Insight

Britain is Great for business

September 2014


A strong financial sector and low interest rates provide access to funding for both start-ups and established businesses. Banks are widely promoting they are "open for business" and the UK Government is encouraging them to lend.

The economic outlook is positive: the UK expects to grow faster in 2014 than any other G7 economy, with capital investment by businesses being a major factor. While the service sectors continue to lead the growth, both manufacturing and construction are also on the up.

The employment market is buoyant with unemployment rates at their lowest since 2008. This, along with a rising property market, has led to increased consumer confidence.

Both consumers and businesses embrace technology, and Tech City - the East London technology cluster - is fast developing into one of the world's leading technology, media and telecoms hubs.

The UK has a proud history of innovation and entrepreneurship. These qualities continue to be encouraged through various tax incentives and reliefs, creating an attractive environment for both businesses and their investors. These include:

  • Enterprise Investment Scheme (EIS) - provides income and capital gains tax relief for investors in qualifying unquoted companies.
  • Seed Enterprise Investment Scheme (SEIS) - a junior version of EIS.
  • Substantial shareholder relief - exempts gains made by qualifying trading companies on disposals of another trading company, where at least a 10% shareholding was held.
  • Entrepreneurs' Relief - available to individuals on qualifying business assets, including shares in a trading company or group, reducing the capital gains tax rate on the first £10m (a lifetime limit) of gains from a standard rate of 28% to 10%.
  • Research and development (R&D) - enhanced tax relief, 225% for small and medium-sized companies, available on R&D revenue expenditure.
  • Patent Box - a reduced 10% corporation tax rate on patented inventions.
  • Annual investment allowance - provides 100% tax relief in the year of acquisition on qualifying plant and machinery up to an annual limit of currently £500,000.
  • Enterprise zones - there are currently 24 enterprise zones encouraging new businesses through various incentives.

The UK has an internationally competitive tax regime, and from 2015 it will have a single corporation tax rate of 20%. The UK also has an extensive network of global double-taxation treaties. Further, dividends do not attract withholding tax and generally holding companies do not pay tax on any dividends they receive from both UK and overseas subsidiaries.

There are very few barriers to investing or commencing trade in the UK. There are several business structures, the most common being:

  • Sole trader - running your own business as an individual with minimal formalities. You have unlimited liability for the businesses debts.
  • Partnership - running your business with a partner or partners and sharing the profits. Each partner is jointly and severally liable for the debts of the partnership.
  • Limited liability partnership (LLP) - a separate legal entity, governed by aspects of company law, with limited liability protecting the personal assets of the partners, referred to as members. However, the profits are taxed as if it were a partnership.
  • Private limited company - a separate legal entity owned by the shareholders with their liability limited to their investment. The company is run by the directors, who are often also the shareholders. All profits belong to the company and are subject to corporation tax. The profits after corporation tax are available for distribution to the shareholders.
  • Public limited company - the same as a private limited company except the shares can be traded on a stock market. Any company listed on a UK stock market must adhere to the associated rules and requirements, which can be very onerous.

In addition, a representative office or branch establishment are also options suited to a business looking for a minimal presence in the UK. The most appropriate structure will depend on several factors and it is important that you seek professional advice.

The UK's current economic climate, long and successful trading history, solid business infrastructure and promotion of investment and innovation all contribute to making it an attractive proposition to investors and an ideal location to conduct business.

 

Author: Lee Facey