Bright Business Consulting LLP

Monday, July 16, 2018

Why Investing in United Kingdom (UK)

Within the European Union, the United Kingdom is one of the largest economic markets (next to Germany, France and Italy). In addition to being part of EFTA (European Free Trade Association) it is a member of WTO (World Trade Association). The UK is an important trading partner for many Countries around the world, representing an opening key in the market.

Membership in the European Union leads to freedom of trade movement within it, while respecting its common rules of business. While taking into account that the United Kingdom, for the 12th consecutive year, is the best European country for FDI (Foreign Direct Invesments), the decision on the penetration strategy of the UK market should be evaluated and weighted in the light of various factors, such as the nature of the activity to undertake, the firm size, the duration of business, the will to make use of an entity with limited or unlimited liability, tax considerations, etc.

In the United Kingdom, as well as in all European Union member States, there are two complementary legal systems:

  • The National Common Law legal System.
  • The System of Community Law.

While the legal System of Common Law contains a set of rules prepared by the British Parliament and the British Courts, the system in office of Community Law is made by Directives, which must be converted into national Law by a Member State in order to be implemented and regulations which, on the other hand, are directly and immediately applicable in all Member States. The fruitful activity of the European Parliament invests nearly all areas: from the use and disclosure of personal information to the legislation on trade, selling franchises to strict rules on public procurement for the supply of goods and services, to the legislation on consumer protection and so forth).

There are many reasons why foreign investors choose the United Kingdom for their international expansion:

While it is true that British Legislation on trade is particularly flexible (think of the possibility of obtaining funding for research and development of business, capital grants for manufacturing, relief up to 100% for investments in certain areas such as those for energy plans and so forth), on the other hand the "Country" has got a strict system of rules designed to control business activities (think of the Law on fighting money laundering, the fight against corruption, the protection of personal data, the fight against unfair competition practices, consumer protection, trademarks protection and so forth).

The infrastructure to support research and development in the UK, together with Government policies such as, for example, tax deductions relating to research and development and the "Patent Box", are further magnets for high-tech, innovative companies and for "Start-Up" ones which are strongly growing up.

The analysis of investment trends by sector shows an increase in investments in advanced fields such as engineering, energy, health-tech and ICT (Information and Communication Technology) with an intersection of innovative technologies among different sectors.

What are the ingredients that can make the UK an attractive Country?

A Legislation that encourages innovation and entrepreneurship.

  • The UK is not part of the Eurozone, given its refusal to adhere to Euro, its common currency.
  • The austerity of the British Government implemented its Public fiscal consolidation, not through tax increases but with the reduction of the same as an effect of the following spending cuts:
  • Reduction of tax on business profits.
  • Reduction of tax on the highest incomes of individuals.
  • Incentives and tax breaks for businesses.
  • Cut of excise duties on petrol and electricity consumption.
  • Tax relief for young couples.

Given the potential for investment, both companies and everyone wishing to start up new businesses or diversify large or small investment plans, are going to find the United Kingdom an ideal area. The issues of European markets expected to persist until 2020 and perhaps more, the financial troubles that are weakening them and the lack of investment opportunities - despite the availability of know-how and efficient structures organization - make the UK market very attractive in terms of investments in general.

The annual reports on investment (UK Inward Investment's Annual Report) published by UKTI (UK Trade & Investment) show that the UK continues to attract Foreign Direct Investments (FDI), with an increase focused on projects and jobs.

In London, its core and center of worldwide financial services, the United Kingdom is a magnet for international businesses. It also represents the access point to the European Union, that is the largest Single Market in the world.

The City wins over the Big Apple in New York. London is the optimal location for establishing a bank, an investment company, a large company has already started or a baby "Start-Up". Being a large global financial center, London is home to almost all the major banks and financial institutions in the world. Four of the ten largest banks globally have their headquarters in London.


  • Territory: 243 610 sq km.
  • GDP (in 2014): 2.46177 trillion dollars.
  • GDP-per-capita (in 2014): $ 37,569.79.
  • Currency reserves (in 2014): 106 247 000 dollars.
  • Balance of Payments (in 2014): - 2,364.00 million GBP.
  • Export (in 2014): 40,699.00 million GBP.
  • Inflation (in 2014): 1.8%.
  • Foreign direct investment (in 2014): 6,038.00 million GBP.
  • Population (in 2014): 63,395,574.
  • Population census year: 7.60%.

Economic prosperity, political stability and favorable regulations to entrepreneurs make the UK the chosen place for investors throughout the world.


The UK is one of the most competitive Countries in the world from its tax point of view, giving several advantages for both Legal Entities and for Individuals.

The UK tax system involves:

  • Income taxes of Legal Entities which are the lowest in Europe.
  • Strong incentives and/or subsidies for investment in research and development.
  • An effective system of monitoring and enforcement of double taxation's provisions.
  • Competitive personal Taxes.
  • A minimum contribution in the field of social services.
  • The possibility to amortize the cost of capital goods with taxable profits.

There are two types of taxes in this system:

  • Direct Taxes.
  • Indirect Taxes.

The first ones include:

  • Income Tax.
  • Corporation Tax.
  • Inheritance Tax.
  • Capital Gains Tax.

The second ones include:

  • Value Added Tax -IVA.
  • Stamp Duty.
  • Stamp Duty Land Tax.
  • Customs Duty.


According to the principle of double taxation, in accordance with the general international and community principles, residents in the UK are subjected to pay their income taxes compared to their total revenue, while non-residents are subjected only to tax in the UK which are connected to incomes gained there. Taxes apply the Source Rule, according to which any form of gain is taxed only if there is a specific Law that recognizes it as due.

In the UK each year tax rates are determined and / or confirmed for the next fiscal year.

E.g: Over the year 2015 the rates corresponded to the following values:

  • Exemption up to £ 10,600.
  • 20% for any income up to £ 31,785.
  • 40% for any income from 31,786 to 150,000 GBP.
  • 45% for any income over 150,000 GBP.


Income received by legal entities are subjected to Corporation Tax. This tax is applied to:

  • Incomes earned by legal entities which are residents in the United Kingdom.
  • Incomes earned by permanent establishments of legal entities which are non-residents in the United Kingdom.

A legal entity will therefore be subjected to taxation if its Registered Office is set in the UK and / or if its activity is mainly carried out in that Country. Note that if a legal entity is resident both in the UK and in another European Country, according to the mentioned treaty against double taxation, it is first necessary to determine where that entity owns its legal residence.

It is left unaffected, in any case, the general requirement of contribution on the part of profit realized in the UK. In the UK each year the tax rates are fixed and / or confirmed for the next fiscal year. The tax on legal entities is approved annually by the British Parliament, otherwise there will be no entitlement to be paid. Unlike past years, from 1 April 2015, in the United Kingdom is established a single tax rate of 20%, the lowest ever achieved in the Country.

The tax is calculated on the entire taxable income, when it is higher than 1.5 million GBP and divisible because of associations of legal entities (only when the legal entity which is resident in the UK controls other legal entities which are residents or non-residents in the UK).

To ensure the competitiveness and survival of a company in the market, a regular tax plan is necessary in order to properly include the tax burden, both in the "Business Plan" linked to new initiatives and in forecasting which are useful for large and small business managing. The first step for an investor who wants to enter the UK market is whether the tax burden due on its products or services and its work in general, are convenient for such investment. While tax planning, the investor will have to choose the best tax system. The choice will not be final, though, as it can be modified at the beginning of each year.



Bright Business Consulting LLP
58/60 - Kensington Church Street


fb  linkedin  twitter  


Scroll to Top