United Kingdom

Companies resident in the UK are generally chargeable to corporation tax on their worldwide profits, including both income and capital gains. However, a UK-resident company may elect for both the profits and the losses of its foreign permanent establishments to be left out of account in calculating its taxable profits. Double tax relief is available in respect of foreign tax suffered on both income and gains. Non-resident companies are liable to corporation tax if they carry on a trade in the UK through a permanent establishment in the UK. In that case they are liable to corporation tax on trading income arising through the permanent establishment, income from property or rights held by or for (or used by) the permanent establishment and gains from the disposal of assets used by the permanent establishment. Even if a non-resident company does not trade in the UK through a permanent establishment, it may still be subject to income tax on certain UK source income. Withholding taxes on interest and royalties are frequently reduced (sometimes to 0%) by double tax treaties; interest and royalty payments within the EU may also be exempt from withholding tax under EU law. Capital gains derived by a non-resident company from assets situated in the UK are generally not taxable unless they are attributable to a trade being carried on through a UK permanent establishment. Certain companies that hold residential property in the UK may also be liable to tax on the disposal of that property (as well as to an annual tax while the company holds the property). Transactions at non-arm's length prices are covered by transfer pricing rules. There is an exemption for small and medium-sized enterprises. In effect thin capitalisation is also covered by the transfer pricing rules. Controlled foreign companies (“CFC”) legislation charges tax on UK resident shareholders of companies resident in low-tax jurisdictions. There are several situations where the regime does not apply. Dividends received from other UK resident companies are exempt from corporation tax. Dividends received from overseas companies on or after 1 July 2009 are exempt from corporation tax provided certain conditions are met. There is no withholding tax on the payment of dividends. VAT is generally charged on the supply of goods or services in the UK, the acquisition in the UK from other EU Member States of any goods and the importation of goods from places outside the EU Member States. Certain supplies are exempt, including financial services, education and medical services. Supplies of commercial property are exempt but the supplier has an option to elect to charge tax. The UK also charges VAT at a “zero rate” on items such as (most) food, books, newspapers and children’s clothing. The current VAT registration threshold is £83,000.

UK selected tax rates and allowances; reforms to domicile rules
UK: tax changes dropped or deferred because of the election on 8th June
Memo on leaving the UK
Tax changes in the UK September-November 2022