United Kingdom

Corporate considerations

The United Kingdom has an extremely sophisticated legal and tax system, out of which any investor willing to invest time and effort can derive great benefits. One can incorporate a range of companies in the United Kingdom, with the limited liability company being the most popular. Clearly, a company in the UK must comply with more stringent legal obligations than those normally associated with more lenient countries such as offshore jurisdictions. Although there are special exemptions from the auditing of accounts (for “small companies”), companies in the UK must prepare accounts and these must be submitted with Companies House. Small companies can, however, submit abbreviated accounts rather than statutory accounts.

The registry for companies in the UK is called Companies House, and is accessible here: Companies House

Tax considerations

As concerns taxation, the United Kingdom can offer a lot to potential investors. US firms can achieve tax breaks by means of a process known as 'tax inversion', and the UK is, amongst other jurisdictions, one of the jurisidictions favoured in this kind of structuring. Although the United Kingdom is not an offshore jurisdiction, its taxation system is designed to promote international investment. The most recent tax development is the amendment of the Controlled Foreign Company rules (CFC rules). A Controlled Foreign Company is a foreign company (i.e. it is resident outside the UK) that is controlled by UK persons and is subject to a lower level of taxation. It is often used in tax structuring whereby income is left in the lower taxed jurisdiction rather than distributed to higher taxed jurisdictions.

The recent amendments mean that all profits of foreign subsidiaries will no longer be potentially subject to a tax charge under the CFC rules. In fact, they will be outside the scope of the CFC regime unless they meet specified conditions set out in a 'gateway'. These conditions define what is to be treated for the purposes of the CFC regime as profits which have been artificially diverted from the UK.

These amendments allow greater scope for tax structuring for foreign investors.

Furthermore, the UK possesses incentives which are specific to particular industries. For example due to a joint memorandum of understanding entered into between the British Venture Capital Association (BVCA), the Inland Revenue and the Treasury, the people who run private equity funds pay an effective rate of 10%.