Understand UK tax and incentives

    The UK has one of the most competitive tax systems in the world and the corporate tax rules are simple and clear.

    Business taxes

    Tax on profits

    Any foreign company with a UK branch or office must pay UK Corporation Tax. The current corporation tax rate is 20%, reducing to 17% by 2020. At the current rate of 20%, the UK has the lowest headline business tax rate in the G7, and joint lowest in the G20.

    Tax on sales

    Value Added Tax (VAT) must be charged and paid on goods and services. UK VAT is charged at 20%, although there are some exceptions. UK businesses that sell goods or services charge VAT on sales and customers who are themselves registered for VAT will be able to recover VAT paid out.

    VAT is not applied to most export transactions, although it is likely to apply to sales to non-VAT registered businesses and private individuals within other EU countries.

    Tax on imports

    Imports into the UK (and other EU countries) from non-EU countries will have an import duty charge to pay on goods but not services.

    Tax relief and incentives for businesses in the UK

    There are a number of tax relief schemes and incentives for business owners and investors.

    Tax relief for investment

    The UK offers attractive venture capital schemes to help small and medium enterprises expand.

    The Enterprise Investment Scheme and the Venture Capital Trust offer tax relief for individuals interested in investing in small businesses.

    Tax incentives for innovation

    There are generous incentives for companies investing in research and development in the UK to promote fast-growing, innovative services and products.

    The Patent Box offers a 10% corporation tax on profits from inventions patented in the UK (compared to the usual 20% corporation tax).

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