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Taxation in United Kingdom

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Taxation in United Kingdom

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Taxation & VAT in the UK

Corporate tax rates

The standard or main rate of corporation tax in the UK is 19 per cent and applies to both resident and non-resident companies. Marginal relief is applied to profits between the various rates, easing the transition between the small companies rate and the main rate. HM Revenue and Customs

Capital Allowances

The UK has an extensive range of capital allowances that allow the costs of capital assets to be written off against taxable profits.

Tax credits for research and development

Research and development (R&D) tax credits are available for large corporations and SMEs investing in R & D:

In addition to the normal 100 per cent deduction, large companies are entitled to a further deduction from their taxable income of 30 per cent of their current spending on qualifying R&D. For example, if a company spends £100,000 on qualifying R&D, it will be able to deduct £100,000 from its taxable income under ordinary tax rules and an additional £30,000 under the R&D tax credit.

In addition to the normal 100 per cent deduction, SMEs are entitled to a further deduction from their taxable income of 75 per cent of their current spending on qualifying R&D (for the purposes of this scheme only, an SME is defined as a company employing up to 500 people).

The rate for an employers National Insurance Contributions (NIC) on the earnings of each individual employee.

Approved and tax-favoured share plans

The UK Government actively supports small companies, entrepreneurs and an innovative business environment by encouraging the granting of stock/share options. There are several specific schemes employers can utilise to reward employees, such as:

  • the Enterprise Management Incentive,
  • the Share Incentive Plan,
  • Save as You Earn, and
  • Approved Company Share Option Plans.

How VAT Works

VAT(Value Added Tax) is a tax added to most products and services sold by VAT-registered businesses.

Businesses have to register for VAT if their VAT taxable turnover is more than £85,000. They can also choose to register if their turnover is less than £85,000.

Your responsibilities as a VAT-registered business

As a VAT-registered business you must:

  • include VAT in the price of all goods and services at the correct rate
  • keep records of how much VAT you pay for things you buy for your business
  • account for VAT on any goods you import into the UK
  • report the amount of VAT you charged your customers and the amount of VAT you paid to other businesses by sending a VATreturn to HM Revenue and Customs (HMRC) - usually every 3 months
  • pay any VAT you owe to HMRC

The VAT you pay is usually the difference between any VAT you’ve paid to other businesses, and the VAT you’ve charged your customers.

If you’ve charged more VAT than you’ve paid, you must pay the difference to HMRC.


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Organisations that can assist with Taxation

  • > Nexus

    Nexus provides a bespoke advisory service across a range of areas for international clients. We combine a fresh approach with professionalism and expertise, offering a comprehensive, tailored services in today’s global and competitive market.

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  • > Paul Beare Ltd

    Paul Beare Ltd are UK based accountants and legal advisors to overseas companies setting up in the UK. They work with companies either entering, or already operating in the UK.

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  • > Crunch

    We’re Crunch, an award-winning online accounting service supporting over 11,000 freelancers, contractors, small businesses - almost anyone who’s self-employed. We offer 100% free accounting software & paid services for sole traders and ltd companies.

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