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Date of publication: April 2017

1. TAX INCENTIVES

Competitive tax system

  • Low overall tax rate of 19%
  • R&D Tax Credits
  • Patent Box

Government funding is more limited than in some countries which comes as a shock to many clients but DIT can help advise on what funding options may be available.

2. EASE OF SET-UP

Formation of a limited company is fast and inexpensive with no minimum capital requirements.

Only need 1 director & 1 shareholder. No requirement for director residency, although often needed to open a bank account.

Payroll is mandatory, but is quick to register (10 days) and simple to administer.

VAT registration is mandatory for turnover above £85k. Overseas companies may elect to, and sometimes must, register

3. R&D AND PATENT BOX

There are significant tax incentives for companies undertaking R&D.

SMEs can deduct an extra 130% of their qualifying costs.

Large companies credit is calculated at 11% of their qualifying R&D expenditure.
Patent Box: 10% tax rate for income from UK & European Patents.

4. EMPLOYMENT

Self-Employed or Employee?

  • Employees are entitled to more rights (e.g. holiday and sick pay).
  • Self-employed individual deals with own income tax and social security and have larger control over their business.
  • HMRC and employment tribunals determine status by looking at the actual nature of the relationship, not just the agreement in place.
  • All new companies must auto-enrol employees into a pension scheme with employer’s contributions 1% matched.

5. WORK VISAS

Sole Rep Visa: Send an employee to UK to set-up branch or subsidiary. Initial 3 year visa, apply before starting to trade in UK (extendable for 2 years).

Tier 1 Entrepreneur Visa: Investor has approx. £200k cash to invest in setting up or taking over a UK business. Initial visa is for 3 years (extendable for further 2 years).

Tier 2 Skilled Worker Visa: Employer applies for a sponsor licence and then can apply to bring non-EU citizen to work in the UK

6. INTELLECTUAL PROPERTY (TRADEMARKS)

UK: Protection in the UK only. Fee is £200 for application in one class plus legal fees (includes searches, report and application), and the process takes 3-4 months.

EU: Protection in all 28 EU member states including the UK. Fee is €850 for application in one class plus legal fees as above and takes approx. 6 months.

The owner of a trademark can legally defend the mark against infringements.

7. DATA PROTECTION

  • The General Data Protection Regulation (GDPR) comes into force on 25th May 2018
  • Intended to harmonise European privacy laws for the ‘big data’ era.
  • Applies to all business established inside or outside the EU, which offers goods or services to EU citizens or monitors their behaviour.
  • Potential fines for breach at 4% global turnover €20m, whichever is the higher.

8. PROPERTY

  • Ownership: UK statute dictates many of the key terms and conditions in a lease.
  • Lease structure: leases are usually on a full repairing and insuring basis. Rent is quoted net of taxes, insurance and service charge.
  • On average a commercial lease is for 2-5 years.
  • It is common for tenants to receive a rent-free period of 3 to 6 months at the start of a lease.

9. BANK ACCOUNT

Opening a UK bank account:

  • Takes between 3-6 months.
  • Is cheaper to handle transactions rather than overseas bank transfers.
  • Should you need to be VAT registered, having a UK bank account expedites the process.
  • The bank will require an original passport and 1-2 utility bills (less than 3 months old), showing your current home address which need not be in the UK.

10. INVESTORS

EIS / SEIS

EIS: 30% income tax relief for an investor on investments up to £1m.

Sale of shares can be free of capital gains tax after a qualifying period.

SEIS: Available to small start-up companies with under 25 employees and £200k assets.

Investor receives 50% of the investment as income tax relief.

Disclaimer: This note does not contain a full statement of the law and it does not constitute legal advice. Please contact us if you have any questions about the information set out above.

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