Great Britain

The Great Britain is one of the leading financial and business centers of the world. Unlike a number of jurisdictions widely used in international tax planning, it is neither an offshore or low-tax zone. For British companies requirements are applied to supply the annual corporate and accounting report. Tax rates in relation to the activities of companies incorporated in the Great Britain are quite high. What, then, do the English companies make attractive for business? First of all, such a company, in the opinion of every single European counterpart, is a trustworthy partner of transparent and respectable jurisdiction. Secondly, when you open a bank account, banks relate more sympathetic to British companies, presenting fewer demands. Thirdly, in order to conduct transactions with companies from a number of jurisdictions (including in the European Union), that limit interaction with offshore companies, the British company looks credible and respectable. In terms of confidentiality, British companies are less attractive than the company’s offshore jurisdictions. The modern UK legislation makes it possible to distinguish two types of companies, which are of the greatest interest to incorporate. This is a partnership – Limited Liability Partnership (LLP) and a company Limited by Shares (LTD).

UK legislation gives the possibility for the registration and using of companies with a zero rate of tax – Company LLP. The legislation on these companies exists in the UK for over a century, but it is in its current edition (Limited Liability Partnership Act 2000), the law provides all the benefits of LLP using. LLP Registration allows to create in the UK virtually tax-exempt structure. According to the tax laws of the Great Britain, LLP is not considered in this country as a separate taxable subject (respectively, an LLP is not required to obtain a taxpayer identification number in the UK), and taxes from profits received should pay its founders («Designated Members”) at the place of its residence in proportion of their interests in the LLP.

In order to register an LLP at least two partners are necessary. In order to maintain tax-exempt status in the UK you must meet certain conditions. So, if any partner is not a resident of the UK and LLP activities are carried out exclusively outside the UK and refers to a trade or professional services, the duty to pay taxes arises in LLP participants, but not the LLP itself. And if the partners of LLP are two classic offshore companies, the taxes are not paid in the UK. Also, taxes are not paid at the place of registration of partner companies in connection with their offshore status. In the LLP the director does not provide. The company is managed by the authorized partner (designated member), from which you get the general power of attorney. Trust Declaration is a document confirming the ownership of the structure – as well as it is given by partners of the company to you as the beneficiary.

LLP Company, like a regular limited liability company shall submit a report. Annual Return contains information about the registered office and partners. The report is submitted every 12 months from the date of registration of the company and its preparation is endured 28 days. Annual Accounts are information about the company’s financial activities. First time report must be submitted within 9 months from the end of the reporting period. By default, the period is defined as the end of the month following the month anniversary of incorporation of the company. For late submitted reports heavy fines are charged. If LLP partners are offshore companies, and the partnership does not work in the UK, it is not a tax resident. Therefore, the report merely states that the partnership is not subject to taxation. This report is submitted on the basis of the declaration of the beneficiary, compiled by a special form.

LTD is an analogue of the Limited Liability Company. Founders of the company are liable in the amount of the contribution made to the Company. One director carries out at least the management of the company (may use nominees for confidentiality). Physical and legal entities can be as Directors. Since October 1, 2009 one of the directors must obligatory be a physical person. It should be noted that LTD is taxed as established by legislation. The Great Britain has the largest network of agreements for avoidance of double taxation (over 100). But the use of tax agreements is only possible if the company is not nominal, that is not an agent of the offshore company-principal, which owns the lion’s share of profits (income). Only if the revenue will be recognized as income in the British company, it can lay claim to the use of agreements for the avoidance of double taxation.

Of course, it is impossible the application of agreements for the avoidance of double taxation for the company submitting the “dormant accounts”. “Dormant Company” may be used for the organization of representatives, joint ventures, as well as for the ownership of rights to patents, copyrights, works, etc. The practice of the use of British companies shows that the majority of Russian businessmen prefer not to conduct an active trading activity and submit dormant accounts. Below there is the information for those who are still going to use the English company in the active mode. Corporate tax (tax on profits of companies). Tax rates are set annually by the Budget Act of the country. From 1 April 2008, the following rates of corporate tax set:
• the company’s profits is up to £ 300 000 – the rate is 21% (for small companies);
• the company’s profits is from £ 300 000 to 1 500 000 pounds – a special formula is used and the rate is from 20 to 28%.
• the company’s profits is more than 1 500 000 pounds – the rate is 28% (common rate);

Value Added Tax (VAT). The company is not obliged to stand on VAT-registration, if its sales do not exceed 68 000 pounds in the UK. The company, which does not conduct active work, or all of its activities are the import-export activities, it should not register in the Board of VAT. However, for a refund of VAT for trade inside the European Union, it is required to be registered, so the company can apply for “voluntary” production of records. Due to the high incidence of fraud, the Board of VAT applies to such applications with suspicion, and almost always asks for detailed information about the company, including phone numbers and names of partners in Europe.

Financial year in the UK is calculated from April, 1 of this year to March, 31 of next year. LTD submits three types of reports: Annual Return contains information about the registered office, the Governing bodies (structure) of the company. It is submitted every 12 months since the incorporation of the company. In order to submit a report you have 28 days. Annual Accounts is the information about the company’s financial activities. The first report must be submitted within 10 months from the end of the reporting period. By default, the reporting period equals to the calendar year from the date of incorporation. For late submitted reports heavy fines are charged. The tax report is submitted on the basis of the declaration of the beneficiary, compiled by a special form. Company, making the Dormant Accounts, is not obliged to submit the tax return. However, active company is obliged to submit the report in accordance with tax legislation.

Companies – UK residents are subject to corporation tax on income earned worldwide (world-wide income). At the same time non-resident company having a branch or agency in the UK or are leading in any activity otherwise, shall be taxable only on the income derived from sources in the UK (in accordance with the provisions of agreements to avoid double taxation). It should be noted that these companies are resident, where their central management bodies are situated, but their place of registration is irrelevant. The company, registered abroad, may be taxed in the UK, if the management of its activities is made from its territory. From March 15, 1988 the companies incorporated in the UK, are regarded as its residents for tax purposes, regardless of where their management bodies are located. The Company may not be resident in the UK, but still be taxable here on the concept of “doing business” in the country. Moreover, the definition of the fact, if the activities are conducted in the UK or not, depend on where the contractual conditions fulfill: in the country or abroad.