Business Tax Relief in the UK

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    Blog posted on : 28-01-2021

    Business Tax Relief in the UK

    For small businesses in the United Kingdom, the cost of doing business can be a major deterrent to starting or expanding a business. This is one reason that many small businesses in the UK are looking for a good accountant to handle all of their taxes and business accounts. The high corporate taxation UK comes with makes it difficult for the new business owner to compete in a difficult market if they cannot properly apportion their costs between profits and costs. The business owner must be informed about the UK corporate tax rates in order to effectively apportion costs and profits accordingly.


    Legal Entity

    Every company is treated as an individual under UK law and that includes corporations. A company formed in the UK is not considered to be a separate legal entity from its owners and can be subject to UK corporate tax even if ownership is foreigners. Many wealthy business owners move assets to offshore jurisdictions in order to protect their wealth and investments in the UK and, often, assets like the shell corporation. This makes it important for a UK resident, who owns a corporation, to understand the differences between UK business taxation and that of the corporation offshore.

    Business Tax Relief

    Because businesses UK citizens can incorporate as a sole proprietorship, a partnership, a limited liability company, or any other type of business entity, they are able to take advantage of tax savings available. When corporations are incorporated they generally receive UK tax relief on the corporate share or dividends they pay out. However, there is currently a limit on the amount of relief that can be claimed each year. When a corporation pays dividends to other corporations, it may have to pay a large amount of UK tax on those dividends. As a result, many new businesses in the UK are attracted to incorporating as a partnership rather than paying a huge amount of UK tax on dividend payments.


    Corporate Tax Rate

    The other main way that a business in the UK can reduce its UK corporation tax rate is to let the company off its UK tax obligations when it goes public. By electing to become a public company in the UK taxpayer can write off its UK tax on its ownership and net assets. When a corporation becomes publicly held the UK tax rate it paid abroad immediately disappears. However, there are some UK tax considerations when a business chooses to become a private company and opts not to become a public company.

    Business Tax Relief


    European Union 

    When a UK citizen owns shares in a business in another country they are not subject to UK tax on those shares. In most countries this is referred to as "staying tax". A few exceptions to this include the UK and many possessions in the European Union (EU). If an individual owns a large portion of a business in the EU then that person could be subjected to paying double the UK corporation tax rate on their ownership shares. An individual can claim relief by claiming the residence of the business as their principal residence if they meet certain requirements.


    Tax Relief

    An individual may also be eligible for tax relief when they buy shares in a business in the UK. For most purposes an individual can choose to purchase shares in a business in the UK from a broker who is registered with Companies House. In addition, an individual can use their savings to purchase shares in a UK company or restrict their tax relief by owning shares directly. It is very important to remember that the purpose of saving money on tax payments is to reduce the UK corporation tax and not to increase savings.

    Business Tax Relief

    The ability to pay less tax on UK business and personal tax payments is one of the main reasons to incorporate. The formation of a limited liability company provides the UK citizen with the opportunity to eliminate their UK tax obligations through efficient business management. A limited liability company is not considered a partnership and therefore taxes are deferred until the distribution of dividends. This means that the UK citizen's income from the business and personal activities is not reduced.


    Tax Rate

    When it comes to corporate tax in the UK company tax rate can be low or it can be high. The UK company tax rate is based on many factors including the location of the business and its turnover. However, the most important factor is whether the owner makes the payments required. If the owner cannot afford the payment then the UK citizen can choose to sell their shares in the corporation at a later date and claim the tax payments from the designated beneficiary. As long as the owner makes their payments on time every single year then they will never have to worry about the corporate tax UK. Therefore, if you want to buy a share in a corporation in the UK then you should always keep in mind what the tax and the benefits of owning a business in the UK are going to be.