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Setting up in the UK: 10 Things to Consider
There are a lot of advantages in choosing the UK for startups considering their next steps for growth. Apart from language being the same, here are ten things to consider if you are thinking about setting up in the UK.
When setting up in the UK there are 10 key points for companies to keep in mind:
1. Tax incentives
The UK have a competitive tax system with a low overall tax rate (19%) with intentions to reduced that rate (to 17%) by 2020. Although government funding in the UK is more limited than in other countries they do have regional funding, and reliefs from the R&D and Creative Industry are quite generous.
2. Ease of set up
With no minimum capital requirements and a requirement of only 1 director and 1 shareholder to be British or living in the UK, it is fast and inexpensive to form a limited company that provides protection for Directors and Shareholders. Other required registrations such as VAT and Payroll are also quick and easy.
3. R&D and Patent Box
As mentioned above, R&D Tax incentives and Creative Industry reliefs, which include a range of reliefs for different industries, are generous. R&D can be conducted from anywhere and 33% of costs during R&D can be claimed as a cash back payment to the company.
There is also an added bonus of benefiting from a lower Corporation Tax rate of 10% for holding an EU patent.
Self-employed individuals have greater control through dealing with their own income tax and social security. Employees also benefit through entitlement to rights after 2 years, before which dismissal can be for no reason, and enrolment into a pension scheme with employer’s contributions. Dispute resolution and tribunals look past the agreement and into the nature of the relationship in cases before them.
5. Work Visas
There are 3 Visas available to company employees. An employee sent to the UK to set-up a branch or subsidiary will gain a 3-year visa. Sponsored employees, that have been employed by the parent company for 12 months, working for a subsidiary can gain a 5-year visa. Non-EU citizens can work in the UK through employer sponsor licenses.
6. Intellectual Property
In the UK, protection processes take 3-4 months and cost £200, which protects in the UK only. For protection in the EU (28 countries), processes take 6 months and cost €850.
7. Data Protection
When setting up in the UK, you need to think about the General Data Protection Regulation (GDPR). Since May 25th 2018, data is protected under the GDPR, which intends to harmonise European privacy laws, applied to all business which offer goods or services to EU citizens. Fines for breach are the highest of either 4% global turnover or €20m
UK statute dictates key terms and conditions of ownership in a lease. The lease is structured on a full repairing and insuring basis and rent is quoted net of taxes, insurance and service charge. Commercial leases average for 2-5 years and usually include a rent-free period of 3-6 months for tenants on signing.
9. Bank Account
Companies must comply with bank requirements and a KYC process. Opening an account should usually take 4-6 weeks, but it can take up to 6 months.
10. Investors EIS/SEIS
When setting up in the UK, consider the investors.
EIS tax reliefs can be 30% on investments up to £1m each tax year and a company can raise up to £5m each tax year. Sale of shares, after 3 years, can be free of capital gains tax.
SEIS tax reliefs are available to small start-ups under 2 years old, with under 25 employees and £200K in assets. A company can raise no more than £150K in total and the investor receives 50% of the investment (maximum £100k per year) as income tax relief.
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Stuart Reynolds is the founder of Fullstack Advisory, an award-winning accounting firm for businesses leading the future. He is a 3rd generation accountant who specialises in tech companies, agencies and entrepreneurs.