Robert Newey & Co

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Corporate tax planning (UK and international)

The taxation of companies has several distinctive features. These include:

  • UK-resident companies are charged to corporation tax on their income and gains.
  • Companies are artificial, not real, persons. Sooner or later they pay dividends and make other distributions to their shareholders. As well as companies’ own tax liabilities one must also consider the tax treatment of such distributions.
  • There are tax reliefs for groups of companies. These include reliefs for transfers of assets within a group, and for certain types of reorganisation.
  • Where a UK resident company is associated with one or more overseas companies, several issues may arise. These include rules on transfer pricing and controlled foreign companies, as well as rules under which the shareholders in the parent company may be liable to tax on the gains of a non-resident subsidiary.
  • UK corporation tax is charged on UK resident companies and companies that trade in the UK through a permanent establishment.  Foreign companies that trade in the UK, and resident companies that trade abroad, risk being liable for tax in two jurisdictions.  Usually, however, relief will be available under a double tax treaty.
  • A non-resident shareholder in a UK resident company may be liable to tax both in the UK and in the shareholder’s place of residence.  Once again, a double tax treaty usually resolves difficulties.
  • A non-resident company, while not liable to corporation tax, may still be liable to income tax on certain types of income from UK sources.
  • The UK rules may be sometimes overridden or modified by European law.

Another type of corporate entity is the UK limited liability partnership (“LLP"). LLPs are generally treated as partnerships for tax purposes. In some situations, however, they risk liability to corporation tax.  Care is needed to obtain the benefits of LLPs while avoiding any problems.


If an overseas business proposes to set up UK operations, the business will need to consider the following tax issues:

(1)          Is there a permanent establishment under UK law? If so, does an applicable double tax treaty override UK domestic law so that there is no permanent establishment?

(2)          Should a branch or subsidiary be formed?

(3)          Will there be withholding tax on any payments of interest and royalties from the UK? Does an applicable double tax treaty change the position?

(4)          Transfer pricing rules may affect the calculation of the profits of a branch or subsidiary for tax purposes. It may be necessary to consider the ownership of intellectual property in particular.

(5)          To what extent should a subsidiary be financed with debt or equity? What restrictions are there on the deductibility of interest payments for tax purposes?

(6)          The company or branch may need to register for VAT.

(7)          The company or branch may need to register for pay as you earn ("PAYE") income tax deductions and National Insurance (social security) contributions in respect of employees.

(8)          There may be a requirement to file accounts with Companies House.

The UK can also be an attractive place in which to establish a holding company, offering in particular:

  •   An exemption from tax on dividends received;
  •   A tax exemption for capital gains under the substantial shareholding exemption;
  •   No withholding tax on dividends paid to shareholders; and
  •   A good network of double tax agreements (DTAs) which can reduce withholding tax on dividends received from subsidiaries.

The UK does have controlled foreign company ("CFC") rules, under which a UK company may be taxed on the profits of its foreign subsidiaries. The scope of these rules was narrowed by recent reforms.

Examples of how we can help

  • Advise on how to structure transactions, taking into account tax issues and commercial aims;
  • Advise on cross-border issues;
  • Advise on the use of LLPs;
  • Use our knowledge of the tax system as a whole (e.g. VAT and employment taxation), as well as corporate taxation, to give rounded advice on proposals;
  • Call on accountants and overseas tax specialists (with whom we have long-standing links) to assist if required;
  • Seek rulings from HM Revenue & Customs.

Please contact us to find out more about our services and discuss your situation in more detail.

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