Britain

Welcome to the UK

The UK is one of the world’s leading locations for foreign businesses. It is consistently ranked as the top destination in Europe for attracting foreign investment from all over the world and, indeed, is the number one destination for US investment globally. The UK is already home to over 9,000 US companies and consistently attracts between 28% and 40% of all US investment into Europe each year. Foreign companies that set up in the UK find a superb business environment, economic and political stability, and a highly skilled and flexible workforce. The UK has an international reputation for entrepreneurship, leading-edge research and development, technology, design and creativity.

The UK Business Support Network

The UK government is fully committed to assisting companies to set up and grow successfully in the UK. The lead organisation that supports foreign businesses to do this is UK Trade & Investment, a specialist government inward investment agency with commercial teams worldwide, including 10 locations across the US.

UK Trade & Investment works in close partnership with regional investment agencies in England, Scotland, Wales and Northern Ireland to support overseas companies to maximise their business objectives in the UK. In particular, UK Trade & Investment provides:

• Bespoke information on key commercial considerations, such as company formation, financial incentives, labour, real estate, transport, utilities and regulatory issues;
• Comprehensive regional and local location analysis to help overseas companies to choose the right place to set up; and
• Introductions to sector networks — such as industry leaders, universities, other centres of excellence and collaborative partnerships.

For further information, please see the UK Trade & Investment website at: www.uktradeinvestusa.com.

Forming a company in the UK

Companies House is the key government organisation that coordinates the administration of businesses in the UK. Detailed guidance on the requirements for forming a company in the UK is available at www.companieshouse.gov.uk (for England, Scotland and Wales), or www.companiesregistry-ni.gov.uk (for Northern Ireland).

Establishing a company in the UK is straightforward. There are no separate rules for foreign nationals. The main types of business structure available are:

• Private company limited by shares, where liability is limited to the amount unpaid on shares that each member holds;
• Public limited company, where the company’s shares are offered for sale to the general public and liability of the members is limited to the amount unpaid on shares held by them;
• Private company limited by guarantee, where liability is limited to the amount that members have agreed to contribute to the company’s assets if the company is wound up; and
• Private unlimited company, where there is no limit to the members’ liability.

The most common business structure used in the UK is the company limited by shares, either as a private limited company or as a public limited company (most foreign businesses choose to set up as private limited companies in the UK). Certain mandatory documents, such as the Memorandum of Association and Articles of Association, must be filed with Companies House in order to establish a business in the UK.

You should always seek independent professional advice if you are considering establishing a company in the UK, particularly if you are planning a joint venture, branch or partnership.

Business incentives available in the UK

To support the development and growth of businesses across the UK, there are several incentives and grants available. The Selective Finance for Investment/Regional Selective Assistance programme. This is a discretionary incentive programme operated by the UK government that is designed to support companies that are opening a new facility or expanding or modernising an existing facility within an Assisted Area of the UK. For more information, please see www.dti.gov.uk/regionalinvestment/

There are a wide range of initiatives that offer assistance to companies undertaking research and development (R&D) in the UK. The major form of assistance is through tax credits, which allow companies to deduct 150% (for small and mediumsized companies) or 125% (for large companies) of qualifying expenditure on R&D activities when calculating their profit for tax purposes. For more information, please see www.inlandrevenue.gov.uk/randd/index.htm

Another frequently used R&D incentive is the Grant for Research and Development. This incentive provides support for both individuals and small to medium-sized businesses in order to research and develop technologically innovative products and processes. For further information, please see:

– in England: www.dti.gov.uk/r-d

– in Northern Ireland: www.investni.co.uk/smart

– in Scotland: www.scotland.gov.uk/Topics/ Business-industry/support/16879/6780

– in Wales: www.wda.co.uk/SMARTCymru

Taxation in the UK - Business and personal

The UK has an internationally competitive tax system for businesses. For example, the rates of corporation tax for 2005/06 are as follows:

• For companies with profits of up to £10,000, the tax rate is zero;
• For companies with profits of £10,001 to £50,000, marginal relief eases the transaction from the starting rate of zero to the small companies’ rate of 19%;
• For companies with profits of £50,001 to £300,000, the tax rate is 19%;
• For companies with profits of £300,001 to £1.5 million, marginal relief eases the transaction from the small rate of 19% to the main rate of 30%; and
• the main rate of 30% is paid by companies with profits of more than £1.5 million.

A foreign company with a branch in the UK pays corporation tax on the trading profits of the branch’s UK activities. Capital gains and investment income connected with the branch’s UK activities are also taxed. However, foreign tax paid can generally be credited against the company’s UK tax bill, so reducing the amount that has to be paid in the UK.

For individuals, the UK tax system is also internationally competitive. All UK residents are entitled to a “basic personal allowance” (an amount of income on which individuals do not have to pay tax). In 2006/07, the basic personal allowance is £5,035 (other reliefs and allowances may be available, depending on individual circumstances).

For income above the personal allowance, the tax rates for 2006/07 are as follows:

• 10% on the first £2,150 of taxable income (known as the “starting rate”);
• 22% on taxable income between £2,151 and £33,300 (the “basic rate”); and
• 40% on taxable income over £33,300 (the “higher rate”).

There is a range of other advantageous tax programmes for individuals in the UK. For example, for the tax year 2006/07, individuals are exempt from Capital Gains Tax on the first £8,800 of profits made from the sale of an asset. For more information and guidance on all aspects of company and personal taxation, including a range of helpful booklets, please see www.hmrc.gov.uk

Entry to the UK

There are a variety of ways that individuals can enter the UK, for example by obtaining a visa, a work permit, or a place through the Highly Skilled Migrant Programme.

Appropriate entry clearance (obtained before arrival in the UK) must be held by all non-European Economic Area nationals entering the UK if they:

• Are coming to the UK to establish themselves in business or self-employment; or
• Are representatives of overseas companies that have no branch, subsidiary or other representative in the UK.

Further advice and applications for entry clearance must be made to a UK “Overseas Mission” (such as a British Embassy, High Commission or Consulate General). For contact details of your nearest UK Overseas Mission, please see www.fco.gov.uk.
The options for entering the UK are as follows:

Visas

Whether you will need a visa to enter the UK depends on your country of origin and your personal details. If you are coming to the UK as an investor, you will probably need a visa (unless you are a national from the European Economic Area). However, you may be exempt if you can claim British Citizenship or another connection with the UK — for instance, if you are a Commonwealth citizen and you can prove that one of your grandparents was born in the UK.

In addition, a UK Residence Permit is also required for nationals of non-European Economic Area countries that are planning to stay in the UK for more than six months. UKvisas is a government service that handles entry clearance for foreign nationals wishing to enter the UK. Preliminary checks on UK visa requirements can be made by filling out the online visa enquiry form at www.ukvisas.gov.uk

Work permits

Any non-European Economic Area national who wishes to come to the UK to work must, with limited exceptions, have a work permit. If foreign nationals are coming to the UK as inward investors, they will probably not require a work permit, as long as the necessary entry clearance has already been obtained from a UK Overseas Mission. This applies if individuals are coming to the UK to:

• Set up a new business;
• Take over an existing business;
• Join an existing business as a partner, director or sole trader;

or

• Establish a UK branch or subsidiary of an overseas firm.

Individuals do not need work permits if they:

• Are nationals of countries in the European Economic Area;
• Are Commonwealth citizens who were allowed to enter or remain in the UK on the basis that a grandparent was born in the UK;
• Are husbands, wives or dependent children under 18 of people who hold work permits or who are exempt for any of the above reasons, providing the endorsement in their passport places no restriction on their employment in the UK;
• Were born in Gibraltar; or
• Are people with no conditions attached to their stay in the UK.

For application forms and guidance notes on UK work permits, please see www.workpermits.gov.uk or telephone +44 (0)8705 210224.

Highly Skilled Migrant Programe

The “Highly Skilled Migrant Programme” is designed to allow individuals with exceptional skills and sought-after experience to come to the UK to seek and take work. Further details and application forms for the Highly Skilled Migrant Programme are available from: www.workingintheuk.gov.uk

Summary

The UK is one of the world’s most attractive locations for international businesses and is the number one destination for US investment globally. Establishing a presence in the UK, for companies and individuals, is uncomplicated and pragmatic. For further information on any aspect of setting up a business in the UK, please do not hesitate to contact UK Trade & Investment — they have unrivalled knowledge of business opportunities across the UK and can advise on the best ways for foreign companies and individuals to enjoy the UK’s innovative, highly skilled and entrepreneurial business environment.

 

Disclaimer

Information changes from time to time. Whilst we have attempted to ensure the accuracy of information within this article, please contact the organisations mentioned to confirm any data that you intend to rely on. We do not warrant that this article is complete or accurate, and we are not legally responsible for errors or omissions. Queries should always be directed toward qualified professionals in the appropriate area on an individual and formal consultation basis.

 

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