Ready to secure funding? What you need to know when expanding to the UK
Welcome back to our series of short, sharp articles – all focused on going international!
This time we are giving you a bite sized look into that certainty of life – tax! We won’t pretend this is the most exciting part of your scaling up and expanding journey, but we will assure you it’s one of the most important – and we can help with all of it. Thinking about tax may make you want to hide under the covers, but it’s always going to be there, and at least some of these taxes will sound familiar from Australia. Let’s take a look at the tax schemes you’ll encounter in the UK.
1. The lowdown on UK taxes
Corporation tax – this applies to all UK-based limited companies and foreign companies with a UK branch or office. You need to register within 3 months of starting business activities, and note the payment deadline (9 months + 1 day after the end of the accounting period) and the filing deadline (12 months after the end of the accounting period).
PAYE (pay as you earn) – the system for collecting income tax and national insurance contributions (NICs) from employees’ wages and salaries. Employers must operate PAYE as part of their payroll process. You need to register before the first payday, and the payment deadline is (typically) monthly by the 22nd of the following month.
Value Added Tax (VAT)
VAT is like GST in Australia. Your business needs to register for VAT (and charge it) once your turnover reaches £85,000 or more. You can register online via the HMRC website, even if you don’t meet the threshold yet. Once registered, you’ll receive a VAT registration number and certificate.
Your VAT returns are due quarterly (to HMRC), even if you haven’t generated any sales. They include total sales (which can be 0), purchases, VAT owed/reclaimed and VAT due to HMRC/refund claims. HMRC is making the UK tax system digital so you can file them online. You also need to keep VAT records for at least 6 years, including sales/purchase invoices and VAT accounts using MTD-compatible software.
VAT key points
- Based on where the end recipient is (via address or business VAT number), not where your company is located
- Threshold is £85,000
- 20% on most goods and services
- Returns are quarterly +7 days
2. More taxes!
Capital gains tax – tax on the profit made from selling/disposing of assets (shares, property, valuable items). Filing/payment deadlines depend on the asset type and self-assessment tax return deadlines.
Business rates – tax on non-residential properties, typically paid by commercial landlords or business owners based on a property’s estimated rental value. Payment deadlines vary by local authority, and tax is usually payable in monthly instalments.
Stamp duty land tax – tax on property and land purchases over a certain threshold, payable by the buyer. Payment and filing deadlines are 14 days from the transaction’s effective date.
Dividend tax – tax on the income earned from dividend payments to company shareholders. Payment deadlines depend on self-assessment tax return deadlines.
Employment allowance – reduction in employer’s class 1 NICs, available to some eligible businesses and charities and claimed through the employer’s PAYE system applied throughout the tax year.
Patent box – tax relief scheme allowing companies to apply a lower corporation tax rate on profits earned from patented inventions and certain other innovations. You need to opt into the scheme in your corporation tax return.
We have also written about the Top 10 international tax considerations for Aussie businesses, so take a look and if you’re already in the UK, contact our team for more information.
What’s next?
Expanding into international territories unleashes a rollercoaster of tax considerations that need savvy navigation. Being proactive to ensure compliance and minimise tax liabilities will mean positioning yourself for success in the global marketplace. Aussie founders relocating for business expansion also need to look at personal tax residency issues, and we’re here to help with every step, be it business or personal. Get in touch, and remember to download our free guide here to answer any other questions about expanding to the UK!
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Expanding Your Scaleup to the UK: Legal and Accounting Considerations
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