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Articles
Doing business in UK
Cet article expose brièvement l’environnement fiscal, social et en droit des sociétés du Royaume Uni à l’attention des entreprises qui souhaiteraient évaluer une implantation dans cette zone.
a) Taxation Tax charges arise at two levels: corporate and employee. In this paragraph tax payable by the branch office or subsidiary is considered and in sub-paragraph (f) employee taxation is summarised. Throughout Europe businesses tend to be taxed at a national level on their income, capital gains and transfers of property. Employers are also liable to contribute to social security costs of those employed by them and to charge a sales tax on goods sold or services provided. Generally speaking, there are no local taxes on profits or gains of companies. The overall tax burden in the UK is one of the most competitive in Europe but not as attractive as Ireland. 1. Income In common with many other countries, the UK seeks to tax branch offices and subsidiaries differently: - Branches of foreign companies Non-resident trading companies are liable to tax on profits of a UK branch or agency and on gains on the disposal of assets situated in the UK held for the purposes of the trade of the branch. Under most double tax treaties the tax charge is limited to profits attributable to a permanent establishment of the company in the UK; - Subsidiaries of foreign companies A subsidiary will be subject to UK tax on its worldwide profits and gains if it is either incorporated in the UK or managed and controlled from the UK, unless it is treated as non-resident under an applicable double tax treaty. The full rate of tax is 30%. Lower rates apply if profits are less than GB£1.5 million (about US$2.4 million). 2. Capital gains Capital gains are treated similarly to income. 3. Transfers of property A disposal of assets other than shares may attract a transfer tax known as 'stamp duty' of up to 4%. The transfer of shares is taxed at 0.5%. 4. Social security Both employers and employees pay social security contributions (known as 'National Insurance') which are calculated as a percentage of earnings. With effect from April 1, 2003 an employer's contribution will be at a rate of 12.8%. 5. Sales tax Throughout the EU a sales tax ('VAT') is payable on goods and services supplied. Some supplies are zero rated or exempt and rates differ from country to country. In the UK the standard rate is 17.5%. As credit is given for VAT to registered traders, it is ultimately borne by the final consumer. 6. Local taxes The only local tax is a property tax (known as 'rates'), levied by local authorities on commercial properties. The rate is set annually by the local rating authority and is payable per £1 valuation of property. 7. Dividends and interest to foreign corporate shareholder No withholding tax is payable on dividends or interest but a 22% withholding applies to patent royalties. 8. Thin capitalisation The UK has thin capitalisation rules which may prohibit the deductibility of interest in the case of thinly capitalised companies (normally where debt to equity exceeds 1:1). 9. Transfer pricing In common with the other EU countries, the UK has transfer pricing rules requiring trade between UK companies and foreign affiliates on an arm's length basis. b) Fiscal incentives Financial assistance is available to companies setting up in certain 'Assisted Areas' in the UK. However, to qualify the project requires capital expenditure in excess of £500,000 and the areas concerned lack proximity to Heathrow airport and, as such, rarely appeal to corporations in your situation. c) Labor environment Broadly speaking UK labour laws are less onerous than many other EU countries (although EU standardisation is changing this), but is more onerous than US labour laws. 1. Working week In common with the other EU countries the UK has imposed a statutory maximum working week (including overtime) of 48 hours on average (over a 17 week rolling period), which can be waived by employees. 2. Minimum wage £4.20 (about $6.50) and £3.50 ($5.30) for workers under 22. 3. Minimum holiday entitlement Four weeks, which can include public holidays (ordinarily 8). In practice, four weeks plus public holidays is more typical. 4. Contract requirement Written statement of certain prescribed terms is required within two months of commencement of employment. In addition to the express terms, common law implies a duty of trust and confidence (confidentiality and non-competition during the employment contract). 5. Compensation package and employee incentives In the UK it is commonplace for key managers to be compensated by way of salary, bonus, pension contribution, medical health insurance and a company car. Share options are also used to incentivise employees but by comparison to Silicon Valley they are perceived as the 'icing on the cake' and are unlikely to be taken as a salary sacrifice. In traditional UK businesses share options are generally reserved for key managers and widespread use throughout an organisation is rare. A number of different share option schemes are used in the UK and some offer more tax efficient alternatives to the grant of an option under the US corporation's scheme. A separate paper on these schemes can be supplied. 6. Employment protection rights a) Termination Employees in the UK are entitled to a minimum of one week's notice for each complete year of service, subject to a maximum of 12 weeks. b) Unfair dismissal Employees with at least 12 months' continuous employment can only be dismissed for a fair reason (for example, redundancy, misconduct or poor performance) and the dismissal must be procedurally fair. The maximum award for unfair dismissal is £52,600 ($80,000) c) Redundancy Employees with at least 24 months' continuous employment are entitled to statutory redundancy compensation of a varying amount, depending upon their age, length of service and salary. The compensation gives up to 1½ weeks' pay (capped at £250 ($390) per week) for each year of service. d) Anti-discrimination UK law prohibits discrimination on the grounds of sex, race or disability. e) Pregnancy Pregnant employees are entitled to certain minimum maternity leave and pay rights. f) Consultation rights Employees are not entitled to Board representation as they are in Germany and other European countries. The only consultation requirement arises in the case of collective redundancies (20 or more) or the sale of the business (not the company). g) Employee taxation - Income tax If an individual is resident in the UK, he or she will be liable to tax on all income arising in the UK. (A person is resident in the UK if, for example, he or she is in the UK for 183 days or more in a tax year or has been working an average of at least 91 days per year in the UK for a period of at least four years). All "emoluments" of employment are potentially subject to income tax (for example, salary, bonus and benefits in kind). The personal income tax year runs from 6th April to 5th April. Income tax rates are tapered and income tax is charged on taxable income less personal credits. The basic rate is currently 22%. The rate on earnings over GB£34,515 (about US$53,843) is 40%. An employee seconded to the UK on a short-term assignment (i.e. no more than 183 days in a tax year) is likely to be exempt from UK income tax. - Social security contributions Employees pay a national insurance contribution at 10% of income above £89 ($135) up to £585 ($880) per week. 7. Work permits A work permit is required unless the individual is a European Economic Areas (EEA) national. In the case of an employee setting up a representative office, it may be possible for him or her to obtain a 'representative permit' from the nearest British Embassy or Consulate. Otherwise, application is made via the employer to a UK agency and typically takes from 4 to 6 weeks. d) Form of business entity In most European countries a foreign corporation can conduct its business operations either through a representative office, branch or a subsidiary. A representative office is the simplest form of business structure and is usually set up for preparatory purposes, often to prepare for future expansion into a branch office or a subsidiary. A representative office is not a legal entity and will not trade. Usually its functions will be limited to preliminary activities such as advertising, public relations, market research and information gathering. In most countries a representative office is free from formalities and avoids the country's tax liabilities. A branch office will be a local division of the overseas corporation rather than a separate legal entity, permanently established for doing business in the country in which it is located. Throughout Europe branch offices are liable to pay tax in the host country and to make financial returns to the host tax authority. The head office corporation will always be liable for its branch's liabilities since it is part of the same legal entity. A company is a separate legal entity from the parent corporation formed and registered in the host country. In most European countries a parent corporation is not responsible for its subsidiaries' debts and liabilities unless it has explicitly undertaken to do so. The most appropriate structure will depend upon a mix of commercial tax and legal considerations. For many clients the overwhelming consideration is to limit their exposure for their European operations and this points to establishing European operations through a separate company. Occasionally clients will prefer a branch office structure because they anticipate either heavy start up losses or the incurrence of substantial capital expenditure and this enables them to set off the losses/expenditure against profits made elsewhere. UK a) Representative office UK law requires registration of a representative office with the Registrar of Companies within one month of establishment. The registration is straightforward (filing plus notarised copy of the constitutional documents of the overseas corporation) and involves a small filing fee (£20). Once registered the representative office is required to register and file annual accounts relating to the overseas corporation. b) Branch office Similar registration and accounts filing requirements as for a representative office but with an additional requirement to file the latest set of audited accounts on registration. c) Company The formation of a company in the UK is easy and straightforward. No permission is required to establish a business presence, although there is some regulation of the use of business and trading names. For example, 'international' may not be used unless the Registrar of Companies is satisfied that the proposed business will use it. All companies registered in the UK are required to register with Companies House and have to submit accounts as well as annual returns. Companies operating in the financial, defence, oil exploration and other regulated areas may require licences or authorisation to conduct business. The law provides for the formation of four different types of company: - Private company limited by shares (Ltd) - members' liability is limited to the amount unpaid on shares they hold. - 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. - Private unlimited company - there is no limit to the members' liability. - Public limited company (PLC) - the company's shares are offered for sale to the general public and members' liability is limited to the amount unpaid on shares held by them. Only a PLC may offer its shares for public subscription. For almost all business purposes the form used is the company limited by shares, either as a private limited company (Ltd) or as a public limited company (PLC). Most foreign companies set up a private limited company. No consents are needed, no local shareholders or directors are required and no minimum capital rules apply. Certain documents (e.g. Memorandum and Articles) must be filed with Companies House in order to form the company. Most firms of lawyers offer ready-made companies and tailoring them to your needs can be done quickly and inexpensively. Although there are no minimum share capital requirements for a private limited company the thin capitalisation rates need to be considered. A PLC must have a nominal share capital of £50,000 ($80,000) of which £12,500 ($20,000 must be paid up. d) LLP A new form of association/partnerships with limited liability became available when The Limited Liability Partnerships Act 2000 came into force on 6 April 2001. An LLP is an alternative corporate business vehicle that gives the benefits of limited liability but allows its members the flexibility of organising their internal structure as a traditional partnership. Any new or existing firm of two or more persons will be able to incorporate as an LLP. Incorporation of an LLP will be by registration at Companies House; this process is similar to that described above for registering a company. LLPs will have similar disclosure requirements to a company including the filing of accounts. Amongst other things, they will also be required to: - File an annual return; - Notify any changes to the LLP's membership; - Notify any changes to their members' names and residential addresses; and - Notify any change to their Registered Office address. Osborne Clarke (Bristol - London - Palo Alto)
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