DOING BUSINESS IN THE UNITED KINGDOM
United Kingdom is a high-income economy with the 6th highest GDP in the world. The most important sectors of the UK’s economy in 2016 were wholesale and retail trade and transport.
The United Kingdom is ranked 9 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings in 2018.
The politics in the United Kingdom operate within a ‘constitutional monarchy’. While theQueen is head of state, the Prime Minister is head of government.
The UK has an unwritten constitution. The legal system in the UK is a common law one which means the decisions of the senior appellate courts become part of the law.
Set up business in the UK
There are three principal ways to carry on business in UK:
- UK establishment
- Private limited company
- Corporate limited liability partnership.
A UK establishment is either a branch or a place of business that is not a branch but located within the UK. It should be noted that an establishment is not a separate legal entity from overseas parent and does not have limited liability on its own right.
Such establishment needs to be registered and you must provide notably the following information on the specific form:
– official name of the company and country of incorporation,
– address of the establishment;
– details relating to management bodies and representatives of the company.
Private limited company
A private limited company is a separate legal entity which have its own assets and liabilities. This means the company has separate finances.
A private limited company must have at least:
– one director,
– appoint auditors,
– keep registers of members,
– deliver an annual statutory account to the Registrar of Companies,
– a registered office address in the UK.
Private limited companies are the most form of trading entity in the UK and offer flexibility of ownership. It can be incorporated with one or more shareholders.
Limited Liability Partnership
Introduced in April 2001 by the Limited Liability Partnerships Act 2000, a hybrid form of business entity between a partnership and a company.
Like a company, an LLP is a body corporate and therefore a separate legal entity and an LLP member’s liability is limited.
However, like a partnership the relationship between the LLP members is governed by private agreement. An LLP does not have shareholders or directors and is taxed like a partnership.
Each member pays tax on their share of the profits, as in an ‘ordinary’ business partnership, but isn’t personally liable for any debts the business can’t pay.
You’ll need to:
– choose a name
– have a registered address – this will be publicly available
– have at least 2 ‘designated members’ with a limited liability (A member can be a person or a company, known as a ‘corporate member’.
– have an LLP agreement that says how the LLP will be run
– register the LLP with Companies House
Corporate tax income
UK resident companies pay corporation tax on their gains (i.e dividends) at the relevant corporation tax rate.
A company that is resident in the UK for tax purposes is liable to corporation tax on its worldwide profits and chargeable gains.
A UK Establishment of a non-resident company is liable to UK corporation tax on trading income arising through the UK establishment, income from property or rights held in the UK and chargeable gains on the disposal of assets situated in the UK.
Losses may be utilised to:
– Reduce other profits of the same period;
– Reduce profits of any description in the prior period;
– Reduce profits of the same trade in future periods; and
– For group of companies, as group relief in the same accounting periods to other companies’ group.
In the UK, an individual is assessed for income tax for the financial year starting on 6 April in one year and ending on 5 April in the following year on income
Capital gain tax
Individuals who are resident in the UK are liable to capital gains tax on:
– worldwide gains – if domiciled in the UK; and
– gains remitted to the UK – on the remittance basis (in practice the remittance basis can help to prevent double taxation because individuals only pay UK tax on foreign income and foreign gains if and when they are brought (or ‘remitted’) to the UK)
– a general duty to provide a safe place of work. Employers must take out liability insurance, consult the employees over health and safety issues;
– to provide a written statement of terms and conditions of the employment within two months;
– not to discriminate against employee on the grounds of race, colour, nationality, gender, ethnic origin.
– to pay employees at least the national minimum wage which is hourly fixed at £8,21 for individuals aged 25 and over
– a requirement not to allow a worker to work beyond 48 hours per week without express consent
– to give each employee a minimum amount of 28 days paid holiday each year.
Moreover, various rights are grant to employees in order to protect them in the event of termination of employment. These include a minimum notice and a right to statutory payment on being made redundant with more than two years’ service..
Where the employment exceeds one year, a dismissed employee exceeds one year, a dismissed employee has a right to claim compensation for unfair dismissal and that claim will be successful unless the employer can show a permitted reason for termination and that a fair and legal process has been followed.