TKEG Expat ™ United Kingdom Corporate Tax Guide

The United Kingdom’s main corporation tax rate is 25% for companies with profits above GBP 250,000. A small profits rate of 19% generally applies to companies with profits up to GBP 50,000, and marginal relief may apply between GBP 50,000 and GBP 250,000. Resident companies are generally taxed on worldwide profits, subject to relevant exemptions and treaty rules.

United Kingdom VAT Overview:

1. The standard tax rate of 20% applies to most goods and services. Domestic fuel, electricity, and certain tax-reduced goods are subject to 5% VAT. Some small traders (with a supply of less than £150,000 per year) may apply a flat rate for a specific industry to calculate VAT.
2. Most exports, food, public transport, books and publications (including electronic publications since May 1, 2020) and certain essential goods and services are subject to zero tax rates. Some land, insurance, financial services, gaming and betting, education, certain sports services, cultural services, health and welfare are exempt.
3. VAT is deductible for costs incurred for zero-rated supplies, but not for costs incurred for tax-exempt supplies.
4. VAT applicable rules and regional rules are different from direct taxes. If goods or services are provided in the United Kingdom and a person or business outside the United Kingdom does not have a place of business in the United Kingdom, they may be required to register for VAT in the United Kingdom.
5. In the case of goods, the basic principle is that the supply of goods should be taxed at the physical place at the time of supply. In the case of services, the basic guideline is to pay VAT in the jurisdiction of the customer. For B2C supplies, the basic principle is that VAT is paid in the jurisdiction of the consumer's legal jurisdiction.

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VAT declaration and payment

1. The VAT return must be completed on a scheduled time, usually every 3 months. Larger businesses may be required to file monthly statements or make monthly payments. Small businesses can apply for an annual return. In general, VAT returns must be filed 30 days after the expiration of the deadline.
2. Some small e-merchants (supply less than £150,000 per annum) may use a specific industry flat rate to calculate VAT. From 1 April 2019, businesses with turnover exceeding the United Kingdom VAT registration threshold are required to keep electronic records.
3. Taxable taxpayers with an annual turnover (including VAT) of £1,350,000 or less can carry out annual accounting. Cash accounting is available to taxpayers with an annual turnover (including VAT) of £1,350,000 or less. In addition, a flat rate scheme has been introduced for small businesses, with the aim of simplifying the accounting process for VAT.

The United Kingdom does not levy a separate payroll tax apart from employer National Insurance contributions and normal payroll withholding obligations. Employers are responsible for operating PAYE, withholding income tax and employee contributions, and paying employer National Insurance contributions under the applicable rules.

Northern Ireland remains in the EU single market:
The Northern Ireland Protocol requires Northern Ireland to remain in the EU Single Market and to continue to comply with import and export rules within the European Community. Therefore, United Kingdom goods between Great Britain and Northern Ireland are considered import and export goods. EU goods to Northern Ireland will be subject to Northern Ireland import VAT.
Goods imported from Northern Ireland into the United Kingdom are subject to VAT. Goods imported from Northern Ireland, the United Kingdom, are also subject to VAT as export goods.

Northern Ireland continues to implement the low-value cargo relief policy:
From 1 January 2021, overseas businesses selling directly to United Kingdom consumers must register in the United Kingdom and pay VAT if the value of the goods is less than £135. However, the "Low Value Goods Relief" for imported VAT on consignments under £15 still applies to Northern Ireland.

• Stamp duty is charged at 0.5% on instruments effecting sales of shares. 

Issues or transfers of shares to clearance services or depositary receipt systems that are not an integral part of an issue of share capital may attract SDRT at 1.5%.

• Transfers of bearer shares also attract stamp duty at 1.5%.
• Acquisitions of non-residential or mixed land and buildings in England and Northern Ireland are charged stamp duty land tax (SDLT) at progressive rates of up to 5.
• Acquisitions of residential property by companies and similar non-natural persons and by individuals acquiring second homes are charged at rates of up to 15%.
• Purchases of land and buildings in Scotland are subject to Land and Buildings Transactions Tax (LBTT). Residential rates are graduated up to 12%.