Why is the UK a great place to invest and expand your business?
By Andy Jones, Haines Watts
If you are looking to expand, then the UK is a great place to do business. The UK has a wide and diverse marketplace covering many industries, such as automotive, aerospace and technology, to name but a few. For anyone looking to set up a manufacturing operation, distribution hub, service operation or even European headquarters, there are many reasons why the UK is the perfect place. The UK makes a fantastic export base and is one of the leading trading nations in the world.
The interest rates are currently very low, at only 0.5%, and are reviewed monthly by The Bank of England. In February 2014, the UK’s rate of inflation, as measured by the Consumer Prices Index (CPI), fell to 1.7%. The International Monetary Fund (IMF) recently predicted that UK economic growth would reach 2.9% in 2014.
From the 1 April 2014, the UK government has put many financial incentives in place for businesses. The annual investment allowance (AIA) in relation to claiming capital allowances has been extended until 31 December 2015, meaning that the first GBP 500,000 that a business invests in capital equipment will be 100% deductible from taxable profits. Corporation tax rates have been reduced to 21%, while the main rate has been reduced to 20% from the 1 April 2015. This will then mean that the UK will have the lowest rate in the G8.
The relief that small and medium-sized companies can claim for research and development now stands at 225%, so for every GBP 1,000 spent the company can claim a deduction of GBP 2,250 against its taxable profits.
The Patent Box was introduced on the 1 April 2013 and is being phased in over four years. This will allow companies that have qualifying patents to pay a reduced corporation tax rate of 10% on taxable profits derived from specific uses of that patent.
The UK government also offers many grants for businesses looking to invest in new plants and machinery, relocate to certain areas within the UK, create new jobs and more.
Setting up a business and the regulations
The UK legal system makes it very easy to set up a business. Limited companies need to be registered with Companies House before they can begin to trade. This can be carried out online and a business can be registered in less than 24 hours. The minimum share capital can be as little as GBP 1, thereby making it very cost-effective. Once in existence, the entity must also register with HM Revenue and Customs (HMRC).
Other business structures are available, such as Limited Liability Partnerships (LLP) or unincorporated partnerships and sole traders. LLPs also need to register at Companies House and with HMRC, but unincorporated businesses only need to register with HMRC.
If the entity has a turnover of more than GBP 81,000 it must register for value added tax (VAT). This then means that a VAT rate of 20% is added to any sales made in the UK, but companies could also reclaim any VAT they are charged by other businesses in the UK. The entity must file an online VAT return each quarter and pay the difference between the VAT charged and reclaimed.
If the business intends to employ people in the UK, it must also register for Pay As You Earn (PAYE). Any salary then paid to employees would be subject to deductions of Income Tax and National Insurance, depending on the employees’ individual circumstances, and the entity would also pay Employers National Insurance, currently at a rate of 13.8% on weekly salaries above GBP 153. A monthly return must then be filed online with HMRC with payments for the deductions.
Other incentives and considerations
The purchase or lease of premises in the UK might also be subject to Stamp Duty Land Tax (SDLT) and this is payable at a rate of between 0% and 4%, which is determined by the property or lease value.
The property would also be subject to business rates payable to the local council in the area that the property is situated. Certain rate reliefs are available depending on the type, size and location of the business in the UK.
There are certain planning laws that need to be considered and permissions that must be gained when deciding to purchase land and build property.
The UK also benefits from having a first- class information and communications technology (ICT) infrastructure in place, which is essential in this world of international business.
The UK Government has also introduced new fast track rules for investors and entrepreneurs looking to invest large sums of money in the country.
Thousands of companies already make the UK their preferred choice for business investments. Many of these companies also make repeat investments each year in the UK by adding additional facilities and recruiting more employees, which is the strongest possible commercial endorsement of the UK’s dynamic business environment.
Andy Jones, Partner
Andy Jones is a partner in the Birmingham Office of Haines Watts, a GGI member. Haines Watts offer international tax planning advice for both companies and high net worth individuals along with the traditional and more compliance-based services, such as auditing, accounting, payroll and VAT services. Haines Watts can also assist in fundraising and acquiring new businesses as well as in setting up operations in the UK.
published: May 2014