Edition No.

2
June 2017

Doing Business Guide

UK
 This guide has been produced by Kingston Smith LLP for the benefit of
About This its clients and associate offices worldwide who are interested in doing
business in the UK.
Guide
Its main purpose is to provide a broad overview of the various issues
that should be considered by organisations when considering setting-up
business in the UK.

The information provided cannot be exhaustive and as underlying

legislation and regulations are subject to frequent changes we
recommend anyone considering doing business in the UK, or looking to
the UK as an opportunity for expansion, should seek professional advice
before making any business or investment decision.

The information in this guide is up to date as at the edition date.

For more information, please contact:

Kingston Smith LLP

www.kingstonsmith.co.uk

Mr Jon Sutcliffe
jsutcliffe@ks.co.uk
+44 (0)20 7566 4000

Devonshire House
60 Goswell Road
London
EC1M 7AD
UK

Disclaimer: Morison KSi is a global association of independent professional

firms. Professional services are provided by individual member firms.
Morison KSi does not provide professional services in its own right. No
member firm has liability for the acts or omissions of any other member firm
arising from its membership of Morison KSi.

www.morisonksi.com
Edition No. 2
June 2017

Contents

Introduction 1
Business Structures 2
Labour and Personnel 3
International Mobility 5
Taxation System 6
Banking and Finance 9
Reporting Requirements 11
Grants and Incentives 12
Agencies Providing Assistance 14
 various incentives, such as R&D tax the process to set up a new business
Introduction credits, decreasing corporation in the UK is a very quick process,
tax rates, and friendly visa options which allows foreign companies
which enable them to accelerate to get off the ground quickly and
their business growth in this very start focussing on achieving their
important market. business objectives.

Post the economic slowdown in the The economy

last decade, the UK has come back As of date, the UK economy is the
strongly and continues to provide a 10th largest in the world, measured
stable economic environment, with by purchasing power parity, and is
a transparent regulatory and legal the fastest growing economy in the
Why the UK? environment that is welcomed by G7 for the last 3 consecutive years.
local and international businesses.
The UK is the number one The economic growth in the UK has
destination for foreign direct The service sector dominates the been primarily fuelled by a robust
investment in Europe, attracting UK economy, contributing around domestic demand, in particular from
the highest number of foreign 78% of GDP; the financial services acceleration in private consumption,
direct investment (FDI) projects and industry is particularly important which benefited from low inflation
receiving the largest value of FDI net and London is the world's largest and an improvement in employment
inflows in 2015-16 in Europe. Across financial centre. The City, a term opportunities.
the country, 2,213 inward investment used to describe the UKs collective
projects were secured in that period, financial and related business The Bank of England base is
an 11% increase on the previous year. services industry, is a world leader. announced by the Bank of England's
This lead to around 116,000 jobs It is at the heart of the worlds Monetary Policy Committee every
being created or safeguarded in the financial markets and is a vital month and is currently at 0.25%
UK - the second highest number on asset to the British and European (May 2017) having been set at 0.5%
record. USA is the leading investor economies. for the previous six years.
region followed by China, India
and France. All these above facts Historically, the UK has had a very The pound sterling () has remained
clearly demonstrate one thing; The strong manufacturing background reasonably stable against the US
UK is one of the leading preferred and is home to some of the biggest dollar and Euro, thus providing a
destinations for internationally companies such as Rolls Royce, stable and competitive environment
focussed companies looking to Unilever, GSK and Rio Tinto. With for global companies trading with
expand their global footprints. many of the biggest manufacturers the UK.
present, the UK supply chain has
The UK, being the 5th largest gone from strength to strength, The UK corporation tax has been
economy worldwide in terms of as well as a growing distribution decreasing year on year, and is now
national GDP, and one of the largest hub enabling companies to easily 19% and set to reduce to 17% by
trading nations, helps to position the navigate and transport their goods April 2020/21 thus very competitive
country at the forefront of business through our ports, railways and when compared to other countries
attractiveness. Its geographical international airports. and below the average for the EU.
position allows international
companies to use the UK as a spring The UKs technology sector has The UK also has one of the largest
board into Europe and the rest of also boomed significantly with the tax treaties networks in the world.
the world, in addition to the access creation of Tech City, widely known Its aim is to eliminate double
to talent, ease of doing business, as the UKs Silicon Valley, housing taxation for foreign companies and
huge infrastructure and good some of the unicorns of the business individuals that are subject to tax
transport links, which are key factors world and emerging high growth in two or more jurisdictions. This
for global businesses to succeed. companies. Tech City has developed is significantly advantageous for
significantly, showcasing the UK- international business, enabling
The UK government seeks to wide talent of various technology them to conduct business in a tax-
attract and support foreign sub-sectors including FinTech, friendly manner.
companies, entrepreneurs and EduTech, MedTech, etc.
talented individuals through
Over and above all these factors,
www.morisonksi.com UK 1
 most appropriate structure will there is no longer a mandatory
Business depend on a combination of your
commercial objectives; the degree
requirement for companies to
appoint a company secretary.
Structures of permanency required in the UK;
as well as legal, accounting and tax Every UK registered company
considerations. Generally businesses is required to file accounts at
have preferred the following Companies House, and these
structures for their UK entry: become available for inspection
by the public. A private limited
The private limited company is the company has to file accounts
most common type of corporate within nine months of its period
entity in the UK. The liability of its end or become liable to automatic
Choosing the right structure members is limited to the issued penalties. The accounts also need to
share capital, which could be as be audited if certain thresholds of
Once you have taken the decision low as 1. The company requires a turnover, gross assets and number
to set up in the UK, there are registered office in the UK and at of employees are exceeded.
various legal structures you can least one director for whom there
adopt to start your business. The is no residency requirement. Also, Setting up a UK subsidiary can take
as little as 48 hours, and is a very
Table 1: Advantages and disadvantages of business structures quick and simple process.

Business Structure Advantages Disadvantages

Sole trader Few formalities Unlimited personal liability for business debt
Sole traders are self-employed for tax Greater flexibility If the business fails owing money, you could be
purposes and dont need any formal Taxed as an individual, but differently from declared personally bankrupt
constitution. You will have to prepare annual an employee For VAT registration purposes, all the business
accounts as the basis of the profits to be Lower National Insurance than being activities of a sole trader are aggregated
included in your Self Assessment Tax Return. employed Potentially higher tax rates on profits reinvested
Start immediately
No audit requirement
Partnership Draw on talents of others Share the profits and set up costs
If you form a partnership you and your Relatively unrestrictive Jointly and severally liable for business debts
partners are individually self-employed for National Insurance the same as a sole trader Not in sole control
tax purposes, with profits allocated in profit
sharing ratios.
Limited company Not normally personally liable for More formal and restrictive
Limited companies are incorporated under companys debts Not normally allowed to borrow money from
Companies Act 2006. To form a limited Enhanced business image the company
company you need at least one shareholder Various tax reliefs, including those for Accounts must be prepared in a statutory
and at least one director. It is a requirement Research & Development are only available format and filed with Companies House; they
for companies to maintain a register with to companies may have to be audited if you exceed the
Companies House, including filing an annual Normally set up in a matter of days statutory audit threshold
return of directors and shareholders details. For VAT purposes, a limited company is
Kingston Smith can organise incorporation not aggregated with other businesses,
and maintain all the registers that a business as are different businesses carried on by
needs. individuals

Limited liability partnership Similar to partnership, but: Have to notify Companies House of the
In broad terms, this is a cross between a Personal liability is limited unless business address and the names of the partners
partnership and a limited company. You responsible for partnerships bankruptcy Accounts must be on public record every year
can organise your business and pay tax Greater flexibility on introducing or and they need to be audited if the statutory
in exactly the same way as if you were an repaying capital audit threshold is exceeded
ordinary partnership. The agreement between the members on All profits are taxed on the partners at rates of
sharing profit and managing the business up to 45% plus National Insurance, so not as
etc. is a private document effective as a company if profits are retained in
the LLP
Branch Losses in a UK branch may be relievable in The accounts of the whole overseas company
Simply an extension of the overseas entity. the home country will need to be filed at Companies House
No requirement to prepare or file UK UK customers may prefer to deal with a UK
financial statements or have a UK audit company
A branch constitutes a business establishment
for VAT purposes

www.morisonksi.com UK 2
 important to consider the type of
Labour and candidates you want to target and
"Employment is one of
to use specific platforms that can the key considerations
Personnel enable this.
when setting up in the
There are also helpful visa options UK, how you choose
which enable foreign companies to to operate, manage
send their employees to come and
work for the UK entity. and incentivise your
staff is important for
Employment
the success of the
Employment is one of the key business."
considerations when setting up
in the UK. How you choose to
operate, manage and incentivise
your staff is important for the
Attracting employees success of the business. Permanent contracts: This
requires commitment from both
The UK is known for its skilled and Employment contracts the employer and employee,
talented workforce, and being able and is the most common type of
to retain employees is critical to a It is a legal requirement for employment. This is an indefinite
businesss success. businesses to provide their contract and can be terminated
employees with an employment when the employee no longer
There are a number of different contract. There are different types wishes to work there, or (subject
routes to attract the type of of employment contracts that are to certain protections) by the
employees the business needs available in the UK including casual employer.
including entering into partnerships and internships, although these
with local universities to attract and three are most commonly used:
work with the top students and Employment rights in the UK differ
graduates, and offering internships Temporary contracts: This type significantly from those in other
and placements, which can be less of contract is good if you are in parts of the world and may appear
expensive for the company, but need of short-term workers; it contradictory in some cases.
which might be less suitable if the provides flexibility and allows Typically employees have certain
company requires candidates with a you to adjust for increases rights from the point of application,
specific level of experience. or decreases in staffing level not the point of recruitment. There
requirements. You may choose to is no fire at will in the UK, although
Recruitment agencies offer a quick work with a recruitment agency, in some instances employees may
and less stressful way of identifying who will normally manage have their employment terminated
employees, and established or the payment of wages and all within the first two years without
specialised agencies will normally the administration procedures a strong reason. Correctly worded
have good talent pools of potential meaning you are recruiting employment contracts will outline
candidates. This method may be agency workers not hiring the majority of the legislation
more expensive, but a good way to yourself. employers are working towards, so
get off the ground. its always advisable to take advice
Fixed term contracts: Fixed term before terminating an employment.
The government runs an contracts allow for you to hire
employment agency, Job Centre employees for a specific time Employee benefits
Plus, and this can identify period, and can plan according
candidates, although it may be to a fixed time and budget. This As businesses establish themselves
difficult to identify candidates that type of contract is good for a in the UK, getting the employee
have a track record using this route. specific assignment/project or package right is the difference
if you require someone for an between attracting and retaining
Other routes include social media agreed period of time. the best talent or making do with
and online advertising boards; it is average employees. Setting it too

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low may not attract and retain the come up with suggestions for Share Options
best employees, whilst setting it staff development and improved
too high may jeopardise your cash working practices, increasing Operating a share scheme can
flow and set the wrong structure autonomy and engagement help you achieve your goals
internally. without high cost implications. of recruiting, incentivising and
retaining the right people.
There are a number of options you Medical benefits: Although
can consider, both financial and non- you may not have the funds to The most common way of providing
financial including: offer private medical care for shares to employees is by using a
employees, many large providers share option scheme under which
Bonus scheme: Bonus schemes may offer a group discount and a company grants the employee
can be either contractual or non- your employees could elect to pay the right to acquire shares at some
contractual depending on how for this insurance. point in the future by exercising
they operate within your business. the option at a price determined
You may not have one in place or Pensions: Auto-enrolment of at the date of grant. The ability
you may indeed have one which employees into pensions schemes to exercise the option may be
may not be achieving the desired is now applicable to almost all contingent on a future event, such
results. These can be used not businesses, but you will still need as a sale, or the employee meeting
only as a tool to motivate your to consider if you will contribute certain performance targets. If the
workforce, but also with the clear the minimum amounts required company is successful the value
objective of adding to the bottom or if you will offer an enhanced of the shares will increase and the
line. percentage as an additional employee will benefit by being
benefit. able to acquire the shares at the
Commission payments: originally agreed price.
Particularly for employees in Corporate gym membership: If
a sales function or those who your employees are gym goers, Certain share schemes come
otherwise have a direct impact conversations with your local with UK tax advantages, with
on income generation, you establishments could provide your an EMI (Enterprise Management
could implement a commission employees with a discount and Incentives) Scheme generally being
scheme. These schemes are usually wont cost you anything. the preferred scheme where the
usually contractual and have an qualifying conditions are met.
on target earnings (OTE) element Company cars: Where an
in addition to the annual salary. employee is provided with a car
Generally, the basic annual salary for their personal use, a taxable PAYE (Pay As You Earn)
is set low and the rest can be benefit-in-kind will arise in the
made up in commission payments. employees hands. The taxable A UK employer is required to
amount is calculated as the process payments to employees
Learning and development/ manufacturers list price of the through a registered payroll
training: Most training is on car when new, multiplied by a scheme, and where applicable to
the job and a necessity for the percentage that is based on the withhold tax and National Insurance
employee to perform their duties. CO2 emissions figure for the car Contributions at source. Details
However, offering training to and the type of fuel. The amount of amounts processed through
further enhance an employee's the employer actually pays for the the payroll scheme, and tax and
skills can not only benefit the car, and the amount of private use National Insurance Contributions,
organisation, but also be viewed the employee has, are irrelevant in must be provided by the employer
favourably by the employee. determining the taxable amount. to HM Revenue & Customs.
If the employer also provides fuel
Appraisal: Aside from discussing for private use, this gives rise to
remuneration, these can be a further taxable benefit which is
used as a tool for managers to calculated as 22,600 multiplied
understand the wider drivers and by the same percentage used
motivators of their employees. to determine the company car
By discussing the business benefit.
with employees, they can be
motivated and encouraged to

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 There are a number of different visa options that are available to international
International companies and entrepreneurs looking to come to the UK. It is important to
understand the criteria and requirements of each type of visa as these vary. The
Mobility table below outlines the different types of visa that are available.
Table 2: Visa types

Visa Type Requirements Long Term Duration

Sole Representative Visa Be the UK entitys first hire and be responsible for Individuals can come to the UK The sole
An overseas business that is based running the new UK office. for an initial period of 3 years. representative can
outside the European Economic Area apply for a visa
that plans to send a senior employee Applicants must not be majority shareholders of the Individuals may be able to up to 3 months
to set up and run their UK office can parent business. extend for a further 2 years. before travel.
apply for a Sole Representative Visa.
After 5 years the individual may A decision is
apply for permission to settle normally made
permanently in the UK. in 2-4 weeks of
application.
Tier 1 Entrepreneur Visa Applicants should have access to 200,000 funds A 40-month visa, extendable by 28 weeks from
This type of visa is ideal for (In limited cases 50,000) and must be able to prove a further two years. Permanent application (can
individuals who would like to set that the money is: residency after 5 years, but sometimes take
up and/or run a business in the UK. your own can be accelerated in some several months).
There are no restrictions on the size of made available to you by other people (third circumstances.
shareholding in the new business. parties), e.g. a husband, wife, partner or investor
in a joint account with your spouse or partner To extend the visa, it must meet
but only if they arent applying for a Tier 1 a number of requirements, such
(Entrepreneur Visa). as creating 2 jobs that must
last over a period of at least 12
months.
Tier 1 Exceptional Talent Visa This is a 2 step process; initially the individual must The individual can stay in the The process
An individual can apply for a Tier 1 apply for endorsement to the home office as a UK for up to: can take up
(Exceptional Talent) visa if they have leader in their field. 5 years and 4 months if they to 3 months
been endorsed in the field of science, apply outside the UK depending
humanities, engineering, medicine, The endorsement must be from one of the 5 years if they apply inside on the time of
digital technology or the arts as: a designated endorsing bodies: Arts Council England; the UK endorsement.
recognised leader (exceptional talent) British Academy; Royal Academy of Engineering; After 5 years, the individual
or an emerging leader (exceptional Royal Society. can apply for permanent
promise). residency

Tier 2 If the individual is applying for entry under this visa scheme they must be in possession Licence for UK
Tier 2 visa options are a route for of a job offer and a Certificate of Sponsorship from a UK employer with a valid Tier entity: approx.
skilled workers who are based outside 2 sponsorship licence. In each case, the individual must fulfil the requirements of the 2-3 months from
the European Economic Area. particular Tier 2 visa for which they are applying too. having first
employee in the
The UK entity will need to obtain a sponsorship license to employ someone from UK.
outside the European Economic Area to work in the UK. This licence lasts for 4 years.
Tier 2 Intra-Company Transfer Long-term staff applicants - at least 41,500 or the A visa of up to 5 years in total (or 24 weeks from
An individual may apply for this visa appropriate rate for the role (whichever is higher). 9 years if annual salary is at least application. The
if the overseas employer has offered 155,300). Does not lead to sponsorship
the person a role in a UK branch of the Graduate trainee - at least 23,000 or the permanent residency. licence must be
organisation. appropriate rate (whichever is higher). put in place first.
The maximum allowed for the
visa is 5 years, once this has
been reached the employee
must leave the UK.

Tier 2 General The job youre offered must pay 25,000 or more The individual can stay in the UK 24 weeks from
An individual may apply for this visa or the current market rate. The individual must meet for a maximum of 5 years and 14 application. The
if they have been offered a skilled job English language requirements and hold a certificate days, or the time given on your sponsorship
in the UK and are from outside the of sponsorship. certificate of sponsorship plus 1 licence must be
European Economic Area. month, whichever is shorter. put in place first.

The individual can apply to

extend this visa for up to
another 5 years, as long as your
total stay is not more than 6
years.
Tech City Visa The visa is split into 4 qualifying criteria: The visa is granted for 5 years Approximately
This is also known as the Tier 1 Building UK scale-ups proven track record in and can lead to settlement. 2 weeks from
exceptional talent visa for digital tech, assisting digital tech companies scale up application.
and recently launched to attract global Recognising exceptional promise track record The individual can be either
digital tech talent to the UK. in digital tech with technical or business employed or self-employed.
This is a 2 stage process and there are experience
200 endorsements available every Powering the Northern Powerhouse For digital
year. tech migrants who will work in a digital tech role
or set up a digital tech business in Hull, Leeds,
Liverpool, Manchester, Newcastle, Sheffield or
Sunderland
Recruiting Teams from Overseas allows a UK
digital tech business to recruit a team of up to 5
migrants to work on 1 project.

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 Details of various tax incentives for payable is based on the value of the
Taxation companies are set out later in this property, and the charges for the
document. Businesses coming to year from 1 April 2017 to 31 March
System the UK will need to ensure that they 2018 can be seen in table 3.
set up their operations in the UK to
ensure they do not pay any more tax There are certain reliefs from the
than they need to this is something charge which apply, for example,
that should be considered as early in where the property is let to an
the planning process as possible. unconnected third party on a
commercial basis, where it is being
Value Added Tax (VAT) developed for resale, or where it
is open to the public for at least 28
Value Added Tax (VAT) is charged days per year.
on the UK supply of most goods
Table 3: ATED annual charges
and services, and any trader whose
taxable turnover exceeds 85,000
Property Annual
(as of April 2017) in a 12 month period
This section provides an outline of has an obligation to register for VAT. Value Charge
the key UK tax considerations that 500,000 - 1m 3,500
apply to companies and individuals. In general, for each VAT period 1m - 2m 7,050
It also contains specific implications (normally a quarter), the VAT paid 2m - 5m 23,550
for cross-border transactions. by a registered trader (input tax) 5m - 10m 54,950
is deducted from the VAT charged
10m - 20m 110,100
Tax for companies on supplies (output tax), and the
20m+ 220,350
difference is either payable to HM
Corporation tax Revenue and Customs, or repayable
by them. Tax for individuals
It is not just UK resident companies
that have to pay corporation tax. This basic principle is modified if Income tax
Overseas entities trading in the UK the supplies made by the registered
through a permanent establishment person are not fully taxable. Individuals may be subject to UK
will be liable too. income tax on employment income,
There are two main rates of VAT business profits (if for example they
Corporation tax is currently at the the standard rate, which is currently operate as a sole trader or member
relatively low rate of 19% and it is 20%, and zero rate although of a partnership/LLP), or on other
planned that this will reduce further there are complications and the income they receive such as interest
to 17% by 2020. VAT implications of a particular and dividends.
trading venture always need to be
Companies that are subject to considered in their own right. See table 4 below for the rates
UK corporation tax must do the which apply for an individuals
following to comply with UK Annual Tax on Enveloped Dwellings taxable income.
regulations: (ATED)

File a corporation tax return ATED is an annual tax that is mainly

within 12 months of the end of its payable by companies that own
accounting period UK residential property valued at
more than 500,000. The amount
Pay any corporation tax by the Table 4: Income tax rates
due date, which is normally nine
months and one day after the end Tax rate 2017 / 18
of the accounting period, but in Personal allowance (phased out as the 0% on first 11,500
the case of larger companies will individuals income exceeds 100,000)
be earlier as they pay their tax by Basic rate 20% on next 33,500
quarterly instalments Higher rate 40% on next 116,500
Additional rate 45% above 150,000

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National Insurance Contributions unincorporated businesses (sole NIC. The table below sets out the
(NIC) traders, partnerships) and LLPs just rates that apply to employees for
as they do to companies. the for the 2017/18 tax year:
Individuals trading as a sole trader
or member of a partnership/LLP are Inheritance Tax (IHT) Table 5: Employees NIC
subject to two different types of
NIC, as follows: UK IHT can be charged when
assets are transferred out of an
Your pay Employees
Class 2 NIC is paid at a rate of individuals estate; most commonly contribution
2.85 per week this is applicable when assets are 157 to 866 a week 12%
transferred on an individuals death,
Class 4 NIC is paid at 9% of but it can also apply when assets Over 866 a week 2%
annual profits between 8,164 are transferred in the 7 years prior
and 45,000, and at 2% of to death, and in certain other cases.
annual profits above 45,000
Individuals who are UK domiciled Employers contributions are paid
or UK deemed-domiciled (those at 13.8% on earnings above 157 per
Capital Gains Tax (CGT) individuals who have been resident week. The Government introduced,
in at least 15 of the 20 tax years in April 2014, an allowance which
UK resident individuals are with prior to the transfer) are subject to is now 3,000 per year, that
some exemptions subject to UK UK IHT on the chargeable transfer employers can offset against their
CGT on any gains they make on of any worldwide assets, whereas employers NIC liability.
capital assets (such as property, other individuals are only subject to
or shares in companies). Non-UK UK IHT on the chargeable transfer
resident individuals are subject of their UK assets. Expatriate tax
to UK CGT on gains made on UK
residential property. Chargeable transfers up to the nil Expatriate tax is an area where
rate band of 325,000 will not give advice must be sought well in
Individuals have an annual rise to a IHT charge. In addition, advance of an employee coming to
exemption of 11,300, but gains there is an additional nil rate the UK to ensure that opportunities
above that amount are subject band of 100,000 which can be are not missed, and that the
to capital gains tax at rates of used against an individual's "main employers PAYE (income tax) and
10%,18%,20% or 28%. Assets that residence". Chargeable transfers NIC obligations are met.
are exempt from CGT include: in excess of these amounts will
normally be subject to IHT at the Bringing overseas staff to the UK
An individuals only or main main rate of 40%.
home Short term visitors to the UK:
Certain transfers including When non-UK employees visit
Cars transfers between spouses or civil the UK for short periods, even for
partners, and the transfer of certain just a few days, their salary (even
Government gilts shares or business assets which if paid outside the UK) will fall
qualify for Business Property Relief within the UK employment tax
Investments made under the will not give rise to IHT. system unless rules relating to
Enterprise Investment Scheme and Short Term Business Visitors can
the Seed Enterprise Investment Tax for employees be used.
Scheme can come with income tax
and capital gains tax reliefs, and National Insurance Contributions NIC exemptions for secondees:
details of these are set out later in (NIC) Where individuals come to work
this document. in the UK temporarily, there is
As well as being subject to income normally a period of exemption
Value Added Tax (VAT) tax, salaries can also be subject to from NIC, ranging from one to
both employees and employers five years depending on the
The comments made above employees home country.
in respect of VAT apply to

www.morisonksi.com UK 7
 Temporary Workplace Relief: However, where there is no
Where employees are "The UK has one of the corresponding product or service
temporarily seconded to work largest double tax in the market place, establishing
in the UK for a period of up to open market value is not always
24 months, they may be able treaty networks, and a straightforward and in such cases
to claim deductions from their key aim of the treaties detailed analysis may need to be
taxable income for the expenses prepared and retained.
they incur as a result of their
is to stop the same
attendance at a temporary income or gains being Diverted Profits Tax
workplace. These expenses subject to tax in more
can include amounts spent on The Diverted Profits Tax affects
accommodation, Council Tax, than one jurisdiction." large multinational enterprises
utility bills, subsistence and with business activities in the
travel to and from work. UK, that enter into arrangements
to divert profits from the UK by
Overseas Workday Relief: key aim of the treaties is to stop the avoiding a UK taxable presence or
In the first year of UK tax same income or gains being subject by exploiting their position with
residence and the two to tax in more than one jurisdiction. connected entities. Where this
subsequent years, an employee applies, profits that have been
can split their income between Transfer pricing diverted from the UK are subject
UK and non-UK workdays. to tax at a rate of 25%.
Provided the employee Increasingly, governments around
makes a valid claim and the the world are investigating
income attributable to non-UK transactions between connected
workdays is not received in or parties with the aim of ensuring that
subsequently remitted to the UK, no artificial advantage is taken of
that income will not be taxable lower tax rates. The UK, like most
in the UK. countries around the world, requires
the arms-length price to be used
Tax considerations for cross-border in most cases for transactions
transactions between connected parties. For
general trading transactions,
Tax Treaty network where open market price is readily
available, assessing the arms length
The UK has one of the largest price is unlikely to cause problems.
double tax treaty networks, and a

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 Identification and proof of
Banking and Learning from the financial crisis address: Either a bank statement
in 2008, there has been a strong or a utility bill can be used to
Finance increased focus in the UK on verify addresses and identity.
the regulatory environment, This will be required for all
implementing preventative systems beneficial owners and principal
and regular reviews with financial controllers.
institutions to ensure that they comply
with the Financial Conduct Authority, Company structure: This will
Prudential Authority and BASEL III. need to detail the ownership and
the percentage share ownership
Setting up a UK bank account of the UK entity.

For an overseas company, it is Bank statements: For newly

important to note that they should registered subsidiaries of
start the process of opening a UK overseas parents, statements of
bank account as soon as possible. the overseas parent company
As the banks are under increased may need to be provided. If the
UK banking system pressure these days, they need to business is new, the owners will
The UKs banking and financial ensure that they minimise the risk need to provide the previous
services sector is very well by understanding the flow of cash 3 months of personal bank
established, and offers a stable between accounts and companies statements they must be
environment for businesses. with this in mind there are stringent certified or original copies.
Founded in 1694, the Bank of identification processes and anti-
England is the central bank of the money laundering checks in place. Audited accounts: The bank may
UK. Also known as the Old Lady request these if the business is
of Threadneedle Street, the Banks To set up a UK bank account, planning on borrowing money
mission is to promote the good of the overseas company requires from the bank.
the people of the UK by maintaining setting up the UK entity first.
monetary and financial stability. The Below is an outline of the typical There are a number of established
current interest rate is 0.25% and is documentation and information banks such as HSBC, RBS, Barclays
reviewed on a regular basis. required by any of the high street and Lloyds that have decades
banks in the UK, for setting up a UK of experience in corporate and
bank account: smaller businesses. More recently,
challenger banks such as Metro
"Many international Application form: The Bank have been emerging offering
banks have either a application form requests services to start-ups and SMEs.
information on your company
physical presence in name, business activities, Many international banks have
the UK or partnerships customers, turnover, size, either a physical presence in the UK
directors, shareholders, and or partnerships established with UK
established with UK personal address. banks. This means that the process
banks. This means for carrying out the required
Registration of the company: checks may take less time and can
that the process The UK company will need to potentially speed up the process
for carrying out the provide the UK registration of opening a UK bank account.
number, and the overseas Opening a UK bank account can
required checks may
company will need to provide take approximately 2-3 months or
take less time and can the certificate of incorporation. more, depending on the complexity
potentially speed up of the business.
Mandate for companies
the process of opening registered under the Companies
a UK bank account." Act: This includes details of all
the signatories to the account.

www.morisonksi.com UK 9
UK financing sources other financing options. Others Other sources of finance
include trade credit via suppliers,
London, being one of the major high-interest loans through retailers Peer to peer crowd funding is
financial hubs of the world, offers and from friends and family. becoming increasingly popular
many fundraising avenues to for start-up businesses. It is
international businesses. A business Equity finance part of the developing trend of
may wish to raise debt or equity disintermediarisation whereby
funding, or a combination of both. There are a number of different the traditional intermediaries (such
routes to raise equity finance, and as banks and fund managers),
Debt finance is increasingly a preferred route for between the borrower or target
many companies. Often companies and the lender or ultimate investor,
Debt finance is provided by an bootstrap at the beginning and are being pushed aside by direct
external lender such as a bank, self-fund the growth of the business relationships facilitated by new
building society or credit union. through revenues generated and internet platforms.
Financial institutions offer a range personal funds.
of finance products for both
short and long term solutions. For many companies, private
An example of some of these equity or venture capital firms is
products includes business loans, a popular route. The investor and
asset financing, lines of credit and venture capital firm will invest large
overdraft facilities. amounts of funds into the business
in return for a share of the company
There are other methods of raising venture capital firms normally
debt finance such as through have a larger controlling share of
factoring companies, however, even the business. In both cases they
though this is a quick method to normally have industry expertise
raise cash from outstanding invoices and often provide advice and
it can be expensive compared to management.

www.morisonksi.com 10
 Small companies
Reporting
To qualify as small a company must meet at least two of the following
Requirements criteria for the current and previous year. There is a one year grace period
for the first year in which the criteria are not met when the company can
still qualify as small if it did in the previous two years. Small companies
are also permitted to file less information at Companies House than larger
companies.

Certain companies (public companies, financial services authorised

companies and subsidiaries of companies listed on an EU regulated market
are exempt from the small company regime.

Table 6: Criteria for qualifying as a small company

Accounting For periods For periods

Every UK registered company, limited beginning before 1 beginning on or after
liability partnership and non-resident January 2016: 1 January 2016:
company which trades in the UK Turnover <6.5m <10.2m
through a permanent establishment
Total assets <3.26m <5.1m
is required to file accounts at
Companies House, and these are Number of <50 <50
employees
available for inspection by the public
on the Companies House website. Audits
A UK private limited company has
to file statutory accounts within A small company that is in a small group can qualify for an audit exemption.
9 months of its period end, and a The thresholds for a small group are as follows (before any intercompany
public limited company needs to eliminations):
file accounts within 6 months of its
period end. Table 7: Criteria for audit exemption

The statutory accounts of a UK For periods For periods

company are required either to meet beginning before 1 beginning on or after
the requirements of International January 2016: 1 January 2016:
Financial Reporting Standards
Turnover <7.8m <12.2m
(IFRS) or UK Generally Accepted
Accounting Practice (UK GAAP). Most Total assets <3.9m <6.1m
companies prepare their accounts in Number of employees <50 <50
accordance with UK GAAP, which is
based on the principles of IFRS. Please note the group figures need to include all of the group, not just the
UK elements.
It is important to note that penalties
are incurred for late filing of
accounts; the size of the charge
will depend on the number of
months late, and the type of limited
company as the fines are higher
for public limited companies. If
the accounts are very overdue
Companies House may seek to strike
the company off the register.

www.morisonksi.com UK 11
 Patent Box of up to 200,000 per year per
Grants and group of companies.
The Patent Box is a tax incentive
Incentives to encourage companies to Tax incentives for investors
locate their innovative activities
and functions, and the resultant Enterprise Investment Scheme (EIS)
intellectual property, in the UK.
The Patent Box rules offer a tax rate The EIS is designed to help smaller
as low as 10% on the profits arising higher-risk trading companies to
from exploiting qualifying patents raise finance by offering a range
that are owned or exclusively of tax reliefs to investors who
licenced by the company, and subscribe for new shares in those
which were developed in the UK. companies.

Companies that are eligible for, The tax reliefs include both income
and have elected to be within, tax and capital gains tax reliefs
the Patent Box, are taxed at the for the investors, and are available
Tax incentives for companies reduced corporation tax rate on where certain conditions are met by
The UK government is committed their Relevant IP Profits (RIPP), both the company invested in and
to be an attractive environment for which include those attributable to the investors themselves.
foreign companies. This is reflected products incorporating, or made
in the corporation tax rates for UK using, qualifying patents. A qualifying investor will be entitled
companies, and in addition by some to obtain income tax relief at a
of the incentives outlined below: Creative sector tax reliefs rate of 30% on new, ordinary, fully
paid up shares subscribed for in
Research and Development Tax Special tax rules apply to determine cash, up to the annual investment
Relief the tax treatment of certain limit. The annual investment limit
companies within the creative is currently 1,000,000, resulting
The UKs R&D tax regime is one of sector. There are a number of in a maximum possible income tax
the most attractive in the world and different types of creative sector saving of 300,000 (1,000,000 at
there is evidence of the significant tax reliefs that deal with trades 30%) per year. There is no minimum
impact that the scheme has had such as film production, video investment limit. Dividends received
since its inception in 2000. game development, and high on EIS shares are subject to income
end television production; these tax in the usual way.
The regime gives higher rates of reliefs can increase the amount of
corporation tax relief on qualifying expenditure that is allowable as a Where an investor has realised
R&D costs incurred by small and deduction for tax purposes or, if the a capital gain on the disposal of
medium sized companies, and company makes a loss, allow the any assets, it is possible to defer
an Above The Line credit for loss to be surrendered for a payable that capital gain by subscribing
larger companies. It also includes a tax credit. for shares in an EIS qualifying
repayable tax credit system, which company. For the relief to apply, the
can be a lifeline to early stage Capital allowances investment in the EIS Company will
businesses. need to be made either within three
Expenditure on certain assets that years after the relevant disposal, or
To qualify for R&D tax relief, your are acquired for use in a business up to one year before. In addition,
project must seek to achieve an can qualify for capital allowances, providing certain conditions are
advance in science or technology, such that the cost of these assets is met, gains on the disposal of EIS
through the resolution of scientific written off against taxable income. shares which qualified for EIS
or technological uncertainty. Costs Plant and machinery assets that income tax relief will be exempt
which qualify for the enhanced qualify can include anything from from capital gains tax.
corporation tax relief, or the Above office furniture to IT equipment to
The Line credit, include costs certain fixtures in buildings, such as Seed Enterprise Investment
relating to the project that have lifts. The UK tax regime offers a 100% Scheme (SEIS)
been incurred on staff, software, initial allowance (annual investment
and consumables. allowance) for qualifying expenditure The SEIS is designed to help the

www.morisonksi.com UK 12
smallest early stage companies There are a number of schemes
to raise finance by offering of tax "Various regional available specifically for R&D related
reliefs that are similar to EIS, but in programmes projects such as SMART Funding,
some respects even more generous. Horizon 2020 and Innovate UK.
Under the SEIS income tax relief is
are in existence,
available at 50% of the cost of the and often these Various regional programmes
shares subscribed for, although provide incentives are in existence, and often these
in this case the maximum annual provide incentives to encourage job
investment is 100,000. Dividends to encourage creation and economic growth in a
received on SEIS shares are subject job creation and particular local area.
to income tax in the usual way.
economic growth in a In addition to this, there are 46
Where an investor makes a disposal particular local area." enterprise zones across the UK
of an asset which would ordinarily in which businesses can take
give rise to a capital gain, and advantage of business rates
reinvests all or part of the gain in discounts and enhanced capital
Grants and incentives
SEIS qualifying shares, 50% of the allowances. The objective of
gain reinvested will be exempt The government does not offer enterprise zones is to create longer
from capital gains tax. In addition, finance options for overseas term sustainable growth based
providing certain conditions are companies, but there may be some on the most innovative and latest
met, gains on the disposal of shares grants and incentives for which the technology.
which qualified for SEIS income tax company may be eligible.
relief will be exempt from capital
gains tax.

www.morisonksi.com 13
Agencies and city have a unique service
offering to sectors, research,
to facilitate the growth by
providing practical advice
Providing skills and incentives which will be
suitable depending on the type of
to British businesses trading
around the world. (www.
Assistance business you are. One of the main
investment promotional agencies
britishchambers.org.uk)

is London and Partners, supporting Federation of Small Businesses:

companies that are planning to One of the largest UK groups
set up in London, providing a that protects and promotes the
range of services to facilitate their UKs small businesses and self-
expansion. There are a number employed individuals. (www.fsb.
of other promotional agencies org.uk)
across different regions in the UK,
including MIDAS (Manchester), Other key government
Marketing Birmingham, Invest organisations
Northern Ireland and Scottish
Development International. There are a number of different
There are a number of government UK government departments and
organisations and agencies in the organisation which you need to be
UK that look to accelerate the Industry organisations and trade aware of including:
growth of foreign businesses by associations
providing access to the local market HM Revenue & Customs (HMRC):
and business knowhow Industry organisations and trade HMRC is the UKs tax authority
associations are important to the UK (www.gov.uk/government/
The role of investment promotional as they work with the government organisations/hm-revenue-
agencies to create new policies, and enable customs)
companies in the industry to raise
The Department of International their concerns. It is also an excellent UK Visas and Immigration
Trade (DIT), formerly the UK platform to build relationships (UKV&I): UKV&I is responsible for
Trade and Investment (UKTI), within the industry and explore immigration, passports and crime
is a government agency that collaboration. Many associations policies and counter terrorism.
is responsible for developing, hold a number of networking (www.gov.uk/government/
coordinating and delivering events to provide the opportunity organisations/uk-visas-and-
a new trade and investment to meet key stakeholders in the immigration)
policy to promote UK business industries.
across the globe and attract Department for Business, Energy
foreign investments into the UK. There are number of organisations and Industrial Strategy (BE&IS):
They provide free and practical for different sectors, however a few BE&IS is responsible for bringing
consultative guidance to foreign of these have been named below: together responsibilities for
owned companies who are business, industrial strategy,
expanding their business to the Tech UK: Trade association that science, innovation, energy, and
UK and to UK based companies represents the UK tech sector. climate change. (www.gov.
looking to expand globally. DIT has (www.techuk.org) uk/government/organisations/
a national role to play accelerating department-for-business-
the growth of businesses and is Innovate Finance: Innovate energy-and-industrial-strategy)
responsible for contributing to Finance is a not for profit
economic growth by creating new membership organisation, Department for Work and
jobs and safeguarding existing ones. that specifically acts for the Pensions: The Department for
UKs Fintech Industry. (www. Work and Pensions (DWP) is
On a local level there are a number innovatefinance.com) responsible for welfare, pensions
of investment promotional and child maintenance policy.
agencies that collaborate with DIT, British Chambers of Commerce: (www.gov.uk/government/
focusing on creating employment An independent business organisations/department-for-
and positive investment in their network that represents the work-pensions)
own location area. Each region UKs businesses. Their aim is

www.morisonksi.com UK 14
 The Next Step
Contact Kingston Smith LLP to discuss your needs.

Kingston Smith LLP

www.kingstonsmith.co.uk

Mr Jon Sutcliffe
jsutcliffe@ks.co.uk
+44 (0)20 7566 4000

Devonshire House
60 Goswell Road
London
EC1M 7AD
UK

Disclaimer: Morison KSi is a global association of independent professional

firms. Professional services are provided by individual member firms.
Morison KSi does not provide professional services in its own right. No
June 2017

member firm has liability for the acts or omissions of any other member firm
arising from its membership of Morison KSi.

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