Other Taxes

Taxes levied to businesses in the UK

In addition to the main UK taxes – Corporation Tax, Income Tax, VAT and Capital Gains Tax – there are a number of other taxes, paid nationally or locally.

Other Taxes

Council tax is levied by local authority bodies (town or county councils) and is payable by every residential household. Businesses do not pay council tax but will have to pay business rates (property taxes); these are payable to the local authority in the area in which the business is located.

Inheritance Tax is due if someone’s estate is valued at over GBP325,000 (from April 2009). The amount of tax due will be at 40% of the amount that exceeds this threshold. Where the value of an estate is less than the threshold, then there will be no liability for Inheritance Tax. Any assets held in trust or gifts made within seven years of the death of a person will be liable to the tax, provided that the combined value of the estate exceeds the threshold. Married couples (and civil partners) are permitted to transfer the first spouse’s unused Inheritance Tax threshold to the second spouse, thereby doubling the threshold for the surviving spouse. There are some exemptions from Inheritance Tax – these include donations to registered charities and any part of an estate left to a spouse.

Vehicle Duty: This can be a significant cost to road haulage and public service business, especially where there are several vehicles in a fleet. Examples of the annual cost of some vehicle licences are available here , but the exact rate of vehicle duty will depend on the weight and classification of the vehicle.

From April 2010, the purchase of a new car attracts a different 'first year rate', based on the fuel type used, and the carbon emissions levels. This is designed to encourage increased use of 'green' vehicles.

With regard to stamp duty, there are three forms in the UK

  • Stamp Duty Land Tax;
  • Stamp Duty Reserve Tax;
  • Stamp Duty

The last-named is imposed at a rate of 0.5% on the non-electronic sale or transfer of shares (worth more than GBP1,000). It is additionally imposed on certain transfers of interests in partnerships, and before December 2003, was levied on land or property transactions.

Stamp Duty Land Tax

Stamp Duty Land Tax (SDLT) is payable on the purchase or transfer of property or land in the UK, subject to threshold limits. Most transactions concerning the sale or transfer of property or land must be notified to the HMRC on the appropriate form. Certain factors will determine how much, if any tax is due.

 In general terms, SDLT is levied as a percentage of the amount paid by the purchaser or the value when it was transferred. The tax rate starts at 1%, rising to either 3% or 4%, depending on both the value, and whether the property is residential or non-residential. SDLT usually becomes due for properties or land where the value exceeds GBP 125,000 (although this threshold was increased for a year until the end of 2009 to GBP175,000), and - although it reverted on January 1 2010 - a new, two year higher threshold of GBP250,000 was put in place in the 2010-11 Budget, which is set to end on March 24, 2012. Traditionally, the threshold has been GBP150,000 for non-residential properties.

Where the property exceeds the threshold, the tax is paid on the entire value.

For leasehold properties transfers may be liable depending on the length of the lease, and varying between residential and non-residential leases. Tax liability also depends on whether the lease is a new lease or an existing one.

For non-residential leases, SDLT may be payable on the premium and the net present value of the rent. If the annual rent is more than GBP1,000, the buyer will be liable to pay SDLT on the full amount of the premium paid, even if it is within the GBP150,000 non-residential threshold. The rate of 1% applies up to the next threshold of GBP250,000.

Stamp Duty Reserve Tax (SDRT) is payable on electronic (paperless) transactions for the purchase of shares in a UK company, dealings in a foreign company with a share register in the UK, options to buy shares, rights arising from shares already owned and where there is an interest in shares (eg the profit made from sale of shares). The majority of paperless share transactions are processed electronically through the electronic settlement and registration system (CREST). The SDRT is deducted at source and remitted to HMRC. SDRT is payable at a flat rate of 0.5% on the amount paid for the shares (not the value).

Businesses located in the UK are also likely to be subject (indirectly) to excise taxes on alcohol, tobacco, and fuel, and to customs duties on certain items brought into the UK from abroad.

There is no Alternative Minimum Tax for individuals in business.

There are no special income tax regimes for individuals in business.

This article is an extract from Personal Business Tax Guide , dated 4th January 2011, for the latest version please click here .

Council tax is levied by local authority bodies (town or county councils) and is payable by every residential household. Businesses do not pay council tax but will have to pay business rates (property taxes); these are payable to the local authority in the area in which the business is located.

Inheritance Tax is due if someone’s estate is valued at over GBP325,000 (from April 2009). The amount of tax due will be at 40% of the amount that exceeds this threshold. Where the value of an estate is less than the threshold, then there will be no liability for Inheritance Tax. Any assets held in trust or gifts made within seven years of the death of a person will be liable to the tax, provided that the combined value of the estate exceeds the threshold. Married couples (and civil partners) are permitted to transfer the first spouse’s unused Inheritance Tax threshold to the second spouse, thereby doubling the threshold for the surviving spouse. There are some exemptions from Inheritance Tax – these include donations to registered charities and any part of an estate left to a spouse.

Vehicle Duty: This can be a significant cost to road haulage and public service business, especially where there are several vehicles in a fleet. Examples of the annual cost of some vehicle licences are available here , but the exact rate of vehicle duty will depend on the weight and classification of the vehicle.

From April 2010, the purchase of a new car attracts a different 'first year rate', based on the fuel type used, and the carbon emissions levels. This is designed to encourage increased use of 'green' vehicles.

With regard to stamp duty, there are three forms in the UK

  • Stamp Duty Land Tax;
  • Stamp Duty Reserve Tax;
  • Stamp Duty

The last-named is imposed at a rate of 0.5% on the non-electronic sale or transfer of shares (worth more than GBP1,000). It is additionally imposed on certain transfers of interests in partnerships, and before December 2003, was levied on land or property transactions.

Stamp Duty Land Tax

Stamp Duty Land Tax (SDLT) is payable on the purchase or transfer of property or land in the UK, subject to threshold limits. Most transactions concerning the sale or transfer of property or land must be notified to the HMRC on the appropriate form. Certain factors will determine how much, if any tax is due.

 In general terms, SDLT is levied as a percentage of the amount paid by the purchaser or the value when it was transferred. The tax rate starts at 1%, rising to either 3% or 4%, depending on both the value, and whether the property is residential or non-residential. SDLT usually becomes due for properties or land where the value exceeds GBP 125,000 (although this threshold was increased for a year until the end of 2009 to GBP175,000), and - although it reverted on January 1 2010 - a new, two year higher threshold of GBP250,000 was put in place in the 2010-11 Budget, which is set to end on March 24, 2012. Traditionally, the threshold has been GBP150,000 for non-residential properties.

Where the property exceeds the threshold, the tax is paid on the entire value.

For leasehold properties transfers may be liable depending on the length of the lease, and varying between residential and non-residential leases. Tax liability also depends on whether the lease is a new lease or an existing one.

For non-residential leases, SDLT may be payable on the premium and the net present value of the rent. If the annual rent is more than GBP1,000, the buyer will be liable to pay SDLT on the full amount of the premium paid, even if it is within the GBP150,000 non-residential threshold. The rate of 1% applies up to the next threshold of GBP250,000.

Stamp Duty Reserve Tax (SDRT) is payable on electronic (paperless) transactions for the purchase of shares in a UK company, dealings in a foreign company with a share register in the UK, options to buy shares, rights arising from shares already owned and where there is an interest in shares (eg the profit made from sale of shares). The majority of paperless share transactions are processed electronically through the electronic settlement and registration system (CREST). The SDRT is deducted at source and remitted to HMRC. SDRT is payable at a flat rate of 0.5% on the amount paid for the shares (not the value).

Businesses located in the UK are also likely to be subject (indirectly) to excise taxes on alcohol, tobacco, and fuel, and to customs duties on certain items brought into the UK from abroad.

There is no Alternative Minimum Tax for individuals in business.

There are no special income tax regimes for individuals in business.

This article is an extract from Personal Business Tax Guide , dated 4th January 2011, for the latest version please click here .

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