Tax restrictions
Tax restrictions
A UK-resident company can generally be charged corporation tax on all its sources of income and capital gains, wherever arising.
A company that isn’t resident in the UK but has an establishment in the UK and trades with the UK is liable to corporation tax on all income and gains attributable to that permanent establishment
Corporation Tax
Companies pay corporation tax on their taxable profits.
Corporation tax rates are fixed for each financial year (starting 1 April). The standard rate is currently 25%.
Labour’s Manifesto promised to cap corporation tax at the current level of 25% - the lowest rate in the G7 – for the entire parliament, and to act if tax changes in other countries pose a risk to UK competitiveness. It is hoped that this will incentivise investment.
Companies’ capital gains are taxed at the standard rate of corporation tax. Non-resident companies are only taxed on capital gains from the sale of assets used in, or for the purposes of, a trade carried on through a permanent establishment located in the UK.
Non-UK resident companies are chargeable on certain disposals of residential and commercial property in the UK.
There are special provisions allowing tax deferrals by UK resident and non-resident companies for reinvestment/migration. Capital losses can only be offset against capital gains arising in the same financial year or carried forward indefinitely to set against future capital gains. It’s not possible to carry back capital losses.
Stamp duty and stamp duty land tax (SDLT)
Stamp duty at a rate of 0.5% is paid by the purchaser (whether or not UK resident) on the transfer of shares in a UK incorporated company. SDLT is payable on UK land and building transactions, and the rates are between 0% and 12% on the consideration paid for residential properties. SDLT is charged at increasing rates for each portion of the price.
Special rates of SDLT apply where the residential property is purchased by a “non-natural person,” which includes companies. This rate is 15% for property costing over £500,000.
In 2024 the UK government announced a 2% SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland.
VAT
VAT is charged on the supply of most goods and services made by businesses in the UK and is collected at each stage of the supply chain. VAT registration is compulsory for businesses established in the UK making annual taxable supplies in excess of the registration threshold. VAT registration is required if a business’ VAT taxable turnover is more than £90,000. Voluntarily registration on turnover lower than that is also allowed.
There’s no VAT registration threshold for businesses making taxable supplies in the UK that have no UK business address. These businesses must register for VAT immediately on making taxable supplies in the UK, unless the reverse charge simplification applies.
The UK reverse charge simplification applies to most services when provided by a non-UK supplier to a UK VAT-registered business customer. The standard rate of VAT in the UK is 20%.
Some supplies, such as the grant of certain interests in land, insurance, education, financial services, and health and welfare, are exempt from VAT.
VAT-registered businesses with an annual taxable turnover not exceeding £150,000 can elect to simplify their VAT accounting by using the “flat rate” scheme, a voluntary scheme available to small businesses.
Under the scheme, businesses account for VAT at a flat rate on turnover rather than on every single transaction. But they can’t recover VAT on expenditure other than for capital items over £2,000.
Tax incentives and other schemes
There are a number of grants and other forms of assistance available to businesses in the UK.
Expenditure incurred on some research and development activities qualifies for enhanced tax relief. If the qualifying expenditure is incurred by small- and medium-sized companies, the relief is generally an additional deduction of 86% (on top of the normal 100% deduction), making a total 186% deduction.
If these companies have a tax adjusted loss for a period, all or part of the losses can be surrendered for a repayable credit at a rate of 14.5%. Large companies can claim a taxable credit equal to 20% of its qualifying expenditure. The Patent Box relief allows companies with qualifying patent income to be taxed on that income at an effective rate of 10%. A patent is only eligible if the company owns or exclusively licence-in patents grants by the UK Intellectual Property Office, the European Patent Office, or specific EEA countries.
Business rate relief is available to businesses that relocate into an enterprise zone (up to £55,000 a year over five years).
Corporation Tax
Companies pay corporation tax on their taxable profits.
Corporation tax rates are fixed for each financial year (starting 1 April). The standard rate is currently 25%.
Labour’s Manifesto promised to cap corporation tax at the current level of 25% - the lowest rate in the G7 – for the entire parliament, and to act if tax changes in other countries pose a risk to UK competitiveness. It is hoped that this will incentivise investment.
Companies’ capital gains are taxed at the standard rate of corporation tax. Non-resident companies are only taxed on capital gains from the sale of assets used in, or for the purposes of, a trade carried on through a permanent establishment located in the UK.
Non-UK resident companies are chargeable on certain disposals of residential and commercial property in the UK.
There are special provisions allowing tax deferrals by UK resident and non-resident companies for reinvestment/migration. Capital losses can only be offset against capital gains arising in the same financial year or carried forward indefinitely to set against future capital gains. It’s not possible to carry back capital losses.
Stamp duty and stamp duty land tax (SDLT)
Stamp duty at a rate of 0.5% is paid by the purchaser (whether or not UK resident) on the transfer of shares in a UK incorporated company. SDLT is payable on UK land and building transactions, and the rates are between 0% and 12% on the consideration paid for residential properties. SDLT is charged at increasing rates for each portion of the price.
Special rates of SDLT apply where the residential property is purchased by a “non-natural person,” which includes companies. This rate is 15% for property costing over £500,000.
In 2024 the UK government announced a 2% SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland.
VAT
VAT is charged on the supply of most goods and services made by businesses in the UK and is collected at each stage of the supply chain. VAT registration is compulsory for businesses established in the UK making annual taxable supplies in excess of the registration threshold. VAT registration is required if a business’ VAT taxable turnover is more than £90,000. Voluntarily registration on turnover lower than that is also allowed.
There’s no VAT registration threshold for businesses making taxable supplies in the UK that have no UK business address. These businesses must register for VAT immediately on making taxable supplies in the UK, unless the reverse charge simplification applies.
The UK reverse charge simplification applies to most services when provided by a non-UK supplier to a UK VAT-registered business customer. The standard rate of VAT in the UK is 20%.
Some supplies, such as the grant of certain interests in land, insurance, education, financial services, and health and welfare, are exempt from VAT.
VAT-registered businesses with an annual taxable turnover not exceeding £150,000 can elect to simplify their VAT accounting by using the “flat rate” scheme, a voluntary scheme available to small businesses.
Under the scheme, businesses account for VAT at a flat rate on turnover rather than on every single transaction. But they can’t recover VAT on expenditure other than for capital items over £2,000.
Tax incentives and other schemes
There are a number of grants and other forms of assistance available to businesses in the UK.
Expenditure incurred on some research and development activities qualifies for enhanced tax relief. If the qualifying expenditure is incurred by small- and medium-sized companies, the relief is generally an additional deduction of 86%(on top of the normal 100% deduction), making a total 186% deduction.
If these companies have a tax adjusted loss for a period, all or part of the losses can be surrendered for a repayable credit at a rate of 14.5%. Large companies can claim a taxable credit equal to 20% of its qualifying expenditure. The Patent Box relief allows companies with qualifying patent income to be taxed on that income at an effective rate of 10%. A patent is only eligible if the company owns or exclusively licence-in patents grants by the UK Intellectual Property Office, the European Patent Office, or specific EEA countries.
Business rate relief is available to businesses that relocate into an enterprise zone (up to £55,000 a year over five years).
How can we help?
Tax restrictions
UK tax law is complicated and ever-changing. We’ll give you a clear explanation of all legislation affecting your business and a practical plan focused on your unique business needs.
We advise on all tax issues, including:
- Corporate tax, including mergers, acquisitions and disposals
- Real estate tax
- HMRC disputes, enquiries, and investigations.
Whether you need support with a particular transaction or long-term advice, our national team of tax specialists will show you how to stay compliant and minimise your liability.
How can we help?
Tax restrictions
UK tax law is complicated and ever-changing. We’ll give you a clear explanation of all legislation affecting your business and a practical plan focused on your unique business needs.
We advise on all tax issues, including:
- Corporate tax, including mergers, acquisitions and disposals
- Real estate tax
- HMRC disputes, enquiries, and investigations.
Whether you need support with a particular transaction or long-term advice, our national team of tax specialists will show you how to stay compliant and minimise your liability.