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United Kingdom


The United Kingdom of Great Britain and Northern Ireland is a distinctive and marvelous country which is much different from other European countries by not only its outstanding culture traditions but also because of its economic and political identities. In spite of the entrance in the European Union Great Britain is not in the euro zone and distances till now are measured by miles not by meters. The royal power in Great Britain is a statehood symbol though the Queen has no real power.

Great Britain gave to the world many genious poets, writers, scientists, and the British are proud of their educational and cultural traditions. The society of this country is considered one of the most civilized in the world.


1. Great Britain is a respectable jurisdiction, the country with a huge legal heritage. It means that English companies are not only convenient and effective in use, but also are respectable, can play a trendy role in holding.

2. Legal regulation of corporate relations is well stated in details in acts;

3. Tax system of Great Britain is flexible, provides various privileges. Throughout the last years there has been the tendency of reduction of rates of underlying direct and indirect tax.

4. Unlike many European jurisdictions there are not requirements that directors and shareholders of the company should be residents. But there is a restriction according to which in the company there should be at least one director-individual.

5. Great Britain signed more than 100 agreements on double taxation avoidance that allows to plan business activity more favorably.

Legal system

Before you start any activity in a foreign state, it is necessary to receive at least initial knowledge about its legal system.

Great Britain is the country of Common law. The legislative system of the country strongly differs not only from Russian, but also from other European states systems.

Legal source in Great Britain are law, written statutory, case law.

Case law is the decisions of courts which positions are obligatory to apply by all the inferior courts, and also for other legal subjects.

One more unique feature of Great Britain legal system is Law of Equity. It is historically developed legal institute which differs from a statute one, Statutory law, Common law.



At the present time the formation and activity of English companies are regulated by Companies Act 2006. This law is a new version of Companies Act 1985 and is the fullest and modified document regulating corporate relations. There are codified norms of Common law which haven't been fixed earlier in the united act. The law came into force only partially. For October, 1st, 2009 its full coming into force is planned.

Law operation extends not only in the territory of Great Britain, but also in Northern Ireland. Some law positions extend also on dependent territories Isle of Man and Jersey Island.

Besides Great Britain companies the formation of such legal entities as Limited Liability Partnership is possible. Regulation in this area is carried out basically by following laws:

• Limited Liability Partnership Act 2000;

• Limited Liability Partnerships Regulations 2001.

Governmental authorities regulating corporate legal relationship

In Great Britain there is a great attention to effective regulation in the sphere of business and small business assistance.

State regulation in the sphere of corporate legal relationship is carried out by Companies House.

Main functions of this governmental body:

• formation and liquidation of companies with limited liability;

• control and keeping company information, arriving in Company House;

• granting the information for public access.

Companies House gives company information for public access including by means of a website.

In Company House companies with limited liability, created in England, Wales and Scotland are registered.

Department for Business, Enterprise and Regulatory Reform is the governmental body which main functions are:

• regulation of small business and enterprising sphere, and also the governmental support of this sector;

• working out of propositions on improvement of the corporate legislation;

• improvement of the corporate legislation;


Company forms

English companies are divided into public and private companies. Also it’s possible to divide companies into Limited liability companies and Unlimited liability companies.   

The most popular and convenient form for legal entities activity is Private Limited Company. It can be compared with Russian closed joint-stock company. Also the registration of Public Limited Company is possible. Such a company will be an analog of Russian open joint-stock company. Its name should terminate in words Public Limited Company or p.l.c.

Company activity, rights and duties of its participants, directors and secretaries, duty on granting of reports are regulated by Companies Act 2006. One of the norms defines that the formation of the company for the purposes contradicting the law is forbidden.

The company name can't be identical to the name which already exists in the register.

The name of the English company can't be presented with the words carrying offensive, aggressive or insulting character for other persons. The use in the name words which specify in relation of the company with Her Majesty the Queen, or with the Government, local authorities, any other governmental authorities, should be approved by the Minister. For the private company with limited liability the name should terminate with the word Limited or Ltd.

The formation of Limited Liability Partnership (LLP) is also possible. The formation and partnership activity is regulated by the following laws: Limited Liability Partnership Act 2000 and Limited Liability Partnerships Regulations 2001.


Tax system of Great Britain can be effectively used thanks to some privileges and perfectly developed system of the government and small business support.

Tax rates are affirmed by the government according to budgetary bills every fiscal year. It is necessary to notice that in a tax policy the tendency of reduction of the corporate tax is accurately looked through. The beginning of fiscal year is the 1st of April.

According to Finance Act 2011 (part 1, Chapter «Corporate tax», points 4-7) the basic rate of the corporate tax at the current moment is 26%, in April 2012 it will decrease to 25 %.

In 2011 tax rate on income of small companies is 20 %. Moreover it is necessary to remember that the company can be considered as the small one if it meets two or more of following conditions:

 the amount of business is not more than 5,6 million pounds sterling;

• balance result is not more than 2,8 million pounds sterling;

• the number of employees doesn't exceed 50 persons.

The company which is recognized as a small one according to above-stated requirements, can apply tax rate of 20% if annual income of the company is not more than 300 000 pounds sterling per year.

For some kinds of investment funds special tax rate is established. For share investment funds and termless investment companies tax rate is 20%.

There are 3 kinds of VAT:

• the ordinary rate - 20 %

• the lowered rate - 5 %

• the zero rate (it doesn’t mean full tax release as the company should give the information for VAT registration, and also can address for VAT compensation)

The detailed information concerning all the tax rates can be received on the site of the State Administration of Great Britain on tax and custom charges


The system of accounting submission in Great Britain is rather difficult. It’s very important to be careful with terms and procedure of all the company accounting submissions. In the case of infringement of the established order, penalties will be assigned to the company.

Annual account submission to governmental authorities

Each company is obliged to give to Companies House the annual account.

The date of report presentation is the date of company incorporation.

Each account must correspond to such conditions

• should be executed in the established, accepted form;

• should contain the information on quantity of shares, their type, shareholders.

• should contain information on persons which were shareholders during the current year. According to the changes which have come into force since October, 1st, 2008 in the annual account of the private company or the public company which doesn't expose the shares at a stock exchange, addresses of shareholders shouldn't be specified. Only there names are enough.

• should specify what quantity of shares each shareholder owned. The duty to give such information doesn't concern private companies or public companies which don't expose their shares at a stock exchange;

Annual account part is directors' report.

In the directors' report there should be following information:

• persons who were directors throughout a fiscal year;

• profile activity of the company in a year.

If the company doesn't fall under the regime of the «small company» in the directors' report there should be Business review for the last fiscal year.

Business review should meet the following requirements:

• to reflect company business activity truthfully;

• to contain the description of the basic risks or the reasons on which there can be an unreliable condition of the company;

• to comprise the analysis of development and achievements of company business for last year;

• to show the results which the company has reached by the end of fiscal year.

The directors' report is accepted by the company board of directors and subscribed by the director on behalf of the board of directors or by company secretory.

In the case of failure of the annual report submission upon the expire of 28 days since the date when it should be submitted the company will bear responsibility. It will be necessary to pay the penalty, and in the case of the further failure to meet requirements of the law, penalties will be charged per every day of delay.

The director and the secretary also bear a private responsibility for the failure of reports submission if only they don't prove that made all from them depending for performance of given requirements.

Annual financial statement

English companies should submit the financial statement once a year.

The beginning of the first fiscal year of the company is the first day of the accounting period. The first accounting financial period of the company can't be less than 6 months and no more than 18 months from the moment of incorporation and before the delivery of the first account. The next fiscal year comes at once after the termination of the previous one.

For the companies formed since the 1st of April 1996 the initial date of drawing up of the accounting it is necessary to consider the last day that month in which the company has been formed. That is, if the company was formed on the 2nd of April 1996, the date of drawing up of the accounting will be on the 30th of April 1997.

The deadline of submission of the financial statement in Company House:

• for private companies is not later than 9 months from the moment of the termination of the accounting period;

• for public companies is not later than 6 months from the moment of the termination of the accounting period.

The annual individual financial statement can be prepared according to the International Accounting Standards — IAS or according to internal British standards which are defined in the Companies Act individual accounts.

Auditor report

According to the law English companies should submit auditor report that is underlined in Companies Act 2006 in article 475.

Exceptions of this rule according to the article are companies that meet to following conditions:

• the company is recognized as the small one;

• the company doesn't operate the vigorous activity (dormant company);

• the company is noncommercial.

The company recognized small with a purpose of the absolution of a duty to submit the auditor report should correspond to additional requirements:

• the amount of business is not more than 5,6 million pounds sterling;

• the general annual balance annual report is not more than 2,8 million pounds sterling;

For this purpose a company has preferential possibility not to make the auditor report, in the company balance report is necessary the director’s statement for absolution of such duty.

The company can't be recognized small with a view of article 475 Companies Act 2006, in the presence of these conditions:

• the company is public;

• the company has the license for rendering insurance services, bank license, the company issues E-money, it is the investment company.

Company management

Shareholders of the company can be legal entities or  individuals, residents and non-residents.

The director of the company can be individual or legal entity, also irrespective to the resident status.

Since the 1st of October 2008 the articles of Law 155-159 «Companies Act» came into force there is obligatory condition that at least one of directors of the company should be the individual. The minimal age of the director is 16 years.

The companies registered since the 8th of November 2006 should abide this rule and incorporate at least one director-individual. The companies which have been registered till the 8th of November 2006, not having the director-individual, should make change in the board of directors. The deadline for execution of law requirements was prolonged till the 1st of October 2010.

In Companies Act 2006 there is a specified list of director duties including fiduciary ones. Earlier these duties were regulated only by norms of the Case law.

Since the 6th of April 2008 after coming into force of the articles 270-280 of the Law «Companies Act» the presence of the secretary in the company was not compulsory. If in the Charter of the company which has been registered earlier, there is information concerning the presence of the secretary, this presence is obligatory. If for simplification of the procedure the company intends to operate without the secretary it will be necessary to make changes in the Charter.

Confidential information

The information on directors is kept in the state registration body – Companies House. Also there is the information on the address of directors. The register of directors is publicly accessible.

Modern British legislation tends to provide big confidentiality to participants of a business intercourse.

With modification of the corporate legislation for the general access the office address of the director will be public instead of the residence address. The place of residence of the director will be kept nevertheless in registering body but will be accessible only at the request of the authorized persons.

Earlier the information on addresses of shareholders of the company was public. After entry into force of modification the information on the shareholders address will be given only by the inquiry directed to the company. Giving such an information the company should be assured that the information will be used only in the lawful purposes.

Permitted activity

All the kinds of activity are permitted except those that are forbidden by the law or demand licensing.

Licensing demand is necessary for insurance, bank, financially-credit and also other kinds of activity.

Agreements on double taxation avoidance

Great Britain signed more than 100 agreements on double taxation avoidance.

There was the Convention «On double taxation avoidance and prevention of tax evasion concerning income tax and property increase in value» dated 15th of February 1994 between the Russian Federation and the United Kingdom of  Great Britain and Northern Ireland.  This convention was ratified in 1997.

Ukraine concluded with Great Britain and the United Kingdom of Great Britain and Northern Ireland on the 10th 1993 the Convention on double taxation avoidance concerning income tax and property increase in value. The convention was ratified on the 11th of August 1993.

Besides, the Great Britain signed similar agreements with France, Australia, Austria, Germany, Norway, Switzerland, the USA, New Zealand, Cyprus, Latvia, Lithuania, China, Kazakhstan, Estonia and many other countries.

In October 2008 the Great Britain signed the agreement on double taxation avoidance with the British Virgin Islands. This agreement has not been ratified yet.

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