companies. The Holding company will then receive dividends paid by those subsidiaries.

Advantages to setting up your holding company in the UK are

  • that the UK is a full EU member with an impeccable reputation and excellent business infrastructure
  • it has a low corporation tax when compared to other reputable EU jurisdictions of between 20% - 26%
  • It has the widest network of double taxation treaties with over 120 currently in force and others under negotiation
  • It has no restrictions on the movement of capital
  • If the subsidiary is incorporated in an EU country and, if the EU parent subsidiary directive applies then dividends paid to a UK holding company will not have any deduction for withholding tax in the country from which the dividend is paid. Where this directive does not apply the dividend may qualify for a reduced or nil rate of withholding tax under one of the UK’s double taxation treaties
  • UK law provides relief for foreign tax suffered, either through EU directive or under the terms of one of its treaties or unilaterally. This may result in no corporation tax by the holding company being due
  • Dividends received by a UK company from another UK company are exempt from corporation tax
  • There is no withholding tax on dividends paid by the holding company
  • There is exemption from capital gains tax on the disposal of the shares in the subsidiary by the holding company

- UK Royalty Company

The UK belongs to the EU Interest and Royalties Directive. This directive specifies that if a UK company holds at least 25% of the share capital of a royalty paying company then there will be no withholding tax as long as the Royalties are paid from another EU company. If this directive is not applicable then withholding tax may still be reduced or eliminated through one of the numerous double taxation treaties that the UK holds. Over forty of these treaties reduce withholding tax on royalties to zero. The UK also has generous research and development relief. In addition to this in the 2012 budget the UK government announced the Patent Box which will come into effect April 2013. This initiative means that corporation will be much lower on profits earned from Patents, you can expect to pay only 10% come April 2017.

- UK Agent Company

The concept for this is that a UK company may be used as a nominee or agent for an undisclosed principal often being an offshore company or a company in a low tax jurisdiction. Often there will be an agreement in place with the offshore company as the principal and the UK Agency company representing the principal who will adhere to the terms of this agreement. The undisclosed offshore company may then conduct business, but the UK agency company name and details may appear as the face of the enterprise. This structure can be very useful for confidentiality.

For this reason the UK is a popular choice for establishing an Agency Company as the UK has a respectable and professional reputation throughout Europe.

The UK company may deal with all the invoicing and the larger share of profit would belong to the principal offshore company with the UK company taking a commission. The taxable profits in the UK would be on this aspect. Annual accounts must be filed and these may need audited. Care needs to be taken to comply with the laws and regulations in all jurisdictions

Conclusion

The UK government has certainly made many moves in order to make the UK a more popular destination for company incorporation and it would seem that this is already working with an increase in UK company registrations. Please note however, that the rules concerning many aspects of the above UK taxation when it comes to structuring a UK Offshore Company are very complex, but as you can see there are many advantages to this when the UK tax system is used correctly. Chesterfield are on hand to give expert structural advice prior to registering a UK offshore company in order that you may use your company to its full advantage regardless of the jurisdiction or complexity of set-up.

UK Banking

Banking is thought to have started in the UK in the 17th century when goldsmiths began to accumulate large amounts of stocks of gold following the dissolution of the English monasteries by Henry VIII. Around 1650 a cloth merchant called Thomas Smith opened the first provincial bank in Nottingham. The Bank of England was founded shortly after in 1694. The bank of Scotland was opened in 1695 and although established soon after the Bank of England was fundamentally different whereas the Bank of England was specifically formed to finance defense spending by the English government, the Bank of Scotland was formed by the Scottish Government to support Scottish business and was prohibited from lending to the government without parliamentary approval.

The Industrial Revolution and England’s dominance in seaborne shipping led to merchant banks being formed to facilitate trade growth and account for London’s early domination in the world of banking. Today London is one of the financial hubs of the world with over 500 different banks in the city alone. The UK is home to some of the top earners in finance and the industry accounts for about one tenth of the Country’s economy. Studies have shown that the continuation of International Banking in London is positively related to the experience in the local market and the size of local operations.

Clearly the UK’s long history and professional reputation attract banking and investment from all over the world.

Chesterfield have a close relationship with several UK banks including the most reputable and long standing High Street banks and are able to arrange onshore and offshore bank accounts at various locations .

If you would like to find out more about opening a business account with a British Bank or any other bank please follow the link below or call us on our offices Telephone Number: 44 20 7097 1385

UK Intellectual Property

Intellectual Property law or IP law as it is more often referred to as the Legal entitlement in connection with creative ideas and works such as literary works, artistic works, designs and inventions. The purpose of UK Intellectual Property law is ultimately to encourage innovation and creativity by protecting the works of the individual and giving commercial value. Theft of a person’s idea or copying of a person’s work is not generally taken as seriously as theft of a person’s TV or phone, hence the need for IP law to protect this.

In the UK there is the Intellectual Property Office which was established in April 2007 as the government body responsible for Intellectual Property rights in the UK. Part of its responsibilities are examining issuing or rejecting patents and maintaining registers of intellectual property including patents, designs and trade marks in the UK.

The World Intellectual Property Convention of 1968 defines IP as including;

  • Literary, artistic and scientific works
  • Performances of performing artists, phonograms and broadcasts
  • Inventions in all fields of human endeavour
  • Scientific discoveries
  • Industrial designs
  • Trademarks, service marks and commercial names and designations
  • Protection against unfair competition, and
  • All other rights resulting from intellectual activity in the industrial, scientific, literary or artistic fields

UK Intellectual Property Law is in line with the European Union and the UK joined the World Intellectual Property Organization in 1970 and is party to numerous treaties. There has recently been a deal in which a new patent court will be based in London. This makes it simpler for companies in the UK to defend their patent rights and business ideas in Europe only having to go to court once instead of fighting their case in each European country. The decision that London should host this new court shows an exceeding amount of confidence in the strength of the UK’s Intellectual Property regime.

The UK are also looking to make their tax system a more appealing place for innovation and growth. As such they have introduced the Patent Box regime which is specifically designed to give tax relief to profits made from Intellectual property. This regime applies a 10% corporation tax rate to profits attributed to patents by April 2017. This will occur in stages: in April 2013, 60% of the benefit will be phased in, increasing by 10% per tax year until April 2017, at which point the fully reduced 10% rate will be effective.

The Patent Box regime includes income sources from the following IP’s for the purposes of this relief;

  • Proceeds or royalties from the sale or licensing of the patent or patented invention
  • Proceeds from the sale of goods (e.g. spare parts) which incorporate the patented invention or which are designed to be incorporated into the patented invention
  • Damages and settlement funds from patent infringement actions.

Intellectual Property is an evolving field whose influence on technology, social development and Economic growth is immense. Certain legal entities that are active internationally will not allow Intellectual Property to be sold in countries that do not have adequate IP laws to protect the owner’s right. The UK are serious about their IP laws and are a very respected jurisdiction when it comes to this. They are also introducing favorable regimes such as the Patent Box and modernizing Intellectual Properties systems to encourage investment and trade into this area.

UK Proposals for Taxation on Property

During this year’s budget the Chancellor announced a three pronged strategy to eliminate the use of companies to avoid paying Stamp Duty Land Tax.

It is said that these measures are likely to affect many previous arrangements that were put into place for reasons other than the avoidance of SDLT.

The three measures are;

  • a new SDLT rate of 15% for single residential properties purchased for over £2 million by companies and certain other entities (referred to as “non-natural persons”) and applicable to all transactions where the contract is entered into on or after 21 March 2012
  • a new “annual residential Property Tax” on single residential properties worth over £2m held by companies and other “non-natural persons”. This tax is worked out using a banding system based on the value and is applicable to all properties valued at £2 million or more on 1st April 2012 or at acquisition if later.
  • a new capital gains tax (“CGT”) charge on disposals by non-UK resident companies of such UK residential properties worth over £2 million

A consultation paper was released to provide clarity to the annual charges and capital gains charges. The consultation period ended on the 23 August 2012. The final form of these tax charges are dependent on the outcome of the consultation.

It is expected that exemption from the CGT can be obtained by claiming Principal Private Residency relief, meaning that the property is occupied by a beneficiary. There may be an exclusion for companies holding land solely as Trustee, although where the property is held as bare trustee the new charge may depend on the identity of the beneficial owner. Exclusions may also apply to charities and some property development companies.

The rate of the new CGT is to be announced in the UK’s budget 2013. So consideration should be given by foreign companies owning UK property worth over £2 million whether to remove the property before April 2013.

Draft legislation is available only for the capital gains tax at the moment.

UK Registry

Companies House

There are more than three million companies registered in the UK with more than 400,000 companies being incorporated each year and the department responsible for their company registration is Companies House. The UK has had its company registration system since 1844. The company registration matters come under the Companies Act 2006 Law.

Companies House systems are fully electronic allowing fast submission and processing. Company registration can be done same day. It is important to note that Companies House records are accessible by the public. There is a requirement to file an annual return each year with Companies House with respect to the company, please note that annual tax returns must be filed aswell with the HM Revenue and Customs.

Land Registry

The land registry deal with ownership and interest in land in the UK. This is governed by the Land Registration Act 2002 and the Land Registration Rules 2003. The purpose of this is to have a simple and modern registration laws which allows the registry to have a more complete picture regarding the title to land showing any rights and interest affecting it

UK Residency Test

The UK authorities are changing the rules when it comes to tax residence in the UK. The current rules are considered complicated and unclear. The intention of the new rules which were originally to come into force in April 2012, but due to complications raised as part of the consultation phase are now to take effect from April 2013 is make clear rules to establish if a person is classed as resident in the UK for tax purposes.

The proposals centre around a series of conclusive tests in order to establish residency. Please see below a summary of these, please note that until the Finance Bill 2013 receives Royal Assent these may be subject to further amendment.

Automatic Residence Test

First Automatic Overseas Test – if you were resident in the UK for one or more of the three tax years preceding the tax year and you spent fewer than 16 days in the UK in the tax year. Second Automatic Overseas Test – you were resident in the UK for none of the three tax years preceding the tax year, and you spent fewer than 46 days in the UK in the tax year.

Third Automatic Overseas Test – you worked full time overseas for the tax year without any significant break from that overseas work and you spent fewer than 91 days, excluding deemed days, in the UK in the tax year and the number of days in the tax year on which you work for more than three hours in the UK is fewer than 31.

If you meet any one of the above tests then you ought not to be considered resident in the UK for the tax year. However, if you do not meet any of these tests then you should look at the automatic UK tests.

First Automatic Residence Test - You spend 183 days or more in the UK in the tax year.

Second Automatic Residence Test – this is where you live in a home in the UK for a period of more than 90 days or you are present in that UK home on at least 30 separate days during the tax year. Whilst you have this UK home you are still UK resident if there is a period of 91 consecutive days when you have no overseas home or have one or more homes overseas in none of which you are present in for more than 30 days during the tax year. If you have more than one home in the UK, you should consider each of those homes separately, so if you spend time at each home which do not exceed 30 days even though you have spent more than 91 days in homes in the UK you do not meet this automatic residence test.

Third Automatic Residence Test – you work full time in the UK for 365 days or more with no significant break from UK work and all or part of that work period falls within the tax year. Please note that this full time work part of the test does not apply if you are an international transportation worker, meaning that your job consists substantially of duties performed on board a vehicle, aircraft or ship as it makes international journeys.

If you have not met any of the automatic overseas tests and you did not meet any of the automatic residence tests then you should look at the sufficient ties test.

Sufficient Ties Test

This looks at the following areas;

  • Family – meaning husband, wife, civil partner, child, parent or grandparent, brother or sister
  • Accommodation – if you have a place to live that is available to you for a continuous period of 91 days or more during that year.
  • Work – you will have a work tie if you work more than three hours a day in the UK on 40 days or more.
  • Number of days spent in the UK – if you have a 90 day tie for a tax year if you have spent more than 90 days in the UK in either or both the previous two tax year
  • Whether you spend more time in the UK than any other country.

Please note that time spent in the UK due to exceptional circumstances may not count towards your total day count. Exceptional circumstances are generally circumstances out with your control, for instance if you are unable to travel due to sickness or accident.

If you work voluntary and have no contract this does not count as work for the purposes of these tests.

To help digest the above information please see the below further summarized for ease;

  • Few than 45 day – always not resident
  • 45-89 days resident if four connecting factors otherwise not resident
  • 90-119 days resident if three or more connecting factors otherwise not resident
  • 120-182 days resident if two or more connecting factors otherwise not resident
  • 183 days of more always resident

You can also be entitled to split year treatment if you leave the UK to work full time overseas or vice versa.

If you are unsure if you meet any of the above tests then advise should be taken as to what your residency is.

UK Trusts

Trusts in the UK fall under the Trustee Act 2000 which regulates the duties of the Trustees in English Trust Law, though English Trust Law dates back a lot longer than that. English Trust Law is actually the original and foundational trust law in the world dating back to the 12th Century during the crusades when lords leaving the country would leave their castles and lands in trust to another to look after until their return only to find a fight on their hands when they returned to get their property back.

UK trust law was amended in April 2010 to allow more flexibility. Whereas before there was a restriction on the accumulation of trust income meaning that income had to be distributed to the beneficiaries after a set period, trusts were now allowed to roll the income through the lifetime of the trust. The lifetime of a trust was also expanded from 80 to 125 years. This brought the UK up to date with trusts available in other jurisdictions. Trusts established before this new legislation will not automatically have the new rules apply and so persons with older trusts should seek advice whether to set up new trusts to take advantage of new legislation.

Advisors to geographically diverse families may normally recommend that a trust be established in a major financial centre with strong legal and regulatory framework. The UK has long been a choice for this reason as it offers this along with professional expertise and an efficient banking system which has an understanding of trusts.

The UK offers a wide variety of Trusts;

  • Bare Trust – each beneficiary has an immediate right to both capital and income
  • Interest in Possession Trust – beneficiaries have a right to all trust income
  • Discretionary Trust – Trustees choose whether and to whom to pay
  • Accumulation Trust – Trustees re-invest
  • Mixed Trust – combines different types of Trusts
  • Settlor-interested Trust – the Settlor may continue to benefit from assets in the Trust
  • Parental Trust for Children – set up for children under the age of 18 by their parents with special tax rules
  • Non-resident Trust – UK trust, but managed from abroad
  • Vulnerable Trust – set up for disabled people or children who have lost a parent with special tax rules

A discretionary trust is of particular interest in the offshore environment as the trustees are the legal owners of any assets. This provides a level of distance between the original Settlor and Potential Beneficiaries meaning that tax implications arising from the existence of the trust may be beneficial.

Discretionary Trusts in the UK are liable for Income Tax on income and often capital received by the trust and it is the Trustees responsibility to declare and pay this. Barring the first £1,000 which has a special rate the Income Tax rates are between 42.5% - 50% although special rules apply to Trusts with vulnerable beneficiaries. Tax rules surrounding trusts are complex and it is advisable to seek expert advice based on individual circumstances

The UK trust laws have been replicated in many jurisdictions as these are considered a firm reputable base for Trust law. This is the reason that UK trusts are still popular today.

UK Double Taxation Treaties

Double Tax Treaties are agreements entered into between two or more countries or states designed to prevent tax being deducted twice where the same income is taxable in all states. These also provide rules concerning treatment of cross-border trade.

There are more than 2,500 Double Tax Treaties worldwide and the UK has one of the largest networks of treaties with over 120 currently in force and further treaties being negotiated. The UK has a strong commitment to encourage cross-border economic activity and to promote international trade.

A full list of double tax treaties currently in force with the UK can be found below;

Algeria Faroes Lebanon Sierra Leone
Antigua and Barbuda Fiji Lesotho Singapore
Argentina Finland Libya Slovak Republic
Armenia France Liechtenstein Slovenia
Australia Gambia Lithuania Solomon Islands
Austria Georgia Luxembourg South Africa
Azerbaijan Germany Macedonia Spain
Bahrain Ghana Malawi Sri Lanka
Bangladesh Greece Malaysia Sudan
Barbados Grenada Malta Swaziland
Belarus Guernsey Mauritius Sweden
Belgium Guyana Mexico Switzerland
Belize Hong Kong Moldova Taiwan
Bolivia Hungary Mongolia Tajikistan
Bosnia Herzegovina Iceland Montserrat Thailand
Botswana India Morocco Trinidad and Tobago
Brazil Indonesia Namibia Tunisia
Brunei Iran Netherlands Turkey
Bulgaria Iceland New Zealand Turkmenistan
Burma Isle of Man Nigeria Tuvalu
Cameroon Israel Norway Uganda
Canada Italy Oman Ukraine
Cayman Islands Ivory Coast Pakistan USA
Chile Jamaica Papua New Guinea U.S.S.R
China Japan Philippines Uzbekistan
Croatia Jersey Poland Venezuela
Cyprus Jordan Portugal Vietnam
Czech Republic Kazakhstan Qatar Zaire
Denmark Kenya Romania Zambia
Egypt Kiribati Russia Zimbabwe
Estonia Korea St Christopher (St. Kitts)- Nevis
Ethiopia Kuwait Saudi Arabia
Falkland Islands Latvia Serbia & Montenegro

Many of these agreements have been in existence for in excess of fifty years.

Further to these agreements the UK has also signed further treaties with Brunei Darussalam, India, Germany, China, Ethiopia and Brazil which are not yet in force.

United Kingdom VAT

The United Kingdom is the world’s sixth largest economy and has a reputation as a modern and respected tax regime. VAT returns can be done and paid online therefore it is a very current system in line with advancing technology.

The standard rate of VAT increased from 17.5% to 20% on the 4 January 2011 which applies to most goods and services. There are also reduced rates of 5% and zero rates which usually benefits when buying for children or home energy and food.

VAT was introduced to the UK in 1973 after the UK joined the European Economic Community. VAT is levied on most goods and services provided by registered businesses in the UK and some goods and services imported from within the EU. Under EU law the standard rate of VAT in any EU state cannot be lower than 15%. Each state can have up to two reduced rates of at least 5% for certain goods and services. Any temporary reduced of VAT in the public interest must be approved by the European Council first.

VAT Registration is compulsory in the UK for businesses whose taxable turnover exceeds £77,000. This is the highest VAT registration threshold in the world. Businesses that do not exceed this threshold may choose whether or not to register.

The VAT aspects of transactions and other transactions involving EU countries are becoming more and more complex. Anyone not familiar with the rules should seek specialized VAT advice and guidance.

Chesterfield have employees who are expert in the field of VAT.

Our VAT Services include;

  • Registration or de-registration
  • Completion and submission of VAT returns
  • Preparation and submission or recapitulative statement (EC Sales Lists)
  • VAT advice
  • Liaising with VAT authorities with regards to enquiries

If you would like further information on VAT in the UK or any other location please follow the link below or call us on our offices Telephone Number: 44 20 7097 1385

UK Benefits

The UK is genuinely trying to attract foreign investment back to the country. One of the main ways in which it is looking to do this is by a reduction in corporation tax. Many persons when looking to set-up an offshore company consider corporation tax as one of their numerous considerations. The UK recognized that it was losing out on a lot of revenue through corporate formation in countries such as Ireland and Luxembourg and has planned to cut its corporation tax to just 21% by April 2014. Whilst this is still higher than Ireland it does make the UK the lowest rate of any major western economy significantly lower than the US, France and Germany.

Other benefits of forming a company in the UK include;

  • UK tax exemptions for foreign dividends and capital gains from substantial shareholders
  • The UK has one of the widest networks of double tax treaties with over 120 currently in force and others under negotiation
  • Absence of withholding taxation on dividends paid to offshore companies or trusts
  • Generous audit exemptions
  • Non minimum paid up share capital
  • No capital duty
  • Flexible company law
  • Highly respectable corporate image
  • EU but non-UK nationals can use UK companies to override domestic anti-avoidance legislation under Community Law principles

The UK has recovered well from recent global financial concerns and by retaining its National currency has not tied its fate into many countries in the EU like many of its major counterparts have done. London is still considered one of the world’s largest financial centres and the UK’s unwritten constitution means that law develops from practice which has distinct advantages when it comes to flexibility. Please do not hesitate to contact us if you would like more information regarding opening a UK offshore company.