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Tax Considerations for Tier 1 (Entrepreneur) Visa Applicants

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For entrepreneurs moving to the UK on a Tier 1 (entrepreneur) Visa, the issue of tax is both fundamentally important and confusing. It can be difficult enough, even for the most commercially astute business people to understand the tax system of their own country, let alone that of a foreign jurisdiction.

Fortunately, the British tax system, administered by Her Majesty’s Revenue & Customs department, (HMRC) is relatively straightforward. An experienced business immigration solicitor will point you in the direction of the best accountant and/or tax planning consultant available in a particular area.

The main tax charges that those entering the UK on the Entrepreneur Visa route need to be concerned about are:

Corporation tax

UK corporation tax currently sits at 20%. This rate will fall to 19% for the year beginning 1 April 2017, and to 17% for the year beginning 1 April 2020.

There are four special corporation tax regimes which Tier 1 (entrepreneur) Visa applicants who are looking to invest their £200,000 funds in an existing business should be aware of.

  • Oil and gas industry - Profits that come from oil or gas extraction, or oil or gas rights, in the United Kingdom and the UK Continental Shelf ('ring-fence profits') are subject to tax in the United Kingdom of 30% (full rate) and a small profits rate of 19%. A 100% capital allowance tax is also applicable to a majority of capital expenditure.
  • Banking sector – there is a supplementary tax of 8% on profits in excess of £25 million. Loss utilisation is restricted in the banking sector, with trading losses set against only 50% of profits in a period.
  • Tonnage tax – this is an alternative tax regime to corporation tax for companies that operate ships in the UK.
  • Life insurance – these types of businesses are taxed by a separate regime which effectively includes different corporate tax rates as well as special rules for quantifying profits.

Capital gains tax

As an entrepreneur in the UK, if you sell a business asset, you may have to pay Capital Gains Tax on part or all of the profit you receive if you are a sole-trader or in a business partnership.

Assets you may have to pay Capital Gains Tax on include:

  • land and buildings
  • shares
  • plant machinery
  • fixtures and fittings
  • trademarks

If you qualify for Entrepreneurs’ Relief, you may pay less Capital Gains Tax. In the 2016 budget it was announced that Entrepreneurs’ Relief is to be extended to non-participating investors in unlisted companies provided shares are held for at least three years.

Value-added Tax (VAT)

VAT is a tax on the supply of goods and services that businesses in the UK pass on to their clients. If you are setting up a business after gaining entry to the UK under an Entrepreneur Visa, then you will need to ask your Immigration lawyer who can provide you with the best advice regarding this often complicated tax.

The current turnover threshold for having to charge VAT is £81,000.

VAT rates vary depending on the types of goods and services provided. The four categories of VAT rates are:

Suppliers exempt from VAT - education, doctors, dentists, finance and insurance suppliers pay no VAT in most cases.

Zero rate - food (except restaurants and takeaways), prescriptions, children’s clothes and shoes, books and new house sales all incur a zero rate of VAT.

Reduced rate - fuel and power used in the domestic and charitable sectors all incur a 5% VAT charge.

Standard rate – the standard rate of 20% is applied to all goods and services not covered by the above categories.

Getting the right advice

If you are applying for a Tier 1 (entrepreneur) Visa it is imperative that you have an understanding of UK tax laws before you attend an interview as part of the Genuine entrepreneur Test. The best Immigration lawyers are aware that questions surrounding the UK tax system are asked in the interview and any answers are used to assess how familiar foreign-born entrepreneurs are with UK business regulations and policies.

By obtaining expert tax planning advice and having an understanding of UK tax laws, not only will you be confident that you are complying with tax regulations, but you will have a greater chance of successfully gaining a UK Tier 1 (entrepreneur) Visa.

OTS Solicitors is one of the most respected Immigration law firms in London. By making an appointment with one of our Immigration solicitors, you can be assured of receiving some of the best legal advice available in the UK today. We will assist you with all aspects of applying for a Tier 1 (entrepreneur) Visa and will support you throughout the process.

If you wish to discuss any of the points raised in this blog, please phone our London office on 0203 959 9123.

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