Investing in the UK (England and Wales)

A Q&A guide to investing in the UK (England and Wales).

This Q&A gives an overview of the key factors affecting inward investment, including information on the jurisdiction's legal system; key laws and regulatory authorities; investment restrictions; and details of international treaties, customs and monetary unions. The guide also provides information on investor individuals; visa permits; restrictions on foreign ownership; transfer pricing and thin capitalisation rules; imports and import duties; safety regulations and standards for commercial goods and services; structuring and tax incentives; investment guarantees; recent developments and proposals for reform.

To compare answers across multiple jurisdictions, visit the Investing in... Country Q&A tool.

This Q&A is part of the Investing in... Global Guide. For a full list of contents, please visit

David Hamlett, Anthony Thompson, Lee Nuttall and Kate Swaine, Gowling WLG (UK) LLP (First Law International UK (England Wales), Member Firm)
1. How does your jurisdiction compare internationally as a destination for inward investment?

A study by the OECD found that the UK had US$17 trillion of foreign direct investment (FDI) stock in 2013, up almost 50% on 2010. This means that the UK has the largest inward FDI stock in Europe and the third largest in the world after the US and China (see the UK Trade & Investment Inward Investment Report 2014/15 (( _).

The UK is a business friendly jurisdiction, with comparatively low levels of bureaucracy and is a gateway to the European Union (EU), a common market of 500 million consumers. According to the OECD, UK net FDI inflows increased by more than 50% in 2014, despite a 16% reduction across the EU in the same period.

There is no exchange control regulation, which means that repatriation of funds is straightforward subject to international sanctions that may be in place, for example against North Korea. There is no discrimination in favour of local companies and there is no requirement to reinvest profits in the UK.

2. What types of companies are attracting foreign investment into your jurisdiction and what are the most active sectors?

London is a global financial centre and a full range of companies are represented in the UK, both in manufacturing and the services industry. For example, Jaguar Land Rover, acquired by Tata Motors (India) in 2008, is considered a rising star in manufacturing in the UK and throughout the world.

According to UK Trade & Investment (a non-ministerial government department), the top six industries for foreign investment projects in the UK in 2014 and 2015 were (

  • Advanced manufacturing.

  • Energy and infrastructure.

  • Financial and professional services.

  • Creative industries and ICT.

  • Life sciences.

  • Electronics and telecoms.

3. What will be the main factors affecting the market and how do you expect the market to develop?

Following the global economic downturn, the UK is experiencing a positive economic recovery (2.2% growth in GDP in 2015 on 2014 according to Office of National Statistics) together with low inflation, which is projected to continue.

A Conservative Government was elected on 7 May 2015. There are likely to be further real term cuts in public spending in order to redress the current account deficit, except in the area of healthcare, which is considered too important by all the major political parties.

There has been right wing pressure to revise the terms of the UK's membership of the EU. A referendum is due to be held on 23 June 2016 on whether the UK should stay in or leave the EU based on the reforms agreed by the Prime Minister and the EU member states in February 2016 . However, no major political party appears to be genuinely in favour of withdrawal. In the event of such a withdrawal, there would likely be reciprocal arrangements to preserve the majority of economic freedoms, similar to the arrangements that Norway has in place.

The Scottish independence referendum was held in 2014 and it was voted that Scotland remain in the UK. However, further devolution of powers is likely, which may include the power to raise taxes.


Legal system

4. Please briefly outline the government and legal system.

The UK is a constitutional monarchy, in which the Queen acts as Head of State. It has an unwritten constitution, which is found in statute (Acts of Parliament), case law, EU law and a series of conventions (or customs).

England and Wales, Northern Ireland and Scotland are distinct jurisdictions. England and Wales, and Northern Ireland are common law systems based on a doctrine of precedent. Scotland has elements of civil law.

Parliament has the power to make legislation and is the highest source of UK law. There are two houses:

  • The House of Commons, made up of elected members from the three main parties (Labour, Conservative and the Liberal Democrats) as well as a host of smaller parties and independents.

  • The House of Lords, made up of appointed peers.

Certain law making powers have been devolved to Northern Ireland, Scotland and Wales to varying extents, and there is support for further devolution of powers in the future.

There is a separation of powers between the judiciary and the executive/legislature. The judiciary is independent, impartial and non-political and judges are appointed rather than elected (unlike in the US, for example).

The judiciary's role is to interpret and apply the will of Parliament. However, under the Human Rights Act 1998 (HRA) the courts have the power to declare an Act of Parliament incompatible with the rights and freedoms guaranteed under the European Convention on Human Rights. In such circumstances, Parliament must consider amending the law accordingly. This is an important check on the power of the state against the individual, but Parliament retains its sovereignty. This is an area that may develop in the future as some members in Parliament support the repeal of the HRA.

5. What are the key laws and regulatory authorities governing foreign investment in your jurisdiction?

The UK is a member state of the EU and is therefore prohibited from restricting the cross-border movement of capital, subject to certain public interest exceptions.

The Department for Business, Innovation and Skills (BIS) may intervene in mergers that prompt certain specified public interest concerns, such as national security, media quality, plurality and standards, and stability of the financial system (Enterprise Act 2002). The UK Government reserves the right to amend this list from time to time.

The Competition and Markets Authority (CMA) can investigate mergers and potentially intervene in mergers that would, in its belief, result in a substantial lessening of competition (Enterprise Act 2002). A merger is either where the target company had a UK turnover of more than GB£70 million in the previous financial year or where the combined enterprise would have a market share of 25% or more in the UK (or a substantial part of the UK).

The European Commission (the executive body of the EU) performs a similar role to the CMA for mergers with a EU community dimension (as defined in Regulation (EC) 139/2004 on the control of concentrations between undertakings (Merger Regulation)).

6. What international treaty organisations and/or economic, customs or monetary unions or free-trade areas is your jurisdiction a member of?

The UK is a key member of the EU, a politico-economic partnership of 28 member states. The key feature of the EU is that goods, services, capital and persons can move freely between member states. However, there is a common external tariff on all goods entering the EU.

The UK is also a member of the World Trade Organization, both in its own right and also as part of the EU.

7. What other international agreements apply to foreign investment?

The UK has double tax treaties with over 100 countries worldwide, including most of Europe, the US, China, India and Brazil (see These double tax treaties are designed to ensure that the same economic activity is not taxed more than once.

The UK is also party to around 100 bilateral investment treaties as well as a number of other international investment agreements (see UNCTAD's Investment Policy Hub


Investor individuals

8. Are there any visas, permits or other requirements for foreign individuals entering your jurisdiction for business purposes?

Whether or not a visitor requires a visa depends on their nationality.

Nationals of the European Economic Area (EEA) and Switzerland can enter, live and work in the UK without applying for permission.

"Visa nationals", that is citizens of countries listed in appendix 1 of the Immigration Rules (, will always need to obtain a visa before visiting the UK. This includes countries such as India, Russia, China and the United Arab Emirates.

"Non-visa nationals", that is citizens of countries not listed in appendix 1 of the Immigration Rules (, will generally be able to visit the UK for less than six months without a visa. However, people wishing to visit for longer will need to obtain a visa in advance. This includes countries such as the US, Australia, Brazil and Singapore.

Visas are issued by the Home Office. The UK officially has a five tier points-based immigration system based on the type of work immigrants intend to undertake as well as their skillset. The visa procedure, requirements, timing and costs vary depending on the individual work visa (

9. Are there any visa waivers or fast-track procedures available for foreign individuals entering your jurisdiction as investors?

Non-EEA/Swiss nationals able to invest GB£2 million or more in the UK and meeting the other eligibility requirements can apply for a Tier 1 (Investor) Visa, which allows the applicant (and their dependants) to work or study in the UK with few restrictions. Applications can be made up to three months before travel. Decisions are normally made within three weeks of submitting the application.

Tier 1 (Investor) applicants are exempt from English language and maintenance requirements. Once in the UK, the individual must invest their money in either UK Government bonds or share or loan capital in active and trading UK registered companies within three months of their "investor start date" (which varies depending on applicants' circumstances).

This visa allows the holder to enter the UK for a maximum of three years and four months with the option to extend for a further two years. An application to settle permanently in the UK can be made after a total of five years continuous period of UK residence (or after two or three years if the investment is GB£10 million or GB£5 million respectively).

For more information, see

10. What are the circumstances under which an individual becomes liable to pay tax in your jurisdiction? Can individuals be liable for tax on foreign-source income?

Whether an individual is liable to pay tax in the UK depends on the individual's place of domicile or residence or, for certain taxes, the location of assets.


Domicile is a common law concept and, in general terms, is an individual's "permanent home", which may be different from their nationality or the country in which they are living. Strictly speaking, domicile is specific to one jurisdiction, so a reference to a domicile in the UK covers domicile in England and Wales, Scotland or Northern Ireland.

Under existing rules, for inheritance tax purposes, a non-UK domiciled individual may (subject to certain exceptions) be deemed domiciled in the UK if either:

  • The individual has been resident in the UK in at least 17 out of the previous 20 tax years.

  • The individual had UK domicile status within the previous three years.

The rules in relation to deemed domicile are due to change with effect from 6 April 2017 (see Question 29).


Tax residence in the UK for the purpose of income tax, capital gains tax and, where relevant, inheritance tax, is based on a statutory residence test. There are three parts to the test to determine residency, which combines simple tests of presence in the UK with more complex tests of connections with the UK (see


Arising basis. A non-UK domiciled UK resident can choose to pay tax on the "arising basis" in which case he or she pays UK tax on his or her worldwide income and gains. In this case, the individual may be taxed twice on some income and gains (by the UK and by the country from which the income and gains originate) but can generally claim Foreign Tax Credit Relief in such circumstances. Similarly, if an individual is potentially liable to tax in respect of UK income or gains in another country, there may be relief available under double tax treaty, or under the domestic legislation of that other country.

Remittance basis. Alternatively, an individual can choose to pay tax on the "remittance basis". In this case, he or she pays UK tax on his or her UK income and gains and on any foreign income and gains that are brought into (remitted to) the UK. Subject to certain exemptions (including one for minors) and de minimis limits (currently GB£2,000), to claim the remittance basis of taxation, an individual must pay an annual charge of GB£30,000 if he or she has been UK resident in seven or more of the previous nine tax years. This increases to GB£50,000 once he or she has been UK resident in 12 or more of the previous 14 tax years and GB£90,000 once he or she has been UK resident in 17 of the previous 20 tax years. The GB£90,000 charge will no longer apply when the new rules on deemed domicile are introduced with effect from 6 April 2017 as the individual will be taxed on the arising basis at that point (see above, Domicile and Question 29).


Investment restrictions

11. Are there any restrictions on foreign ownership and investment in specific industry sectors? Do any formalities, permit or notification requirements apply?

Generally, there are no restrictions on foreign ownership and investment in specific industry sectors. However, authorisation is required before any company, whether UK or overseas owned, can operate in certain regulated sectors, such as:

  • Banking and financial services (including insurance).

  • Defence.

  • Media, broadcasting and telecommunications.

  • Energy and water.

The UK Government regulates participation in other regulated industries by way of licensing. These include life sciences, pharmaceuticals, food and drink production, gambling, waste disposal and professional advisory businesses.

There are also a number of detailed EU rules regulating anti-competitive practices and how goods and services are procured by public bodies, which apply across all sectors.

12. Does the government retain and exercise control over certain industry sectors? If so how?

The government uses a variety of methods to retain control over certain industry sectors, such as defence. For example, the government retains golden shares in strategically important companies such as Rolls Royce, which it may use to prevent a takeover by a foreign investor, or veto unfavourable arrangements.

Much of what was the public sector is now operated as concessions, for example, the rail network and a number of prisons, and controlled by the government through contracts. A lot of UK infrastructure is run through Private Finance Initiative contracts, under which the government has contractual rights and remedies in the event that services are not provided in accordance with the contract.

The government is free to contract with the private sector; no specific legislation is required, unlike in other jurisdictions.

The Shareholder Executive (part of the Department for Business, Innovation and Skills (BIS)), exercises the shareholder rights of the UK Government and manages the UK Government's interventions in the private sector. As of October 2014, the UK Government held shareholdings in a number of companies, including Channel 4 (the UK's second largest commercial public service broadcaster), Eurostar (the high-speed train link between the UK and continental Europe), the Met Office (a world leader in providing weather and climate services) and Royal Mail (the UK's designated universal postal service provider).

13. Are there restrictions on foreign ownership or occupation of real estate? Do any formalities, permit or notification requirements apply?

There are no specific restrictions on foreign nationals owning or occupying real estate in the UK. However, there are restrictions from time to time under international sanctions that may be in place, for example against Iran or North Korea and so on.

14. Are there any minimum capital requirements for foreign investment?

There are generally no minimum capital requirements for foreign investment.

Private companies with shares must have a capital more than zero, while companies limited by guarantee do not have share capital.

Public companies must have a minimum share capital of GB£50,000 paid up for both:

  • At least a quarter of the nominal value (that is, GB£12,500).

  • The whole of any premium payable above the nominal value of the shares.

To be listed on the London Stock Exchange, a company must have at least 25% of its issued shares owned by the public following flotation. The Alternative Investment Market has no such requirement.

15. Are there any exchange control or currency regulations? Are there any restrictions on the remittance of profits abroad?

There are generally no exchange control or currency regulations, or restrictions on the remittance of profits abroad. This is subject to financial or trade sanctions that may be in place from time to time, which prohibit dealing with the assets of, or funding, certain individuals and entities. Some of these sanctions apply to specified territories or governments, while others relate to specific individuals or organisations associated with terrorism.

There are also strict money-laundering rules, designed to prevent terrorists and other criminals obtaining access to funding. These apply principally to any business holding or handling client funds, such as banks and other financial services businesses and professional advisory businesses.



16. Are there any restrictions on the importation of commercial goods?

There are three types of import control:

  • Surveillance, where imports of certain goods are monitored through licensing.

  • Quotas, where the actual volume of goods is restricted.

  • Bans, where imports are prohibited altogether.

As part of the EU single market, the UK is subject to the common policy on import controls. EU import controls may exist as a result of international sanctions or to implement EU trade policy.

However, the UK retains the right to impose national controls on the grounds of security or health, for example. One instance of this is the licensing controls on the import of firearms.

While the majority of industrial goods do not require an import licence, some do. Where this is the case, licences are issued by the Import Licensing Branch (ILB) in accordance with national, EU and UN controls in force from time to time (see

17. What import duties apply to commercial goods?

There are no import tariffs for goods coming into the UK from any other EU member states. However, such goods may be subject to VAT and some goods will attract excise duty (for example, alcohol and tobacco).

Imports from outside the EU must be declared to HM Revenue and Customs (HMRC) (which can be done through an agent). This declaration must include the reason for importing the goods and the commodity code. HMRC then determines what type or rate of duty to levy on the goods.

The UK Government has a full list of commodity codes, and guidance on duties, VAT treatment, licensing requirements, sector-specific regulations and customs procedures (see

18. Are the safety regulations and standards applicable to commercial goods in your jurisdiction compatible with other standards that are recognised internationally?

The UK has safety regulations and standards in line with the rest of the EU, and products cannot be traded in the EEA unless they conform to EU law.

Certain categories of products, such as electrical goods, must bear a "CE" mark in order to be placed on the EU market, which is the manufacturer's assurance that the product conforms to EU law and meets EU safety, health and environmental requirements (see

Civil liability

Commercial goods sold in the UK must fit their description, be fit for purpose and of satisfactory quality (Sale of Goods Act 1979).

Under the Consumer Protection Act 1987 (which implements Directive 99/34/EC amending Directive 85/374/EEC on liability for defective products (Product Liability Directive)), there is a principle of strict (or faultless) civil liability for death, personal injury, loss or damage caused by defective (unsafe) products.

Regardless of any contractual or tortious link, this liability can fall on the manufacturer (of the finished product or a component part), the importer into the EEA, the producer of any raw material, or any person whose name, trade mark or other distinguishing feature is identifiable on the product.

Criminal liability

In addition, the General Products Safety Regulations 2005 (which implements Directive 2001/95/EC on general product safety (General Product Safety Directive)) impose a general safety requirement that covers products supplied to, or likely to be used by, consumers.

The Regulations are complemented by sector-specific regulations, full details of which can be found at

It is a criminal offence to put an unsafe product on the market, punishable by imprisonment and/or an unlimited fine. Other contraventions of the Regulations, such as failure to provide adequate information to the consumer about the risk of using the goods, can also lead to criminal liability. It is also a criminal offence to breach sector-specific regulations.

19. Are there any similar or equivalent restrictions on providing services into another jurisdiction?

Treaty on the Functioning of the European Union (TFEU)

Within the sphere of financial services, the TFEU gives rights to firms to carry on financial services activities in another EEA member state. The TFEU provides firms with rights of freedom of establishment and the right of freedom to provide services. These treaty rights apply when a firm wishes to carry out financial services activities in another EEA state but does not have a passport available under one of the single market directives (see below).

A firm that can benefit from the rights granted by the

TFEU if satisfied both of the following conditions:

  • Its head office is situated in an EEA state.

  • It is recognised under the law of that EEA state as its national.

Firms based in the UK can use treaty rights to provide services in other EEA states.

EU single market directives

Firms authorised under one of the EU single market directives to carry out a service in in one member state can carry on activities in another EEA member state, on the basis of its home state authorisation. This is known as a single market passport. The activities can be conducted either:

  • Through a branch in the host member state (the right of establishment).

  • On a cross-border services basis without using an establishment in the host state.

The single market directives currently cover:

  • The management of alternative funds.

  • Banking services.

  • Insurance mediation.

  • Investment services in securities, derivatives and commodities.

  • The provision of mortgages.

  • Insurance.

  • The management of retail funds.

Firms which have their principal place of business outside the EEA and wish to set up a UK branch must apply to the appropriate financial services regulator for permission to carry out their activities through the UK branch. These firms cannot benefit from either the:

  • Passport rights under the single market directives.

  • Treaty rights under the TFEU.


Structuring and tax

20. How is foreign investment into your jurisdiction typically structured? What forms of legal vehicle are attractive to foreign investors?

The main forms of business vehicle are:

  • Private and public companies limited by shares.

  • General partnerships.

  • Limited liability partnerships (LLPs).

  • Joint ventures.

  • Branches.

Private and public companies limited by shares

Private companies limited by shares are by far the most common form of business vehicle used. Public companies are subject to greater regulation than private companies, but can raise capital by offering shares to the public, which private companies cannot do.

The advantages of limited companies are that:

  • A shareholder's liability for the company's debts is limited to the amount invested.

  • Ownership can easily be transferred by sale of shares.

The main disadvantage arises from the strict reporting and public disclosure requirements, including detailed annual accounts.

Profits (income and capital) are subject to UK corporation tax. Taxable income may be reduced by capital allowances and interest deductions. Transfers of shares incur stamp duty on the consideration given for the transfer. Companies are taxed separately to their shareholders.

General partnerships

Each partner acts as an agent so as to bind the partnership.

The principal advantage is that there are no registration or public disclosure/reporting requirements.

The biggest disadvantages are:

  • Partners are jointly and severally liable for all partnership debts, with no limit on liability.

  • Ownership can be transferred only by sale of the partnership business and assets or by entirely replacing partners.

Partnerships are tax transparent in terms of income and gains. Partners are liable to UK tax on their share of the profits of the partnership.

Limited liability partnerships (LLPs)

Each member acts as an agent so as to bind the LLP. LLPs are used mainly for professional advisory businesses and sometimes as joint venture vehicles.

The most important advantage is that members generally have limited liability.

Disadvantages include:

  • The LLP's annual accounts and other information must be published.

  • Ownership can be transferred only by sale of the LLP business and assets or by entirely replacing members.

LLPs are normally tax transparent in terms of income and gains in the same way as general partnerships.

Joint ventures

A joint venture is not a legal vehicle as such, and may be structured as a limited partnership or general partnership with a local company, contractually, or by way of shareholdings in a separate private company limited by shares. The tax position depends on the structure used.


Overseas companies can establish a branch in the UK, which is relatively easy and inexpensive to do. The branch must be registered with Companies House as a UK establishment and must pay a fee (currently GB£20).

However, UK businesses and lenders may be less willing to do business (for example, because of a lack of UK assets to provide security) and disclosure requirements are broadly equivalent to those for a UK company, that is, details of the overseas company's ownership, management and constitutional documents must be filed on the public register, along with annual accounts (for the overseas company as whole).

An overseas company incorporated in an EEA state that is not required by its parent law to deliver accounting documents is exempt from the requirement to file annual accounts with Companies House.

A UK branch of an overseas company will normally be subject to UK corporation tax as a permanent establishment of that company (see Question 21).

21. What are the circumstances under which a business becomes liable to pay tax in your jurisdiction?

A business is liable to pay UK tax if it is resident in the UK for tax purposes or if its trade is carried out through a permanent establishment in the UK.


A company is resident in the UK for tax purposes if it is incorporated in the UK or if it is centrally managed and controlled in the UK (which usually relates to the place of effective decision making at board level).

Subject to relief under an applicable double tax treaty (see Question 7), a company resident in the UK is generally liable to pay corporation tax on the whole of its chargeable profits and gains worldwide, even where those profits or gains are not repatriated to the UK.

Permanent establishment

A non-resident company has a permanent establishment in the UK if either:

  • It conducts the whole or part of its business through a fixed place of business in the UK (for example, a place of management, an office, a factory and so on).

  • An agent acting on behalf of the company (and not independently in the ordinary course of his own business) has and habitually exercises authority to do business on behalf of the company in the UK.

A non-resident company trading through a permanent establishment in the UK is only liable to pay tax on profits and gains arising through the business carried out through the UK permanent establishment.

In many cases a double tax treaty would prevent profits attributable to that UK permanent establishment being subject to taxation in the company's home jurisdiction as well (see Question 7).

Non-residents holding UK real estate

A non-resident company that is not trading through a permanent establishment is still liable to pay income tax on any rents received from UK real estate.

Gains made on the disposal of UK non-residential real estate are free from UK tax. However, most disposals of UK residential real estate by such persons will be subject to UK tax on chargeable gains unless that person is either a widely held company or a certain type of widely held fund.

Non-residents holding UK residential real estate subject to the annual tax on enveloped dwellings (ATED) will also be subject to ATED-related capital gains tax (CGT) on disposal (see Question 22, Annual Tax on Enveloped Dwellings (ATED)). If a gain is within the scope of both ATED-related CGT and non-resident CGT, then ATED-related CGT will take precedence so that there is no double charge.

Capital gains made by non-resident companies that are not subject to either ATED-related CGT or non-resident CGT, including gains arising on disposals of property other than UK residential property, may be attributed to their UK resident members under anti-avoidance provisions.

Stamp Duty Land Tax (SDLT) will also be payable on acquisitions of UK property (see Question 22).

22. What are the main business tax rates?

The UK has a general anti-abuse rule (GAAR), which means that arrangements to avoid taxation may be invalidated (even where they may otherwise have been lawful) if they are deemed to be "abusive". The UK courts have also adopted a common law doctrine of disregarding artificial arrangements and transactions where the sole or main purpose is to avoid tax. However, there remain opportunities for tax planning and it is recommended to always take professional advice in this area.

Corporation tax

A company is liable to pay corporation tax in each accounting period on its taxable profits, which is the sum of its income profits and chargeable gains less any expenses and other lawful deductions.

The main rate of corporation tax is 20% for the financial year to 31 March 2016. It is projected to fall to 19% from 1 April 2017 and 17% from 2020.

Where a company has taxable profits of up to GB£1.5 million, corporation tax must be paid nine months and one day after the end of its accounting period. Where a company has taxable profits of more than GB£1.5 million, corporation tax must normally be paid in quarterly instalments.

Value added tax (VAT)

VAT is a sales tax charged, very broadly, on all supplies of goods and services made (or deemed to be made) by a business in the UK. There are four main categories of supply for UK VAT purposes: standard rated (20%); reduced rated (5%), zero rated (0%); and exempt. Most supplies are standard rated.

Where the business is registered for VAT in the UK and uses the supplies for taxable (standard, reduced and zero rated but not exempt) business purposes it will receive credit for VAT charged to it. This means that, for most businesses, the impact of VAT is largely neutral as the business can recover the VAT it pays on supplies. However, for businesses with substantial exempt elements (such as in healthcare and finance), VAT can be a considerable additional cost.

VAT is also chargeable on goods imported into the UK from outside the EU (special rules apply for supplies within the EU).

VAT must normally be paid to HM Revenue and Customs quarterly.

Stamp duty

Stamp duty at 0.5% is payable on any transfer (but not the first issue) of shares in a UK company and certain other securities, subject to certain reliefs and exemptions. It is charged on the consideration given for the transfer.

Stamp duty on shares bought on a stock transfer form must be paid no later than 30 days after the form has been dated and signed. Stamp duty reserve tax (SDRT) on the paperless purchase of shares is paid at the time of purchase or within 14 days, or by the seventh of the month after the calendar month in which the trade took place, depending on the circumstances.

Stamp duty land tax (SDLT)

SDLT is payable at a range of rates on transactions involving the transfer or creation of an interest in UK land or real estate or acquisitions that are deemed to be UK land (for example, transfers of interests in real estate investment partnerships). There are a number of reliefs and exemptions.

The rates of SDLT are charged on different portions of the purchase price at different rates (percentage of portion of purchase price).

For acquisitions of commercial real estate, or for a mixture of commercial and residential real estate, the rates are as follows:

  • GB£0 to GB£150,000: 0%.

  • Over GB£150,000 to GB£250,000: 2%.

  • Over GB£250,000: 5%.

For acquisitions of residential real estate SDLT is charged on different portions of the purchase price at different rates (percentage of portion of purchase price) as follows:

  • GB£0 to GB£125,000: 0%.

  • Over GB£125,000 to GB£250,000: 2%.

  • Over GB£250,000 to GB£925,000: 5%.

  • Over GB£925,000 to GB£1.5 million: 10%.

  • Over GB£1.5 million: 12%.

Where residential property is purchased by a non-natural person (for example, a company) and the chargeable consideration is more than GB£500,000, SDLT is charged at 15%.

Special rules apply to determine SDLT on rents.

An SDLT tax return must be submitted, and SDLT paid, within 30 days of the effective transaction date.

A new SDLT surcharge on residential property has been introduced from 1 April 2016 (See Question 29, Stamp duty land tax: SDLT residential property surcharge).

Land and buildings transaction tax (LBTT)

SDLT only applies in England, Wales and Northern Ireland. From 1 April 2015 equivalent transactions in Scotland are subject to the LBTT, which mirrors SDLT in most key aspects except that LBTT applies different rates

For acquisitions of commercial real estate, or for a mixture of commercial and residential real estate, LBTT is charged as follows:

  • GB£0 to GB£150,000: 0%.

  • Over GB£150,000 to GB£350,000: 3%.

  • Over GB£350,000: 4.5%.

For acquisitions of residential real estate LBTT is charged as follows:

  • GB£0 to GB£145,000: 0%.

  • Over GB£145,000 to GB£250,000: 2%.

  • Over GB£250,000 to GB£325,000: 5%.

  • Over GB£325,000 to GB£750,000: 10%.

  • Over GB£750,000: 12%.

A 3% LBTT surcharge on acquisitions of additional dwellings has also been introduced with effect from 1 April 2016.

Annual tax on enveloped dwellings (ATED)

A residential property will (subject to certain exceptions) be subject to an annual charge of between GB£3,500 and GB£218,200 (for properties with a taxable value in excess of GB£20 million) if both:

  • Its taxable value is in excess of GB£500,000.

  • It is held by one of the following:

    • a company;

    • a partnership with at least one corporate partner; or

    • a collective investment scheme.

Certain exclusions apply for letting businesses and interests held by property developers, among others.

Payroll taxes

A UK company or branch/subsidiary that employs individuals to work in the UK must deduct income tax under the pay as you earn system (PAYE) from all payments of salary, bonuses and benefits-in-kind made to those individuals. The company must account monthly to HM Revenue and Customs for the amount deducted.

Social security payments (National Insurance Contributions (NICs)) are also payable both by the employee and the employer. The employer deducts the employee's contribution (which depends on the level of earnings) from payments of salary made to the employee. The employer's contribution must be made in addition to the employee's, and may not be recovered from the employee (so it is an additional cost to the employer). For the tax year 2015/16, the employer's NICs are charged at the rate of 13.8% of the gross salary paid to the employee above GB£155 per week.

Diverted profits tax

From 1 April 2015, a new diverted profits tax applies at a rate of 25% (which is higher than the main rate of corporation tax) on diverted profits (that is, profits not otherwise subject to UK taxation) arising in either of the following circumstances:

  • Group transactions involving UK companies or permanent establishments which lack economic substance and give rise to a mismatch of tax treatment between the parties lowering the overall tax bill (see Question 21).

  • Transactions involving activity in the UK that do not involve or give rise to a company being tax resident in the UK or a company having a permanent establishment in the UK.

Small and medium-sized companies benefit from an exemption in the first case and non-UK companies with total UK sales of less than GB£10 million will benefit from an exemption in the second.

Companies which may be subject to the diverted profits tax must notify the relevant authorities.

Business rates

Businesses that occupy non-domestic premises must pay business rates, which are based on the rateable value of the property multiplied by the business rates multiplier (set by the UK Government).

Business rates are collected by local councils, some of which may accept payment in monthly instalments.

23. What is the tax treatment in your jurisdiction of profits from an investee company remitted outside your jurisdiction by an investor?

Profit from a UK subsidiary company can be remitted by dividend. Dividends can only be paid out of accumulated realised profits, and any losses must be made good before dividends can be paid.

A dividend paid by a UK resident company is made out of post-tax profits (and is therefore not deductible in computing taxable profits). The UK does not impose withholding tax on dividend payments made to a corporate shareholder who is tax-resident overseas.

Profits earned by a branch can be repatriated to the parent company at any time; there is no withholding tax on branch profits.

24. What transfer pricing and/or thin capitalisation restrictions may apply to investments into your jurisdiction from elsewhere?

Transfer pricing

The rules on transfer pricing provide that transactions between UK companies and UK or foreign affiliates must be taxed on the arm's length value of the transaction, (broadly) where:

  • A transaction (or series of transactions) takes place between two companies.

  • One company directly or indirectly participates in the management of the other, or the same person (or persons) directly or indirectly participates in the management of both companies.

  • The terms of the transaction (or series) differ from those that would have been agreed between independent parties (that is, at arm's length).

  • The actual terms of the transaction (or series) confer an advantage in relation to UK tax on either or both of the companies.

Where a transaction (or series of transactions) is caught by the rules, the value of the relevant transaction(s) must be recomputed for tax purposes so as to cancel out the tax advantage obtained from departing from arm's length terms.

Small and medium sized enterprises benefit from an exemption to the transfer pricing rules in certain circumstances.

Thin capitalisation

Thin capitalisation artificially reduces taxable profit. Thin capitalisation rules (which are part of the UK transfer pricing rules) apply where a company borrows money on uncommercial terms (for example, at artificially high interest rates) from an affiliate. Where the rules apply, they will restrict the deductibility of interest payments by the company.

The rules apply equally to loans to or from foreign affiliates and loans between UK affiliates (see and



25. What tax incentive or other schemes exist to encourage foreign investment?


Businesses seeking for funding of less than GB£1 million to set up in England may be eligible for support through Regional Growth Fund (RGF) programmes (see

Otherwise, funding tends to be focused on supporting research and development (R&D) in high technology sectors such as life sciences and digital communications (see

Enterprise zones

The UK Government has designated a number of enterprise zones in England and Wales, designed to encourage businesses to locate in particular areas with the aim of creating jobs and boosting local economies (see

The benefits include:

  • Up to 100% business rate relief worth up to GB£275,000 over a five-year period (provided the business locates on an enterprise zone before March 2018).

  • Simplified local authority planning within specified areas.

  • Enhanced capital allowances to businesses making large investments in plant and machinery in particular zones (provided the business locates on an enterprise zone before March 2020).

Tax incentives

Tax incentives include:

  • The patent box. Companies liable for UK corporation tax and earning profits in the UK from patented inventions or similar types of IP are eligible for corporation tax relief for these profits, provided the relevant eligibility criteria are met (see

  • Research and development (R&D) tax relief. Companies investing in qualifying R&D are entitled to relief from corporation tax (see

  • Creative industry tax reliefs. There are six corporation tax reliefs available to qualifying companies directly involved in the production and development of certain films, high-end television programmes, children's television programmes, animation programmes, video games or theatre productions (see

  • Business investment relief. Individuals who are resident but not domiciled in the UK and who claim remittance basis taxation are not liable to pay a tax charge for foreign income that is invested in a qualifying target company. Broadly speaking, a target company is an unlisted limited company whose activities substantially comprise trading, developing or letting property, or R&D. The relief is not automatic and must be claimed on the UK self-assessment tax return (see The UK Government announced at the Autumn Statement in November 2015 that it will consult on changes to the rules to encourage greater use of the relief to increase investment in UK businesses.

  • Venture capital trust (VCT) relief. Individuals investing in qualifying VCTs may benefit from an income tax exemption on any dividends, capital gains tax (CGT) relief on disposal of the shares, and also income tax relief at 30% of the amount invested (up to GB£200,000 annually) (see

  • Enterprise investment scheme (EIS) relief. The EIS offers a number of tax reliefs to individual investors who subscribe for qualifying shares (up to 30% of the total shares) in qualifying companies (that is, smaller higher-risk trading companies, such as those with assets of GB£15 million or less, or with no more than 250 employees) (see

  • Seed enterprise investment scheme (SEIS) relief. Individuals who subscribe for qualifying shares in a qualifying company (that is, small, early-stage companies) may benefit from income tax relief at 50% of the amount invested (up to GB£100,000 annually) and CGT relief on disposal (see


Investment guarantees

26. What legal guarantees exist against expropriation and/or provide for appropriate compensation? What is your government's track record in this regard?

There is no track record of assets being expropriated by the government without compensation, and there is no differential in treatment of foreign and domestic investors.

Each bilateral investment treaty must be considered on a case by case basis. However, generally, property is not nationalised or expropriated except for public purposes (for example, see Article 5(1), UK Model Bilateral Investment Treaty 2008).

27. Are there any issues in relation to the enforcement of intellectual property rights?

There is a very strong regime for the protection of intellectual property (IP) in the UK. The Intellectual Property (Enforcement) Regulations 2006 were brought in to ensure that English law was in keeping with the rest of the EU following Directive 2004/48/EC on the enforcement of intellectual property rights (Intellectual Property Directive). Both national UK IP rights and EU singular rights, such as the community trade mark, are enforceable in the UK.

There are no material issues in relation to enforcement. Where IP rights are infringed, the holder may, among other remedies, obtain damages, an account of profits or an injunction in the civil courts. If the value of the dispute does not exceed GB£500,000 and the issues and evidence are relatively straightforward, the case may be heard by the Intellectual Property Enterprise Court. Cases of a higher value or that are particularly complex are heard by the High Court (Chancery Division).

Holders of IP rights can also register these rights with HM Revenue and Customs, who can then seize suspected counterfeit goods crossing the UK border under Regulation (EC) 1383/2003 on action against counterfeit and pirated goods (Counterfeit Goods Regulation).

28. Are there any issues in relation to the gaining and enforcement of judgments and/or arbitral awards?

The UK has an independent and impartial judiciary, with no political bias. Indeed, any political bias would be a ground for appeal against a judgment. The courts are generally effective, efficient and impartial, and individuals and body corporates have the right to challenge the exercise of power by a government authority on the grounds of illegality, irrationality or procedural impropriety, provided that certain conditions are met.

London is one of the most popular seats of arbitration and is home to a large number of arbitral bodies. Arbitrations seated in London are governed by the Arbitration Act 1996. Arbitral awards made in England and Wales or states party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) (subject to limited exceptions) may be enforced through the English courts in the same way as court judgments.


Recent developments and proposals for reform

29. Have there been any significant recent or proposed legal developments affecting investors?

Stamp duty land tax: residential property surcharge

A new stamp duty land tax surcharge of 3% came into force on 1 April 2016 on purchases of an interest in residential property that qualifies as a "major interest" in a dwelling acquired by either:

  • Companies and other non-natural persons.

  • Individuals purchasing a second or other additional property.

Different rules apply in different circumstances. However, broadly the charge applies to acquisitions where the chargeable consideration is GB£40,000 or over, the interest being acquired is not subject to a lease with more than 21 years to run at the date of purchase and, where relevant, the property is not being purchased to replace a main residence.

The charge will also apply to trustees acquiring property in certain circumstances.

Deemed domicile rules

The rules in relation to deemed domicile (see Question 10) are due to change with effect from 6 April 2017. Current proposals are that individuals will be deemed to be domiciled in the UK for the purposes of income tax, capital gains tax and inheritance tax after they have been UK resident for 15 out of the last 20 tax years.

In addition, individuals who were born in the UK with a UK domicile at the time of their birth (that is, their domicile of origin) will not be able to take advantage of a subsequently acquired foreign domicile at any time when they are UK resident. Instead, they will be taxed for all purposes as if they were actually UK domiciled. These rules are also due to take effect from 6 April 2017.

Inheritance tax on UK residential property held through offshore companies and other structures

Under existing rules, an individual who is neither domiciled in the UK nor deemed to be so domiciled for inheritance tax (IHT) purposes is only liable to IHT on their assets situated in the UK (regardless of whether the individual is UK resident or otherwise). Property situated in the UK is not subject to from this charge if it is held through an offshore company, the shares of which can be held by either:

  • The individual directly.

  • Within a wider structure (for example, by trustees).

From 6 April 2017, the UK government proposes to change these rules so that trustees or individuals will pay IHT on the value of any UK residential property held through offshore trusts and company structures. This will apply to all UK residential property, regardless of:

  • The property's value.

  • Whether or not it is let out.

The detail of the proposals has not been finalised yet, and the government intends to consult on the measure before it publishes the final legislation.

Restriction of finance cost relief for individual landlords

Under existing rules, individual landlords can deduct properly allowable expenses from rental income to calculate their taxable profits from the property. These include:

  • Finance costs (such as mortgage interest, interest on loans to buy furnishings).

  • Fees incurred when taking out or repaying mortgages or loans.

No relief is available for capital repayments of mortgages or loans. This relief will be gradually restricted with effect from 6 April 2017 so that, by the tax year 2020/21, landlords will only be able to claim a basic rate reduction on such costs.

Collection of disputed tax

In relation to suspected tax avoidance schemes, HM Revenue and Customs can now, in certain circumstances, require taxpayers to pay disputed tax before a court has ruled on the case. This removes the cash flow advantage that taxpayers previously enjoyed.

Interest deductibility

The UK is a committed participant in the OECD's Base Erosion and Profit Shifting (BEPS) project, which aims to redesign elements of the international taxation system to address perceived tax avoidance by large multinational businesses.

One key area of reform on which detailed proposals have been published relates to interest deductibility.

Under current proposals, interest deductibility will be restricted to 30% of a UK group's EBITDA in any given accounting period. The UK group will consist of all:

  • UK resident companies.

  • UK permanent establishments of non-UK companies within a group.

OECD recommendations also allow countries to introduce a rule that will consider the EBITDA of a worldwide group.

The UK government has endorsed the OECD approach but has not yet published detailed proposals for their implementation. A UK government consultation on this subject closed on 14 January 2016 but no detailed response to that consultation has yet been published.

The UK government has indicated that it is unlikely that any such rule would be implemented before 1 April 2017.

Corporation tax: loss relief

At the recent Budget on 16 March 2016, the UK government announced its intention to reform the UK corporate loss relief regime with effect from 1 April 2017. Currently, a trading loss arising in one accounting period can only be carried forward into future accounting periods to set against a profit arising from the same trade in the same company but no other restrictions apply.

Following the proposed changes, a loss would be able to be set against different types of income and surrendered to different group companies. However, a restriction will apply so that only 50% of profits in excess of £5 million can be relieved by the use of losses.

This policy has only been announced in outline and detailed consultation is expected across the course of 2016.

Income tax: changes to dividend taxation

Under rules in effect prior to 6 April 2016, income tax was charged on most dividend income at specified dividend rates. A recipient of a dividend received a tax credit equal to one-ninth of the dividend value. This could be set against their tax liability to tax on dividend income for that year. The rates payable before the application of one-ninth tax credit were 10% (basic rate), 32.5% (higher rate) and 37.5% (additional rate).

30. Are there any planned or on-going treaty negotiations or political developments that could have an impact on your jurisdiction's bilateral relationships with other nations and/or other economic, customs or monetary unions, free-trade areas or markets?

There is right wing political pressure to revise the terms of the UK's membership of the EU (see Question 3).

The EU and US are currently in negotiation over a Transatlantic Trade and Investment Partnership (TTIP) with the aim of removing trade barriers (see

The UK is an early adopter of the OECD's Standard for Automatic Exchange of Financial Information in Tax Matters, or Common Reporting Standard (CRS). In 2017, the UK will begin to exchange financial information with the authorities of other countries that have signed bi-lateral and multi-lateral agreements. Since almost every jurisdiction will eventually exchange information with other jurisdictions under the CRS, any impact it may have on investors should be similar in the UK to that in other jurisdictions.


Main investment organisations

UK Trade and Investment (UKTI)

Main activities. The UKTI is the government agency tasked with encouraging and supporting foreign direct investment to the UK. It has produced helpful guidance on setting up a business in the UK and overviews of investment opportunities in specific sectors.


Confederation of British Industry (CBI)

Main activities. The CBI is a business lobbying organisation, which provides its members with support to help them achieve their ambitions. The site provides non-member access to a number of useful reports on inward investment.


Institute of Directors (IoD)

Main activities. The IoD is an organisation set up to support, represent and set standards for company directors. The site provides non-member access to a number of articles on business issues and inward investment.


UK Business Angels Association (UKBAA)

Main activities. The UKBAA is the national trade association representing angel and early stage investment in the UK. The site provides information and advice to high net worth individuals who want to invest in start-up and early stage businesses in the UK.


Online resources


Description. The official website of Companies House, which is the government agency responsible for storing company information delivered under the Companies Act and related legislation, and making this information available to the public.


Description. The official website of HM Revenue and Customs, the UK's tax authority, which is responsible for the collection and administration of direct and indirect taxes and benefits.


Description. The official website of UK Visas and Immigration, the government agency responsible for running the UK's visa service. This website contains up-to-date information on the process, eligibility, fees and processing times for obtaining visas.


Description. The official UK Government business portal, which provides access to a wide range of information and detailed guidance.


Description. The official UK Government tool to find government-backed business support and finance.


Description. The official UK Government archive of all legislation from 1988 to date, along with some older legislation. Some legislation is shown in its original form and may not incorporate later amendments.


Description. An official website of the European Commission that provides information on EU tariffs, requirements, preferential arrangements and quotas.

Contributor profiles

David Hamlett, Partner, Commercial, IT & Outsourcing

Gowling WLG (UK) LLP

T +44 121 393 0283

First Law International Member Firm (Chambers Global Elite Network)

Chairman of First Law International Advisory Board and Non-executive Director of University Hospital Birmingham

Professional qualifications. England & Wales, Solicitor

Areas of practice. Healthcare; defence; alliancing; joint ventures; outsourcing; public sector; food and drink; manufacturing; energy; professional and business support services.

Non- professional qualifications. MA Law, Downing College, University of Cambridge

Languages. English

Professional associations. The Law Society, England and Wales.

Recent transactions

  • Advising on the Independent Sector Treatment Centre, a four-year reform programme with more than 50 individual contracts and worth in excess of GB£5 billion. To date this is the largest PPP programme in Europe.
  • Part of the team that instigated the first and to date only non-NHS operational franchise of an NHS hospital.
  • Working with the UK Ministry of Defence on various high profile transactions including designing the unique alliancing contract for the supply of two new aircraft carriers for the Royal Navy.

Anthony Thompson, Partner, Private Capital

Gowling WLG (UK) LLP

T +44 20 7759 6543

First Law International Member Firm (Chambers Global Elite Network)

Professional qualifications. England & Wales, Solicitor

Areas of practice. Private capital; tax.

Non- professional qualifications. BSc Zoology, University of Sheffield

Languages. English

Professional associations. Member of the Society of Trust and Estate Practitioners, City of London Law Society.

Recent transactions. Advising high net worth private clients and their families on their international estate planning including advice on trust structuring, succession planning, family governance, residence, domicile and UK taxation.

Lee Nuttall, Partner, Tax & Funds

Gowling WLG (UK) LLP

T +44 870 733 0584

First Law International Member Firm (Chambers Global Elite Network)

Professional qualifications. England & Wales, Solicitor

Areas of practice. Commercial tax.

Non- professional qualifications. LLB (Hons) Law and LLM Law, University of Birmingham

Languages. English

Professional associations. The Law Society, England and Wales; Institute for Fiscal Studies; Investment Property Forum; British Property Federation.

Recent transactions

  • Designing a real estate investment project to give tax efficiency for UK corporate taxpayers, exempt institutions and overseas investors.
  • Promoting the UK as a tax-efficient jurisdiction in which to base a holding company for a European trading group.
  • Advising a pension fund on its GB£150 million participation in a US-based equities fund.
  • Engineering a pre-sale reorganisation for an events and entertainment business to enable the buyer to enjoy the benefit of unused capital allowances.

Kate Swaine, Partner, Intellectual Property

Gowling WLG (UK) LLP

T +44 121 393 0672

First Law International Member Firm (Chambers Global Elite Network)

Professional qualifications. England & Wales, Solicitor

Areas of practice. Construction and engineering; food and drink; advertising; retail.

Non-professional qualifications. BA History, University of York; Diploma in Intellectual Property Law and Legal Practice, Bristol University

Languages. English, Italian

Professional associations. MARQUES (Association of European Trade Mark Owners); International Trademark Association (INTA); Institute of Trade Mark Agents (ITMA); Intellectual Property Lawyers Organisation (TIPLO).

Recent transactions

  • Operating a global hub for Dyson Technology, managing the enforcement of its IP in the Dyson Bladeless fan range in over 40 countries.
  • Helping Iglo Foods to enforce its IP in the UK and co-ordinating European enforcement issues, including proceedings for a comparative advertising claim.
  • Working with Mothercare and ELC on IP enforcement and design project clearance and management worldwide. Working with both the design and legal teams to ensure a smooth process from creation through to execution and enforcement.
  • Advising Mercedes-Benz UK on enforcing its IP.
  • Advising Premier Foods on IP enforcement, exploitation, and advertising and packaging clearance.

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