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UK tax advice

For overseas companies operating in the UK, tax can be time-consuming and costly. Our tax department has the expertise and experience to deliver advice and administration for all aspects of UK tax. Below we take a look at the basics of UK VAT and Corporation Tax.

UK Value Added Tax (VAT) Registration

What is UK VAT?

In the UK, VAT is chargeable on taxable supplies produced by taxable persons. Credit for allowable VAT paid to other businesses and the net balance is payable or reclaimable - normally on a quarterly basis. UK VAT paid on purchases and expenses (inputs) is set off against VAT charged on sales (output tax). Only the net difference is paid to the government (i.e. tax on the value added).

In a start-up situation, or when trading as a branch operation and carrying out marketing activities only, there may be expenses but no sales. In this case the input tax can be reclaimed from HMRC, provided the UK entity is VAT registered.

Thresholds for UK VAT registration

A UK trading entity must register for VAT if its turnover is expected to be more than £82,000 per annum. Companies that are not established in the UK and make taxable sales of goods or services in the UK must register and account for UK VAT. This means that any foreign business trading in the UK (where the place of supply is the UK) will be required to register for VAT. This will not affect EU businesses covered by the distance sales rules, as these rules will still apply to those businesses.

The standard rate for VAT in the UK is 20%. Various criteria must be met in order for a reduced rate or zero rating to be applied before goods can be considered exempt or outside the scope of VAT.

Can I reclaim UK VAT?

Provided that the UK entity is registered for VAT, a business can generally claim the VAT back on its purchases. This is possible where the purchases relating to the goods or services sold are liable for VAT. Some VAT cannot be recovered. VAT in the UK is complicated and it can be a significant liability for your UK business if it is not properly understood. When we initially speak with an overseas company looking to set up in the UK, we discuss their objectives as well as if and when it is appropriate to register for VAT.

UK Corporation Tax

Corporation Tax is charged on the taxable profits of a UK resident company by reference to the total profit from within the accounting period. A UK-based company is liable for UK Corporation Tax on its worldwide profits, including the chargeable gains. Corporation Tax is currently 20%, this will be reduced to 18% in 2020.

When is Corporation Tax due for a UK company?

For small and medium-sized companies (fewer than 250 employees):

  • Nine months and one day after the end of the accounting period

For large companies (more than 250 employees):

By instalments:

  • The 14th day of the 7th, 10th, 13th and 16th months after the commencement of a 12 month accounting period
  • Any balance is due nine months and one day after the end of the accounting period. We are able to prepare computations and file UK Corporation Tax Returns both for a UK branch or subsidiary of an overseas company.

Contact our business relocation team

South Africa

Regent Square
Doncaster Road
Kenilworth 7708
Cape Town
t: +27 (0) 21 657 2120

United Kingdom

Castlewood House
77/91 New Oxford Street
London
WC1A 1DG
t: +44 (0) 20 7759 7514

Australia

Suite 8.06
9 Yarra Street
South Yarra
Melbourne VIC 3141
t: +613 (0) 86 514 500

Hong Kong

Level 1102
The Lee Gardens
33 Hysan Avenue
Causeway Bay, Hong Kong
t: +852 3959 8681

Our phone lines are currently down for scheduled maintenance. Please email us at accounting@sableinternational.com if you need to contact us urgently.

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