Expanding into the UK is exciting, but it is important that you understand the tax system and prepare your new venture or subsidiary for it.
Get the basics right from the start and you will reduce risk, stay compliant and run a more efficient operation once you are up and running here.
Our team at Brown Butler has put together some tips to help you get set up effectively to tax in the UK from the get-go.
Start with structure
Before anything else, decide how your UK presence will be set up: as a subsidiary, a branch, or through a joint venture.
The choice here is not just administrative, it determines your tax obligations directly.
Set up a UK subsidiary, for example, and you have created a company that is legally separate from its parent, generally responsible for its own Corporation Tax bill.
It is important to understand the implications of your business structure by speaking with a professional adviser prior to the business’s establishment.
Payroll and employee tax
Hiring staff in the UK means registering as an employer with HMRC and running PAYE, deducting Income Tax and National Insurance from wages before those amounts go to HMRC.
If you haven’t operated in the UK, it is easy to get caught up in the rules, but getting this wrong brings penalties and unwanted attention from HMRC.
Do not overlook the extras either, such as company cars, private medical cover and relocation packages, which are common for internationally mobile staff.
Each of these benefits can create its own additional tax liability that employers need to account for.
Corporation Tax
In the UK, Corporation Tax is the main form of taxation for incorporate companies and applies to trading profits, investment income and any gains from selling or disposing of assets.
New companies must register for this tax and their first return (CT600) is due 12 months after the end of their accounting period, while the actual tax payment is due nine months and one day after the same period. Be aware that in the UK, a new company’s first accounting period can stretch up to 18 months.
The calculation of Corporation Tax can, at first glance, seem fairly complex:
| Profit band | Rate |
| Up to £50,000 | 19 per cent |
| £50,000 to £250,000 | 25 per cent, though marginal relief may reduce the effective rate |
| Over £250,000 | 25 per cent |
There are a number of tax reliefs and allowances that may affect how much Corporation Tax you are required to pay, so ensure you seek advice beforehand from an experienced tax specialist.
VAT – Know your threshold
VAT is a version of a sales tax that applies to a wide range of goods and services sold in the UK, with its own separate rules covering imports, exports and cross-border supplies.
Registration becomes compulsory once taxable turnover passes £90,000, and the standard rate is 20 per cent, though reliefs and reduced rates exist depending on what you do.
Reviewing your VAT position before you get anywhere near that threshold protects cash flow and keeps compliance risk down, particularly if goods or services are moving across borders.
To those not used to VAT, the intricacies of the tax can mean that it is easy to be caught out, resulting in unexpected penalties.
Helping you get established in the UK
UK tax rules shift often enough that navigating them alone is genuinely difficult, especially while you are also focused on getting a new operation off the ground.
