Answer ... There is a single, UK-wide corporation tax regime.
Answer ... For the financial year 2019–20, the main rate of UK corporation tax is set at 19%. According to current legislation, this rate should fall to 17% in 2020–21. A ‘surcharge’ applies to certain banking entities (see question 2.7).
Where taxable profits are attributed to the exploitation of patents (including where the profits arise from the sale of a product that includes a patent and from patent royalties), a tax rate of 10% may be applicable (see question 2.5).
A tax rate of 25% applies to profits that are subject to the UK diverted profits tax (see question 5.2).
Answer ... Corporation tax is generally charged on a company’s taxable profit for an accounting period, being the sum of its income profits and chargeable gains less certain deductible payments.
Answer ... Corporation tax is charged on both income profits and chargeable gains, although different rules apply to the computation of each, including the available deductions, and exemptions are available to certain classes of income such as dividends earned as investment income. Income profits are calculated by aggregating profits arising from various activities, including trading, property-related activities and loan relationships. UK tax legislation provides for different calculation methodologies for the various forms of income, with specific reliefs and exemptions applicable to each subset. Companies are liable to corporation tax on any chargeable gain arising upon the disposal of capital assets.
Answer ... Companies resident in the United Kingdom are generally subject to corporation tax on their worldwide profits, but in practice, the widespread availability of participation exemptions and reliefs in respect of non-UK source profits means that the system can be territorial in application for significant parts of a company’s income and gains. For example, companies may elect for profits and chargeable gains attributable to permanent establishments outside the UK to be exempt from corporation tax.
Companies that are not resident in the United Kingdom but that carry on a trade within the United Kingdom through a permanent establishment are liable to corporation tax on profits attributable to that UK permanent establishment, irrespective of where they arise. The United Kingdom has recently introduced legislation designed to implement the Base Erosion and Profit Shifting recommendation that companies should not be able to avoid creating a UK permanent establishment by fragmenting their operations in order to rely on specific activity exemptions.
For further discussion of the corporation tax liability of non-resident corporate entities, please see question 4.1.
Answer ... Losses may be utilised for tax purposes, but different rules apply depending on the nature of the activity that gave rise to the loss (eg, trading losses, loan relationship non-trading deficits and capital losses).
Generally, trading losses may be offset by a company against profits of the same accounting period, howsoever arising (including from capital gains). These losses may also be carried back into an accounting period that falls within the 12-month period prior to that in which the trading loss arose. To the extent not already offset or surrendered to another group company (see below), trading losses may be carried forward indefinitely and offset provided that certain conditions are satisfied.
In a given tax year, only 50% of a company or group of companies’ total profits above £5 million may be relieved using carried-forward losses.
Trading losses, as well as certain non-trading losses, may be surrendered to other companies within a group. Group relief is not available for capital losses. Losses arising to a group company that is resident or operating through a permanent establishment in the European Economic Area may be surrendered to UK group companies in very limited circumstances.
Capital losses may be offset by a company against its total chargeable gains in the same accounting period, or carried forward and used in the earliest subsequent accounting period when chargeable gains arise.
Answer ... Yes – the United Kingdom recognises a separation of beneficial and legal ownership in certain circumstances.
Answer ... No – the main rate of 19% corporation tax is chargeable regardless of a company’s revenue, profit or balance sheet.
Companies that make profits from oil extraction or oil rights are subject to a higher main rate of 30% where their profits in an accounting period exceed £1.5 million. A marginal rate applies to profits between £300,000 and £1.5 million.
Answer ... UK partnerships (including limited partnerships and limited liability partnerships) are transparent for tax purposes. Whether foreign partnerships or their members will be subject to tax on UK-related income will depend on whether the relevant entity has characteristics corresponding more closely to transparent or opaque UK entities.