United Kingdom: audit, reporting and optimization of taxation of British companies and individuals: VAT, income tax and capital gains in Great Britain

Basic taxes (briefly)

Personal tax 20-45%
Corporate tax (in detail) Main rate - 19%
Capital gains tax. Details 20%
VAT. Details 20%
Other taxes Real property tax; Inheritance tax; National Insurance Conrtributions
Government fee
Stamp duty 0.5%

International tax agreement

Albania, Algeria, Argentina, Armenia, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Barbados, Belarus, Belgium, Belize, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Brunei Darussalam, Bulgaria, Cameroon, Canada, Cayman Islands, Chile, China, Colombia, Croatia, Cyprus, Czech Republic, Côte d'Ivoire, Denmark, Egypt, Estonia, Falkland Islands (Malvinas), Faroe Islands, Fiji, Finland, Former Yugoslav Republic of Macedonia, France, Gambia, Georgia, Germany, Ghana, Greece, Grenada, Guernsey, Guyana, Hong Kong, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Jamaica, Japan, Jordan, Kazakhstan, Kenya, Kiribati, Korea (Republic of), Kosovo, Kuwait, Kyrgyzstan, Latvia, Lebanon, Lesotho, Libya, Lithuania, Luxembourg, Malawi, Malaysia, Malta, Marshall Islands, Mauritius, Mexico, Moldova (Republic of), Monaco, Mongolia, Montenegro, Montserrat, Morocco, Myanmar, Namibia, Netherlands, New Zealand, Nigeria, Norway, Oman, Pakistan, Panama, Papua New Guinea, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, Saudi Arabia, Senegal, Serbia, Sierra Leone, Singapore, Slovakia, Slovenia, Solomon Islands, South Africa, Spain, Sri Lanka, Sudan, Swaziland, Sweden, Switzerland, Taiwan, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Tuvalu, Uganda, Ukraine, United Arab Emirates, United States, Uruguay, Uzbekistan, Venezuela, Viet nam, Zaire, Zambia, Zimbabwe.
   
Anguilla, Antigua and Barbuda, Aruba, Bahamas, Belize, Bermuda, Dominica, Gibraltar, Grenada, Guernsey, Isle of Man, Jersey, Liberia, Liechtenstein, Nederlandse Antillen, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, San Marino, Turks and Caicos Islands, Virgin Islands, British


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Taxation of English Partnerships

An LLP and its members are required to register with HM Revenue and Customs (HMRC).

Partnerships, including limited liability partnerships (LLPs), are "transparent" for tax purposes. This means that the partnership itself is not subject to income tax. Instead, partners pay tax on the partnership's profits in their respective shares.

In general, for tax purposes, it is recognized that the partners earn profits/income as they are generated by the partnership (without any distribution).

In doing so, the partnership files tax returns. Both the partnership and the partners get on the tax rolls, the partners are individuals - as self-employed. The self-employed also pay social contributions.

The partnership gets on the VAT books, reports and pays VAT in the usual manner.

If the partners in the LLP are not UK tax resident and the activities of the LLP do not take place in the UK, there is no income from UK sources, there may be no UK tax consequences.

Personal Income tax

Individuals who are UK residents and whose permanent residence (domicile) is in the UK are liable to pay income tax on their worldwide income. UK residents without a UK domicile can benefit from reduced taxation of income and assets outside the UK. If the resident is not domiciled in the UK, taxation may be different.

Individual income tax is levied at progressive rates with some exceptions and peculiarities:

  • 20% - on income 0 to 37,700 GBP;
  • 40% - on income between 37,701 and 150,000 GBP;
  • 45% - on income from 150,001 GBP.

Dividend income is taxed at rates from 7.5% to 32.5%, depending on the amount of the dividend.

There are non-taxable thresholds for certain types of income.

Capital gains tax

Capital gains up to 12 300 GBP are tax exempt.

Profits over this amount and up to 37,500 GBP are taxed at the rate of 10%.

Amounts above this limit are taxed at the rate of 20%.

Profits from the sale of housing, which are not exempt from taxation, are taxed at 28% and 18%, depending on the amount of profit.

Income tax

UK tax resident company pays income tax on its worldwide income.

Profits of foreign permanent establishment may be excluded from the tax base at the option of the taxpayer. Non-resident companies pay tax on profits earned in the UK.

The basic rate of income tax is 19%.

Capital gains are taxed at the normal rate of income tax.

Gains from the sale of 10% or more of the shares in a company are generally not taxable. This exemption does not apply to sales of companies acquired in the previous year or to companies not in business.

In most cases, dividends from foreign sources, as well as dividends from companies in the UK, with some exceptions, are not taxed.

Withholding tax

No withholding tax is imposed on dividend payments.

Tax is withheld on payments of interest and royalties at a rate of 20%. There are exceptions for some royalties and interest, such as interest on circulating Eurobonds, interest on short-term (not more than one year) loans, etc.

Tax may be withheld on certain other income payments.

VAT

The standard rate of VAT is 20%.

A reduced VAT rate of 5% is levied on certain types of goods and services.

Stamp Duty

Stamp duty may be charged at a rate of 0.5% (1.5% in some cases) on stock transactions.

Stamp duty of 5% may be payable on the acquisition of non-residential property. Stamp duty on the purchase of residential property is 15% (if the purchaser is a natural person and the property to be purchased is the only home, the tax is charged on a progressive scale up to 12%).

As of April 1, 2021, an additional 2% will be charged if the purchaser of the residential property is a non-resident.

Stamp duty is also levied on rental properties.

There are special rules in Scotland and Wales.

Property taxes

The local authorities levy taxes on real estate located in the respective region.

Also if the owner of residential property is not an individual, and the value of the property is 500,000 GBP or more, then property tax (ATED) is paid at the rates set in pounds sterling and depends on the value of the property. This tax may not be levied if the property is rented out, and in some other cases.

Inheritance and Gift Tax

Inheritance Tax (IHT) is levied on the value of the deceased taxpayer exceeding 325,000 GBP. This tax can also be levied during the taxpayer's lifetime on certain transactions (the most common case being the transfer of property to a trust.

In addition, the transfer of property no earlier than 7 years before the taxpayer's death is also subject to this tax.

Persons without domicile (or imputed domicile) pay this tax on UK property.

Transfers of property between spouses both during life and posthumously are not subject to this tax unless the spouse with a domicile transfers the property to the spouse without a domicile and the value of the property exceeds 325,000 GBP.

Social security contributions

Such contributions (NIC) are paid by employers, employees and the self-employed.

NIC at a rate of 12% applies to employee remuneration between 184 and 962 GBP per week and at a rate of 2% on remuneration above this amount.

Employers pay NIC on employee remuneration at 13.8%.

The self-employed pay NIC at a rate of 9% on income between 8,632 and 50,000 GBP per annum and at a rate of 2% on the excess.

CIC rules

UK companies may be required to pay tax on the profits of controlled foreign companies. The main purpose is to tax profits that have been artificially taken out of taxation in the UK.

A number of tests are applied to determine the tax liability. In particular, it is determined whether the profits of the foreign controlled company are generated in connection with significant functions performed in the UK.

There are various exceptions.

UK exiting the EU (BEXIT)

The transition period for the UK's exit from the EU ended at the end of 2020. The parties had time before the end of the year to conclude a trade and cooperation agreement, which provides, among other things, for the non-application of customs duties in mutual trade, provided certain conditions are met.

The UK will no longer have access to EU directives on subsidiaries and parent companies, interest and royalties, and reorganizations. However, this may be largely offset by the existence of bilateral tax agreements between the UK and EU member states.

Changes in the relationship mean additional administrative procedures, for example, UK companies selling goods to the EU may need to register for VAT purposes in different EU countries.

There are other consequences of leaving the EU to consider.

Double taxation treaties

The UK has entered into the following tax information exchange arrangements with 153 jurisdictions:

132 DTCs: Albania, Algeria, Argentina, Armenia, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Barbados, Belarus, Belgium, Belize, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Brunei Darussalam, Bulgaria, Cameroon, Canada, Cayman Islands, Chile, China, Colombia, Croatia, Cyprus, Czech Republic, Côte d'Ivoire, Denmark, Egypt, Estonia, Falkland Islands (Malvinas), Faroe Islands, Fiji, Finland, Former Yugoslav Republic of Macedonia, France, Gambia, Georgia, Germany, Ghana, Greece, Grenada, Guernsey, Guyana, Hong Kong, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Jamaica, Japan, Jordan, Kazakhstan, Kenya, Kiribati, Korea (Republic of), Kosovo, Kuwait, Kyrgyzstan, Latvia, Lebanon, Lesotho, Libya, Lithuania, Luxembourg, Malawi, Malaysia, Malta, Marshall Islands, Mauritius, Mexico, Moldova (Republic of), Monaco, Mongolia, Montenegro, Montserrat, Morocco, Myanmar, Namibia, Netherlands, New Zealand, Nigeria, Norway, Oman, Pakistan, Panama, Papua New Guinea, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, Saudi Arabia, Senegal, Serbia, Sierra Leone, Singapore, Slovakia, Slovenia, Solomon Islands, South Africa, Spain, Sri Lanka, Sudan, Swaziland, Sweden, Switzerland, Taiwan, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Tuvalu, Uganda, Ukraine, United Arab Emirates, United States, Uruguay, Uzbekistan, Venezuela, Viet Nam, Zaire, Zambia, Zimbabwe.

21 TIEAs: Anguilla, Antigua and Barbuda, Aruba, Bahamas, Belize, Bermuda, Dominica, Gibraltar, Grenada, Guernsey, Isle of Man, Jersey, Liberia, Liechtenstein, Nederlandse Antillen, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, San Marino, Turks and Caicos Islands, Virgin Islands, British.

Exchange controls

In the UK there are no exchange controls.

    Taxes of UK

    Min. rate for corporate tax 19%
    Capital gains tax Regular rate
    VAT 20%
    Withholding tax 0%/20%/20%
    Exchange control No
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