18. Britain Open for Business

In 2013, a statutory residency test for individuals was enacted to replace the residency rules previously developed by courts and the HM Revenue & Customs (HMRC) (Section 218 and Schedule 45 of the Finance Act 2013, FA 2013). According to the new statutory test, residency is established according the following alternative tests (applicable in order of priority): (1) Individual meets the first automatic UK test: Individual spends 183 days or more in the UK in the relevant tax year; (2) Individual does not meet one of the three automatic overseas tests: (a) Individual is resident in the UK for more than 1 year in the 3 preceding tax years but spends less than 16 days in the UK in the relevant tax year; (b) Individual is not resident in the UK in any of the 3 preceding years and spends less than 46 days in the UK in the relevant tax year; (c) Individual works full-time overseas and spends less than 91 days in the UK in the relevant tax year; (3) Individual meets the second automatic UK test: Individual has a home in the UK during the relevant tax year and spends sufficient amount of time in that home; (4) Individual meets the third automatic UK test: Individual works full-time in the UK, with no significant break; (5) Individual meets the sufficient ties test (for details and examples, see “Guidance Note: Statutory Residence Test” (RDR3), December 2013).

A company is resident in the United Kingdom if: (1) it is incorporated in any one of its three company jurisdictions, i.e. England and Wales, Scotland and Northern Ireland (section 14 of CTA 2009), or (2) its business is centrally managed and controlled in the United Kingdom (De Beers Consolidated Mines v. Howe, HL 1906 5 TC 198).

Income tax and corporations tax legislation is contained in the Income and Corporation Taxes Act 1988 (ICTA), the Taxation of Chargeable Gains Act 1992 (TCGA), the Capital Allowances Act 2001 (CAA), Income Tax (Earnings and Pensions) Act 2003 (ITEPA), Income Tax (Trading and Other Income) Act 2005 (ITTOIA), Income Tax Act 2007 (ITA), Corporation Tax Act 2009 (CTA 2009), Corporation Tax Act 2009 (CTA 2010) and Taxation (International and Other Provisions) Act 2010 (TIOPA).

Section 9 of TIOPA. Domestic law provisions granting unilateral relief from double taxation are contained in TIOPA.

Section 112–115 of TIOPA.

Domicile is decided under general law, i.e., determined according to court rulings of the courts. In general terms, an individual has his domicile in the country that is his real or permanent home to which, if he has left, he intends to return.

Prior to 6 April 2013, an individual could also choose to be taxed on the remittance basis if they had foreign income and were resident but not ordinarily resident in the UK. The concept of ordinary residence has been abolished for tax purposes from 6 April 2013. For the taxable year 2013–2014, this possibility is only available to individuals that are not domiciled in the UK.

Section 11 of TIOPA.

Part 2 of TIOPA.

Sections 809B, 809D and 809E of ITA 2007.

Section 809L of ITA deals with alienation, conversion and exporting debts.

Section 809F of ITA.

Section 26 of ITEPA.

Section 26A of ITEPA.

Section 809 of ITA.

Section 809C(1) of ITA.

Sub-sections 809C(2) and (3) of ITA.

Under section 809D of ITA, the individual is not required to make the claim.

Sections 809VA and seq. of ITA.

Sections 18A to 18S of CTA 2009.

The relevant provisions are set out in Pt. 9A of CTA 2009.

Part 9^A CTA 2009.

“Ordinary share” is defined in section 931U of CTA 2009 as a share that does not carry any present or future preferential right to dividends or to a company’s assets on its winding up. For the purposes of the legislation, a share is “redeemable” only if it is redeemable as a result of its terms of issue (or any collateral arrangements) (i) requiring redemption, (ii) entitling the holder to require redemption or (iii) entitling the issuing company to redeem.

As defined in the Annex to Commission Recommendation 2003/361.

Part 5 of FA 2013, with effect from 1 April 2013.

In 2015, the Government has conducted two consultations on the GAAR Penalty: 30 January–12 March 2015 and 22 July–14 October 2015.

Part 7 of FA 2004.

A person is a promoter if, in the course of a relevant business they are responsible for the design of a scheme, make a firm approach to another person with a view to making a scheme available for implementation by that person or other, make a scheme available for implementation by others, or organise or manage the implementation of a scheme. Both UK and non-UK based promoters are subject to the disclosure rules but they only apply to the extent that the scheme enables or is expected to enable a UK tax advantage to be obtained.

Section 98C of Taxes Management Act 1970.

Part 5 and schedules 34–36 of FA 2014 (from April 2015).

Part 3 of FA 2015 (for profits arising on or after 1 April 2015).

Part IV of TIOPA.

Part 9A of TIOPA.

Part 7 of TIOPA.

UK Government, “A guide to UK taxation” (March 2013) 1.

UK Government, “A guide to UK taxation” (March 2013), p.3.

Corporation Tax Act 2009 (CTA 2009) Part 3 Chapter 6A.

A SME, for the purposes of the UK R&D tax relief, is a company which, together with certain related companies, has fewer than 500 employees and either a turnover not exceeding €100 m or total assets not exceeding €86 m.

CTA 2009 Part 13 Chapter 2.

Section 1088 of CTA 2009.

The new Film Tax Relief was introduced by chapter 3 of FA 2006, together with schedules 4 and 5 (replacing previous reliefs relating to film-making). It has been amended over the years.

For this purpose, limited-budget films are those with a total core expenditure of £20 million or less. “Core expenditure” corresponds to expenditure on pre-production, principal photography and post-production (and excludes expenditure incurred on development, distribution or other non-production activities). “UK expenditure” is expenditure on goods or services that are used or consumed in the United Kingdom.

Schedule 16 of FA 2013 introduced Part 15A of CTA 2009.

For this purpose, “core expenditure,” in relation to a relevant programme, means production expenditure on pre-production, principal photography and post-production of the programme. “UK expenditure”, in relation to a relevant programme, means expenditure on goods or services that are used or consumed in the United Kingdom.

Schedule 16 of FA 2013 introduced Part 15B of CTA 2009.

This benefit is available from 1 April 2014.

For this purposes, “core expenditure” means expenditure on designing, producing and testing a video game. It does not include expenditure incurred in designing the initial concept for a video game, or in debugging a completed video game or carrying out maintenance in connection with such a video game. “UK/EEA expenditure” means expenditure on goods or services that are used or consumed in the United Kingdom or other member of the European Economic Area.

Schedule 4 of FA 2014 introduced Part 15C of CTA 2009. This benefit is available from 1 April 2014.

For this purpose, “core expenditure” expenditure on the activities involved in producing the production, and closing the production.

Part 8A of CTA 2010.

Prior to 2015, the main rate of corporation tax applied to profits above £1.5 million. Resident companies whose taxable profits (including chargeable gains) do not exceed £300,000 were taxed at a “small profits rate” on their profits. For 2014, the rate was 20 %. If profits fell between £300,000 and 1.5 million, “marginal relief” applied, with an effective rate of 23.75 % applying to profits falling within the bracket.

In 2010, the general rate of corporation tax was 28 %. It was reduced to 26 % in 2011, to 24 % in 2012, to 23 % in 2013, to 21 % in 2014.

Different rates apply for companies with ring fence profits (i.e., deriving profit from oil and gas activities), to whom the distinction between general and small profits rates continues to apply.