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Last update: November 2008

Investing in the UK

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About the UK

The United Kingdom is the most favoured inward investment location in Europe, attracting companies from the United States, Japan, India and Germany. The reasons for its popularity are many as it has a great deal to offer overseas companies. The UK is the number one gateway to Europe, giving easy access to the 27 member states of the European Union, with the largest single consumer market of 500 million people.

With a highly skilled and flexible English-speaking workforce, and an environment which allows business to prosper, the UK business environment gives every incentive for companies to grow, innovate and compete in a global marketplace. It has the lowest utilities costs in the European Union, and a telecommunications industry that is one of the most advanced in the world. There are tax allowances available for companies setting up in certain areas of the UK. Plus, the UK has the lowest main corporation tax rate of any major industrialised country, and there are no additional local taxes on profits.

The UK continues to be one of the world's most attractive economies for inward investors. In 2011, the UK secured 1,434 foreign direct investment projects, which has created and safe guarded 94,500 jobs. With the London 2012 Olympic and Paralympic games being held in London this year, according to Lloyd’s TSB, this will generate £21bn for the UK economy.

The UK economy is built on a strong economic and political foundation, with good transport, communication, legal and regulatory environment with ready access to finance in helping businesses to grow.  This accompanied with low corporation tax varying between 20 to 26 per cent, and a very competitive tax structure overall, makes the UK business environment very competitive to its European counterparts.


Source: UK Trade and Investment 


Foreign Direct Investment

Foreign direct investment (FDI) is generally recognised as one of the key factors in economic growth and wealth. The UK government believes that investment flows benefit both developed and developing countries, creating opportunities for investors and helping developing countries to achieve sustainable development.

The UK being the third most favoured nation in the world for foreign direct investment, including the most favoured nation in Europe, shows that the UK has a very diverse economy which attracts organisations from around the world.


Source: UK Trade and Investment

 

Foreign Investment Policy and Regulations

In 2006/2007, there has been a 17 per cent increase in inward investments. This increase demonstrates that the UK's proposition - with its business friendly environment, political and economic stability, world-class creative talent, and strong research and development base - continues to act as a powerful magnet for foreign investors.

Source: UK Trade and Investment

 

Entry into the UK

The UK has a positive approach to administering and processing the applications of those who wish to enter the country to set up a business or to work.

There are three main methods of entering the UK for business or employment purposes, specifically:

  • As a business visitor
  • To set up a business
  • To obtain employment

In general, British citizens, people with "Right of Abode", those settled in the UK and nationals of European Economic Area countries are permitted to live and work freely in the UK - all others must apply to enter the UK to work or set up in business.

Nationals of certain countries, known as "visa nationals", require a visa or prior entry clearance to enter the UK for any reason.

"Entry clearance" is the formal term to describe the application process for visa nationals who wish to travel to the UK and for non-visa nationals who intend a longer stay or to settle in the UK. Entry clearance must be applied for at a British "overseas mission" (such as a British embassy, high commission or other British diplomatic post), which issues visas in the country where the applicant is normally and legally resident. An applicant for entry clearance must be outside the UK at the time of the application.

All non-EEA nationals intending to stay in the UK for more than six months must also apply for a UK Residence Permit.

Visa nationals must obtain prior entry clearance to enter the UK as a business visitor. Non-visa nationals can seek entry as a business visitor from an immigration officer at a UK port of arrival.

A business visitor can:

  • Go to meetings and trade fairs, buy goods and negotiate contracts with UK businesses
  • Go to conferences and seminars as a delegate
  • Find out about, check the details of, or examine goods
  • Undertake training, as long as it is classroom-based instruction or limited to observation only.

Source: UK Trade and Investment

For further information, please go to our UK useful info/ visa's section

 

Setting up a company

The UK has an open, transparent and business-friendly system to encourage the formation of new businesses. With a few exceptions, the UK does not discriminate between nationals and foreign individuals in the formation and operation of private companies.

Companies establishing British subsidiaries generally encounter no special nationality requirements on directors or shareholders, although at least one director of any company registered in the UK must be ordinarily resident in the UK. Once established in the UK, foreign-owned companies are treated no differently from UK firms. Within the EU, the British Government is a strong defender of the rights of any British registered company, irrespective of its nationality of ownership.

The fact that an overseas company is carrying on business in Great Britain does not automatically mean that the company has to register, but the majority of foreign investors will establish a UK registered company when setting up in the UK.

Source: Companies House

For further information, please go to our UK products to market/setting up a company's section

 

Types of companies

There are four different types of UK registered company:

  • Private company limited by shares - members' liability is limited to the amount unpaid on shares they hold. This includes those community interest companies (CICs), which are private companies, limited by shares
  • Private company limited by guarantee - members' liability is limited to the amount they have agreed to contribute to the company's assets if it is wound up. This includes all RTM (Right to Manage) companies-, common hold associations and those community interest companies which are companies limited by guarantee
  • Private unlimited company - there is no limit to the members' liability
  • Public limited company (PLC) - the company's shares may be offered for sale to the general public and members' liability is limited to the amount unpaid on shares held by them. This also includes community interest public limited companies. (That is, CICs, which are PLCs).

Source: Companies House 

 

Foreign Business Presence

Instead of registering a UK company, foreign businesses can establish a presence in the UK through the following:

  • A branch: a part of an overseas limited company organised to conduct business through local representatives in the UK.
  • A place of business: it gives a physical or visible indication that a company may be contacted there. An overseas company also has to register if it regularly conducts business from a particular location in the UK, even if there is no physical sign of the company's connection with it.
  • Partnerships: individuals, including overseas investors, can set up as a partnership in the UK.
  • Limited partnerships: it consists of:
    - One or more persons called "general partners" who are liable for all debts and obligations of the firm
    - One or more persons called "limited partners" who contribute a sum or sums of money as capital, or property valued at a stated amount.
  • Limited liability partnerships (LLP): an alternative corporate business structure providing the benefits of limited liability but allowing its members the flexibility of organising their internal structure and tax arrangements as a traditional partnership.
  • Joint ventures: an overseas company can form a base in the UK by joining with a British company.
  • European public limited company: European legislation allows overseas companies to establish a European public limited company (also known as a "Societas Europaea" or "SE") in the UK. An SE can be registered in any country within the European Economic Area although the registered office and head office must be in the same country.

Source: UK Trade and Investment

 

Approvals/Clearances required for new projects

No permission is required to establish a business presence in the UK, although there are regulations on the use of business names and certain business sectors, which may require licences or authorisation (such as finance, defence and oil exploration). Companies House is the key government organisation that co-ordinates the administration of businesses in the UK.

Source: UK Trade and Investment 

 

Taxation in the UK

The UK is a low tax economy with several key advantages for businesses and individuals, including:

  • One of the lowest main corporate tax rates in the European Union
  • Low personal taxes plus low social welfare contributions
  • One of the lowest standard rates of VAT in the European Union
  • Generous tax allowances (such as the availability of research and development tax credits) and no local taxes on profits or surpluses
  • No imposition of VAT on a wide range of essential goods, including food and children's clothing.
  • The most extensive network of double taxation treaties in the world
  • No exchange controls to prevent profits from being paid overseas.

The UK has concluded over 100 tax treaties for the avoidance of double taxation and has the largest network of treaties globally (Source: HM Revenue & Customs, 2007). An important feature of many treaties is a reduced rate for withholding tax on the payment of dividends, interest and royalties.

The standard rate of corporation tax in the UK is 30 per cent and applies to both resident and non-resident companies. If a company is a UK resident it pays corporation tax on its worldwide profits, which are adjusted for tax purposes. This includes capital gains tax on profits from the sale of assets. A company qualifies as a UK resident if it is incorporated in the UK or if its central management and controls are in the UK. Any foreign income on which a company pays tax abroad is liable to tax in the UK. However, any overseas tax paid can usually be credited against a company's tax bill.

If an overseas company sets up a branch in the UK, the trading profits of the branch's activities in the UK will be liable to tax. The rate applied will usually be 30 per cent. This may be reduced for a company that is part of a group or has associated companies.

Value added tax (VAT) is due on supplies of goods and services which are made in the UK by a taxable person who is registered for VAT, and also on the importation and acquisition of goods and some services (other than exempt supplies).

In the UK, VAT is a charge that companies need to make to customers if:

  • They supply goods or services in the UK or Isle of Man
  • The taxable turnover is above, or expected to be above, the registration threshold, which is currently £64,000.

Source: UK Trade and Investment

 

Living and Working in the UK

This guide, written by UK Trade and Investment gives practical information for inward investor. There are two main section:

  • Living in the UK:

Contains practical information on aspects of life in the UK, from education and healthcare to driving licence requirements and personal finance.

  • Working in the UK:

Provides guidance on many facets of doing business in the UK, from company formation to taxation and employee legislation.

Source: UK Trade and Investment

FOR THE FULL REPORT PLEASE CLICK HERE

 

Labour Issues

The UK's labour force of over 30 million people is the second largest in the European Union. Labour market regulations in the UK, including working hours, are amongst the most flexible in Europe, and staffing costs are highly competitive.

The employment level (the proportion of working age people in work) is also high in the UK at 74.6 per cent, compared with the European Union average of 64.3 per cent. The UK's unemployment rate (using the internationally comparable "standardised" rate) of 5.5 per cent is significantly lower than the European Union average of 7.7 per cent (Source: ONS, 2007).

The UK has a flexible labour market with labour regulations designed both to protect the employee and to ensure companies can operate effectively.

The major law governing labour/management relations is the Employment Relations Act 2004. The Employment Relations Act is mainly concerned with collective labour law and trade union rights. It implements the findings of the review of the Employment Relations Act 1999.

But there are other labour laws, such as:

  • Trade Union and Labour Relations (Consolidation) Act, 1992
  • Trade Union Reform and Employment Rights Act, 1993
  • National Minimum Wage Act, 1998
  • Disability Rights Commission Act, 1999
  • Working Time (Amendment) Regulations, 2002
  • Work and Families Act, 2006
  • Employment Equality (Age) regulations, 2006

Source: UK Trade and Investment

For further information, please go to our UK products to market employment law's section

 

Intellectual Property Rights

The UK legal system provides a high level of intellectual property rights protection. The UK is a member of the World Intellectual Property Organisation (WIPO). The UK is also a member of the major intellectual property protection agreements: the Bern Convention for the Protection of Literary and Artistic Works, the Paris Convention for the Protection of Industrial Property, the Universal Copyright Convention, the Geneva Phonograms Convention, and the Patent Cooperation Treaty.

In August 2004, the UK published its first "intellectual property crime strategy." The national strategy represents important advancements in intelligence sharing and coordination between UK government agencies to combat IP crime, along with a commitment to improve training for customs enforcement agents.

Source: UK Trade and Investment

For further information, please go to our UK useful info, Intellectual Property Right's section 

 

 Last update: November 2008

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