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Incorporation

Companies are cheap and quick to incorporate in the UK and simple to maintain. Companies carry limited liability meaning that the shareholders are protected in the event of the insolvency of the company. Companies can be incorporated within 24 hours and there is no minimum requirement for share capital – £100 share capital is common.

Tax regime

Businesses operating in the UK benefit from a relatively straight forward tax regime with tax payable at a rate of 20% on profits of the business up to £300,000. Expenses incurred in the course of business may be deducted from income to reduce the taxable profit of the business.

VAT is generally chargeable at 20% of turnover (depending the nature of the goods or services being sold and the specific VAT scheme that the company has opted for) and businesses can usually offset VAT they have paid out against VAT they have collected. Businesses do not have to register until their VATable turnover has exceeded £190,000 in any twelve month period.

Employment taxes are deducted at source and paid directly to HM Revenue & Customs.

Employing staff

Employment laws in the UK have become more employer-friendly in recent years. In most cases, employees are not protected from “unfair dismissal” until the expiry of two years from commencement of employment giving employers a wide discretion to terminate the employment of employees who are not performing or are not suitable for the businesses. There are some exceptions including where an employee is pregnant.

There are a number of attractive tax relief schemes available to encourage businesses to grant share options to employees.

Compliance

The rules on the maintenance of companies are light touch and easy to satisfy. A company must file a return to the companies regulator (Companies House) each year along with a copy of its accounts. A company will make intra-year filings when it appoints or removes directors and when it changes its share structure (for example, by issuing new shares).

Data protection regulation is lightly enforced compared to some other European jurisdictions.