Her Majesty's Revenue and Customs

UK Corporate & VAT Rates (2014/15)

Taxation of UK Companies

The UK tax system is highly developed but relatively straightforward and efficient compared with many of its West European counter-parts. The UK also has some of the most developed company focused anti-avoidance provisions but nonetheless is still one of the most corporate friendly locations in Europe bettered only by countries such as the Republic of Ireland. BASIC FACTS: In synopsis, the corporate tax rate in the United Kingdom is as follows:

Standard Company Rates of Tax

(From 1st April, 2015)

20 % for companies with taxable profits up to £300,000.00

For companies with taxable profits between £300,000.00 and above will be taxed at a rate of 21% up to March 2015 and thereafter at 20%.

Capital Gains Tax

The rate of capital gains tax for individuals and trusts is 28% or 10% where Entrepreneurs’ Relief can be claimed. Basic tax rate individuals only pay 18% capital gains tax.

Value Added Tax

As with all other European Union member states, the United Kingdom employs a value added tax system. In simple terms, VAT is a tax levied upon consumer expenditure. It does not, at least for VAT registered undertakings; apply to transactions carried out in the course of business. However, to ensure the extraction of the tax, all suppliers of applicable goods and/or services must charge VAT which can then be reclaimed by the receiving VAT registered entity. If further sales are made, then the process is simply extrapolated until, if appropriate, an end consumer is found. Unlike many other countries the UK only has a standard rate of 20% together with a large number of zero rated goods. VAT on fuel and power is 8%. In addition, there are also exempted items which are totally outside the ambit of the tax. The point being that the latter do not, on the assumption that all the goods and/or services dealt with are exempt, require the establishment of a VAT input and output system. On the one hand, this circumvents unnecessary bureaucracy but on the other it means that VAT cannot be reclaimed on purchases. In the case of zero-rated goods however it is necessary to establish such a VAT input and output system but of course the VAT will be reclaimable on purchases. Thus, it is quite possible that a firm selling zero rated goods will, on the basis that some of its purchases are subject to the normal 20% rate, receive rebates from the appropriate Customs & Excise office (the administrating body for VAT). Of course, in reality most firms will find that they will have exempted, zero and full rate inputs and outputs requiring the creation of two different recording methods. Finally, it should be noted that VAT is not chargeable on goods exported outside of the European Union and that, under the current provisions, VAT need not be charged where the recipient of the good and/or service is another VAT registered entity located in one of the member states of the EU. All that is required is that there is an exchange of VAT numbers

Example Exempted Items

  1. Most domestic land & building transactions.
  2. Most banking services
  3. Government duty on registering a limited company.
  4. Most direct and indirect insurance related services.
  5. Most form of betting including the national lottery.
  6. Services provided by the Post Office

THE FIRST BEING FOR EXEMPTED AND THE SECOND FOR ZERO AND STANDARD RATE GOODS AND/OR SERVICES

EXAMPLE ZERO RATED ITEMS

  1. Most food items save those sold through catering establishments except ice cream and confectionery.
  2. Most domestic water and sewerage supplies.
  3. All books, periodicals, magazines and newspapers.
  4. Prescription drugs.
  5. Children's clothing, and shoes
  6. Charities.

Other Taxes: Apart from corporation tax, VAT and social welfare contributions, the only other major outgoings to be faced by a British undertaking would be commercial rates which are generally quite reasonable and under the direct control of the Central Government and certain stamp duties. These normally relating to property acquisition and the registration of securities

For more information on UK Company Formation services, please speak to a tax planning consultant