Taxes and accounting

Het Verenigd Koninkrijk staat zevende op de ‘Ease of Doing Business’ ranking van de Wereldbank, ruimschoots vóór Nederland. Waar krijgt u mee te maken als u er zaken gaat doen? Een overzicht van de belangrijkste aandachtspunten.

Taxes and Accounting

In this page: Corporate Taxes | Accounting Rules | Consumption Taxes | Individual Taxes | Double Taxation Treaties | Sources of Fiscal Information

Corporate Taxes

Tax Base For Resident and Foreign Companies
A company is resident taxpayer if it is incorporated in the UK or if its place of central management and control is in the UK.

 

A UK-resident company is subject to corporation tax on its worldwide profits with credit given for most overseas taxes paid. A non-UK-resident company is taxed only on locally-sourced profits and chargeable gains of its permanent establishment (PE) in the UK as well as any investment activity made with locally-sourced income. Any foreign-sourced profits of the PE is not taxed nor available for tax credits.

Real Estate Investment Trust (REITs) are resident companies listed on a recognized stock exchange and can elect to be exempted from tax on income or gains arising from property rental business. If they opt to do so, they must distribute substantial profits. A REIT must also deduct 20% tax from certain dividends.

Group relief also applies differently to resident and non-resident companies. Refer to the Deloitte guide for more details.

Tax Rate

Main corporate income tax rate, not applicable to profits from oil rights and extraction20%
Tax Rate For Foreign Companies
A diverted profits tax (DPT) applies to profits of MNCs intentionally diverted from the UK for companies to better align their corporate tax position to reflect the expected outcomes of the G20/OECD base erosion and profits shifting project (BEPS). This tax sits above existing double tax treaties and is levied at 55% for oil and gas companies.
Capital Gains Taxation
Capital gains form part of a company's taxable profits but are exempt if they arise from the disposal of substantial shareholdings in both UK and foreign companies. A 28% capital gains tax applies on the sale of UK residential property worth more than GBP 500k and that has previously been subject to the Annual Tax on Enveloped Dwellings (ATED).
Main Allowable Deductions and Tax Credits
In general, all expenses that are not capital in nature and that are used for trading purposes are deductible. Taxes other than direct UK taxes are generally deductible. Interest is deductible within the debt cap rules that apply to companies that are members of large groups.

 

An R&D tax credit is available at 130% of R&D expenditure for large companies and 230% for SMEs (as defined by the EU). A patent box regime is gradually being introduced over 5 years to allow companies to apply an effective 10% rate to all profits derived from qualifying patents from 1 April 2017.

Other Corporate Taxes
A general anti-abuse rule (GAAR) applies across a range of taxes on transactions made after 17 July 2013.

 

A petroleum revenue tax on North Sea oil and gas of 50% is levied on profits from individual oil fields developed before 1963. This is reduced to 35% for chargeable periods ending after 31 Dec 2015. A supplementary charge of 30% to corporate tax is further applied.

A bank levy is applied at 0.21% for short-term chargeable liabilities and 0.105% for long-term chargeable equity and liabilities. The first GBP 20 million of chargeable liabilities is exempt.

A Mileage Allowance Payment (MAP) is applicable when employees are paid to use their own vehicles for business journeys. This applies to cars, motorcycles and cycles. For more details, refer to the gov.uk guidance.

Other Domestic Resources
Consult the Doing Business website, to obtain a summary of the taxes and mandatory contributions.

Country Comparison For Corporate Taxation

 United Kingdom
Number of Payments of Taxes per Year8.0
Time Taken For Administrative Formalities (Hours)110.0
Total Share of Taxes (% of Profit)30.9

Source: Doing Business - 2017.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

 

Accounting Rules

Accounting System

Accounting Standards
Finance Acts and regulations made under powers given by those Acts have included measures to ensure that companies choosing to adopt International Accounting Standards (IAS) or certain UK standards that are equivalent to IAS to draw up their accounts receive broadly equivalent tax treatment to companies that continue to use 'mainstream' UK GAAP (UK Generally Accepted Accounting Practice).
Accounting Regulation Bodies
Financial reporting 
International Accounting Standards Board 
Accounting Law
Companies that are not listed have the option to report either under IFRSs or under UK GAAP. More recently issued UK FRSs have, in any case, replicated the wording of corresponding IFRSs, reducing the differences between the two sets of standards significantly.
Difference Between National and International Standards (IAS/IFRS)
Follow this link to access a Table of comparison between IAS and UK GAAP.
Accounting News
Accounting Web 
Accountancy Live 

Accounting Practices

Tax Year
6 April to 5 April of the next year.
Accounting Reports
English companies must keep account books where are registered all the operations of the company and establish annual accounts including an annual report, a profit and loss account, a balance sheet, a table of financial flows, an appendix, an opinion of the auditors, a statement upon losses and earnings recorded, the comparison between the movements of interests of the shareholders and a note upon the result on historical costs basis.
Publication Requirements
Financial statements must be prepared annually.

Accountancy Profession

Accountants
Only the "Chartered accountants" and "Certified accountants" are authorized and have the possibility given by the accounting commission to exercise a mission of audit or auditorship.
Professional Accountancy Bodies
The Institute of Chartered Accountants in England and Wales 
The Association of Chartered Certified Accountants 
The Chartered Institute of Public Finance and Accountancy 
Member of the International Federation of Accountants (IFAC)
Yes
Member of Other Federation of Accountants
Member of the Federation of European Accountants; 
Member of the Confederation of Asian and Pacific Accountants (CAPA).
Audit Bodies
Companies have to seek a statutory auditor to conduct an annual audit of the financial health of their organisation. For more information, consult the Financial Reporting Council.

 

Consumption Taxes

Nature of the Tax
Value Added Tax (VAT)
Standard Rate
20%
Reduced Tax Rate
A reduced VAT rate of 5% applies to certain categories of goods and services, including children’s car seats or social housing, fuel and power supplied to domestic users and charities, installation of energy-saving materials, mobility aids for senior citizens and so on. Certain goods and services are zero-rated, including books, newspapers, young children’s clothing and shoes, motorcycle helmets and certain types of food, but must still be recorded in VAT accounts. Refer to the gov.uk website for more details.
Exclusion From Taxation
Goods and services that are outside the scope of the UK VAT system are tax exempt
Method of Calculation, Declaration and Settlement
A business can only charge VAT if it is registered with the HMRC. VAT applies to 'taxable supplies' such as the sale of goods and provision of services, the sale of business assets, commission, gifts and so on. Different rules apply to imports, exports and charities. A VAT return is typically filed every 3 months with the HMRC. Refer to the gov.uk websitefor further details.
Other Consumption Taxes
All information are available on the website HM revenue and customs.

 

Individual Taxes

Tax Base For Residents and Non-Residents
A statutory resident test (SRT) is applied to determine if an individual is a resident or non-resident taxpayer of the UK. The test includes a combination of physical presence and connection factors. Where an individual is resident and domiciled in the UK, he or she is subject to UK income tax and capital gains tax on worldwide income and gains. Where an individual is resident but not domiciled in the UK, he or she is also subject to UK income tax on worldwide income but may choose to pay tax on foreign income and capital gains on a remittance basis, subject to a supplementary charge. Non-resident individuals are taxed on UK-sourced income and capital gains realized from the disposal of UK residential property. For additional information, visit the HMRC site.

Tax Rate

Income tax rateProgressive rate up to 45%
0 - £11,000 (allowing for standard Personal Allowance)0%
£11,001 - £43,00020%
£43,001 - £150,00040%
Over £150,00045%
Scottish TaxpayersScottish Taxpayers pay 10% of income to the Scottish Government
Allowable Deductions and Tax Credits
Tax relief can be claimed on personal allowances (the standard amount is £10,600 for the 2015-2016 tax year), work or business expenses and certain pension contributions, charity donations, maintenance payments and time spent working on a ship outside the UK. Refer to the gov.uk sitefor more details.
Special Expatriate Tax Regime
Expatriate allowances are included in taxable income but may be available for exemption for certain subsistence expenses. Refer to the HMRC for more details. 
Capital Tax Rate
An Inheritance tax (IHT) is generally applicable upon death, to the value of the estate and gifts made within the previous seven years, subject to a reduction for gifts made between four and seven years before death. Where assets are worth more than GBP 325,000, IHT is 40%. Where more than 10% of assets are distributed to charity, a reduced IHT of 36% may apply to the rest of the estate.

 

The UK does not levy a net wealth tax.

A real property tax applies to the occupation of domestic property, to the value of the estate on 1 April 1991 in England and Scotland and 1 April 2003 in Wales. If occupied by a single adult, the tax is reduced by 25%. Stamp duty, land tax or land and buildings transaction tax apply to the purchase of property. For more details, refer to the Deloitte guide.

 

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
UK Tax Treaties 
Withholding Taxes
Dividends: 0%, Interest: 20% for nonresidents, Royalties: 20% (rates can be lower if a tax treaty is signed)

 

Sources of Fiscal Information

Tax Authorities
HM Revenue & Customs, HM Revenue & Customs 
Ministry of Finance, Ministry of Finance 
Other Domestic Resources
UK Trade & Investment 
UK income tax information 
Country Guides
Deloitte Tax Guide 
2015 PKF Tax Guide 

 

Learn more about Service Providers in the United Kingdom on Globaltrade.net, the Directory for International Trade Service Providers.

Learn more about Taxes and Accounting in the United Kingdom on Globaltrade.net, the Directory for International Trade Service Providers.

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Last Updates: June 2017