Taxes in Great Britain

The Legal Framework for Taxation in the UK

Common law plays a significant role in the UK. The legislation governing the taxation of companies’ income includes:

• the corporate income tax acts (“Income and Corporation Taxes Act 1988”, “Corporation Tax Act 2009”, “Corporation Tax Act 2010”),
• the Capital Allowances Act 2001 (“Capital allowances Act 2001”),
• the Taxation of Chargeable Gains Act 1992 (“Taxation of Chargeable Gains Act 1992”),
• the Taxes Management Act 1970 (“Taxes Management Act 1970”), which is the procedural legislation.

Taxable Entities in the UK

Ltd companies are subject to corporation tax, whereas entities known as “Partnerships” are not. This is because a partnership is not taxed on its income; instead, each member of the “partnership” pays tax on their share of the profits of that “Partnership”.

As is common elsewhere, the UK distinguishes between resident and non-resident companies.

In the UK, a company is regarded as resident if it meets the following conditions:

• 1) the company is incorporated under British law
• 2) the company’s activities are managed directly from the UK
• 3) its activities are in fact centrally managed and controlled from the UK

If a company is treated as resident in another country, it is not regarded as a UK resident.

Companies in the UK pay tax on their income at a rate that changes over time. Where the accounting period does not coincide with the tax period, profits are apportioned between the tax periods.