This guide gives you an overview of doing business in the UK. The goods news is we can manage all your UK accounting and tax affairs, allowing you to sell your goods and services.
Most overseas companies setting up in the UK use a "limited company" structure. In this structure, a director(s) is appointed to run the business and are legally responsible for running the company and for the tax and accounting obligations - known as "director duties". The shares in the company are "owned" by the overseas parent.
The parent company normally charges management fees, charges interest on inbound loans and distributes profits by paying dividends (dividends are paid after payment of UK Corporation tax).
There are 4 taxes a company must consider:
1. Value Added Tax (VAT) - this is essentially a sales tax. It is charged at a rate of 20% on all sales. The good news is, you can reclaim any VAT you incur when you buy something. This tax must be calculated and paid to the tax authorities every 3 months.
2. Corporation tax- tax paid on the profits of the business. That is, deducting all expenses against all income. The current tax rate is 19% but the UK government has announced this rate will increase to 25% from 2023. (Although this rate will apply in "steps").
Tax Payments are made either 9 months after the accounting year end or every 3 months depending on your profit levels.
3. Payroll Services - a tax paid when you "employ staff" and pay them a wage. The tax rates and allowances are too complex to list here but essentially, the tax must be reported and paid each month to the tax authorities.
You may have "freelancers" who you pay without deducting any tax. This can sometimes be a grey area and the tax authorities are known to challenge businesses doing this if the freelancers share the characteristics of employees.
4. Withholding taxes - when a UK company pays a dividend or pays interest to its parent overseas, it may have to withhold tax (usually 10%-20%. However, I believe the UK has double tax treaties with the EU so this might not be relevant).
A director has a string of legal duties. The main taxes from my perspective are listed below. The good news is you are allowed to appoint a professional accountant to manage these for you.
This is basically the recording of financial transactions and maintaining copies of sales/purchase invoices. A company is required by UK law to keep records and can be fined heavily if it fails to do this.
2) Keeping statutory records
You must keep the public record updated with vital information such as director/shareholder information.
3) filing accounts
Each year financial statements must be prepared and filed using UK accounting standards. The disclosures in the accounts depend on the size/turnover of the company. These are signed by a director and sent to the registrar who publishes these on the public domain.
The tax authorities have higher expectations and want a "full" set of financial statements with complete disclosures and "tagged ixbrl" accounts.
4) Managing tax obligations
The UK tax authorities have strict rules on calculation and payment of taxes. They levy harsh penalties and charge interest on late submissions, errors and failures to comply.
5) Statutory audit
A small UK company is not obliged to get an independent audit. The exemption is available if your company satisfies 2 of the following criteria:
a) Turnover is less than £10.2m
b) Balance sheet value is less than £5.1m
c) Employ less than 50 staff
How we can help
1. Set up your UK business and register with all relevant authorities.
2. Manage all of your accounting, payroll and tax obligations including:
- All bookkeeping
- Calculate all taxes and submit all tax returns
- Process payroll (and provide payslips etc to staff)
- Prepare monthly management packs to measure financial performance
- Prepare financial statements
- Deal with the tax authorities on your behalf
- File your director tax return(s)
3. Provide high quality advice, we are approved and regulated by the Association of Charted Certified Accountants - a leading global accounting body.
4. Ensure your business is tax efficient
5. Work with your parent company accountants/advisors