Taxation of legal entities in the UK:
- Income tax.
- Income tax on fuel production (only oil and gas companies).
- Tax on income from the sale of fixed assets (only private entrepreneurs and trust funds).
- Value Added Tax (VAT – 17,5%).
- Excise taxes on petroleum products.
- Annual excise tax on trucks, taxis and buses.
- Tax on tenants of non-residential premises (in some counties).
Taxation of individuals in the UK:
- Income Tax – Income Tax.
- National Insurance Contributions – deductions to retirement and insurance funds.
- Capital Gains Tax – capital gains tax.
- Inheritance Tax – inheritance tax.
- Council tax – municipal tax on street maintenance, garbage collection, etc.
- Stamp Duty – stamp duty when purchasing real estate.
- Annual excise tax on owners of personal transport (if the car was issued after 1973).
- Taxes on property insurance and ownership of the TV (black and white, by the way, too).
- The tax on residential buildings that has survived in some UK counties.
Taxation of UK companies
The UK tax system consists of nationwide and local taxes. National taxes: personal income tax, corporate income tax (corporate tax), capital gains tax, oil revenue tax, inheritance tax, value added tax (VAT), customs duties and excise taxes, and stamp duty . National taxes in the UK represent more than 90% of tax revenues to the state budget. Local taxes include only property tax, which accounts for about 10% of tax revenues.
Any income received on the territory of the United Kingdom shall be taxed regardless of the place of residence or formal residence of the person or the country of registration of the company.
In the case of private individuals, this can be understood in this way. Persons who are not resident taxpayers in the UK only pay a tax on profits received in the UK. Income earned outside the country is not taxable.
For individuals who are resident tax residents in the UK, the tax is taxed on any income received in the UK and abroad.
For individuals who are resident tax residents in any country other than Great Britain, income received in the territory of England is taxable. Profit earned outside its borders is taxable only if it is imported into the territory of the United Kingdom. (In this case, the UK is a country with preferential tax treatment). The domicile also affects the inheritance tax and capital gains tax.
UK tax calculation is based on audited accounts that is provided to the Inland Revenue Office at the end of each financial year of the company.
The tax year (fiscal year) in England begins on April 6 and ends on April 5 next year. However, the company may at its discretion determine the terms of the end of the fiscal year.
Corporate Tax (Company Tax)
The UK resident company is subject to a corporate tax on all sources of income and capital gains, wherever they may be.
A resident of the United Kingdom for tax purposes is a company registered in the United Kingdom or central government and controlled in the United Kingdom. A UK non-resident company that operates in the United Kingdom through permanent reinsurance (located in the United Kingdom) is liable for corporate income tax on all incomes related to this permanent establishment.
The corporate tax rate is set separately for each fiscal year beginning April 1. If the company’s reporting period does not coincide with the fiscal year, its profit must be distributed over time and, accordingly, the applied corporate tax rate.
The rate for the period from April 1, 2016 to March 31, 2017 was 20%, for the period from April 1, 2017 to March 31, 2018 – 19%. From April 1, 2020, the tax rate is expected to decrease to 17%
If taxable profits can be attributed to the use of patents, a reduced tax rate is applied, which for the period from April 1, 2017 is 10%. At the same time, the reduced rate applies not only to income from patent royalties, but also can be applied to profit from the sale of a patent product.
Dividends received by British companies from British and non-British companies are generally exempt from corporate tax if the conditions are met. These conditions are more severe for small recipient companies.
Capital gains tax
Capital gains are considered to be profits from the sale of capital assets. Capital assets can be both real estate and financial assets (stocks, bonds, etc.). The capital gains tax is charged at a standard corporate tax rate of 19%.
Non-resident companies are taxable only on capital gains from the sale of acts that are used in an agreement or for trading purposes through a permanent establishment located in the United Kingdom. From April 2015 UK non-residents pay for certain types of residential property alienation in the UK.
Capital losses can only be offset by capital gains that arise in the same fiscal year or are carried over indefinitely to offset future capital gains.
VAT is charged on the supply of most goods and services provided by companies in the UK. VAT is levied at each stage of the supply chain, usually when the ownership of the goods passes, or when services are performed.
VAT registration is mandatory for British companies whose turnover exceeds the set threshold of GBP 85,000. Voluntary registration is also possible, when the turnover does not exceed the established threshold.
There are no registration thresholds for VAT companies that supply taxable goods and services to the UK, which do not have a business address in the UK. Such companies must register for VAT immediately after taxed supplies to the UK, unless the reverse charge mechanism applies (applicable to most services provided by a foreign company to a resident company that is a VAT payer).
The standard UK VAT rate is 20%.
Reduced rate is 5%. Under this tax, some construction work and energy-saving products are taxed. At the rate of 0%, you will be charged for exporting goods from the UK, as well as supplies of some goods and services (eg books, food, baby clothes). VAT exemptions include insurance services, educational services, financial services, as well as health and social services. Taxable companies with annual taxable sales of up to € 150 000 can simplify VAT accounting using the “fixed rate” scheme. According to this scheme, companies account for VAT on turnover, and not on each separate agreement.
Income tax withholding tax
Domestic and foreign dividends received by resident companies in the UK are generally not subject to tax subject to different conditions, depending on whether the recipient is a large company.
In case of payment by UK resident companies of interest and royalties in most cases double tax treaties are avoided, otherwise the tax rate will be 20%.
The minimum social contribution of the employer to April 6, 2018 is 1.0% of the qualifying income of the employee, until April 6, 2019 it will amount to 2.0% of income, and after April 6, 2019, it will amount to 3.0%.
Employee income of over £ 156 per week is paid by the employer at a rate of 13.8%.
The tax on additional benefits, benefits and benefits from the employer on behalf of the employee (Fringe Benefits Tax) is not charged.
The local tax is levied on a tenant of commercial real estate in the UK based on the estimated value of the property at a rate determined by the central government.
Rules of TCU in the UK
The British law on transfer pricing describes in detail the procedure for transactions between related parties, based on the internationally recognized principle of “extended hand”. For tax purposes, such transactions are treated in the light of the profits that may arise if the transactions were made by independent parties in comparable conditions.
The UK transfer pricing legislation also applies to agreements between any related entities in the United Kingdom. Exempt from the application of transfer pricing rules, most small and medium-sized companies.
Small companies are considered to be companies with no more than 50 employees, and the annual turnover or balance sheet of which is not less than 10 million euros. Companies with no more than 250 employees and an annual turnover of less than EUR 50 million or a balance sheet of less than EUR 43 million are considered as average.