INSAA - Why Companies and Individuals are Relocating to the UK and a UK Entrepreneur Visa Case Study
During 2016 and also this year, an increasing number of Dixcart contacts are expressing interest in moving to the UK, either for themselves personally or for their clients. They are not only attracted to the UK due to its rich culture and the British "way of life," it is also because of the tax advantages available for both companies and individuals.
London was rated top city in the world in 2016 on a variety of factors, including: culture, entertainment, infrastructure, health and general happiness. The survey was conducted by PwC and involved 5,200 well-educated, high net worth adults from 16 countries around the world.
Tax Advantages Available to UK Companies
- The UK has one of the lowest rates of corporation tax in the Western World. Currently UK corporation tax is 20%; this will be reduced to 19% in April 2017 and 17% in 2020.
- There is no withholding tax on dividends.
- The majority of share disposals and dividends received by holding companies are exempt from taxation.
- Controlled foreign company tax rates only apply to a narrow classification of profit.
Tax Advantages Available to Foreign Individuals
Foreign individuals who are resident but not domiciled in the UK have the opportunity to benefit from electing to be taxed on the remittance basis of taxation. This means that they pay tax on UK source income and gains, but foreign income and gains are only taxed if they are remitted to the UK. This status is available in their first 15 years of residence in the UK.
Who Can Move to the UK?
Currently it is only non-EU nationals who need to obtain a residence visa in the UK.
EU nationals currently have the right to reside in the UK. Following the Brexit vote, and when the UK’s exit from the EU actually takes place, EU citizens are unlikely to retain this favoured status, thereby levelling the playing field. If you have European citizenship, the window of opportunity to secure residence is narrow and should be exercised sooner rather than later.
There are two types of UK visa for non EU nationals which are particularly popular with high net worth individuals and/or entrepreneurs:
- The UK Investor Visa
Individuals from outside the EU can obtain an initial UK residence visa for three years, by investing £2million in the UK in permissible investments.
As long as the investment provisions continue to be met, a further two year visa can be obtained, after which individuals can apply for Indefinite Leave to Remain in the UK. In some cases this can lead to UK Citizenship.
- The UK Entrepreneur Visa
Entrepreneurs can obtain a visa with a lower investment than is required for the UK Investor Visa. The case study below illustrates the opportunities available to entrepreneurs seeking to establish a business in the UK.
CASE STUDY - THE UK ENTREPRENEUR VISA
Petrus, a South African citizen, had always wanted to live in the UK and decided that he would like to set up a company in London specialising in Radio Frequency Identification (RFID) technology for asset tracking. Petrus travelled to the UK to assess the opportunities. Whilst in the UK he visited an art gallery as he has an interest in contemporary art. Talking to the curator he discovered that they had major problems in tracking artwork within the gallery and in the gallery warehouse and stores.
This presented Petrus with an opportunity to exploit his expertise in RFID technology in the UK.
An Initial Visa to Enter and Reside in the UK
Dixcart was able to advise Petrus that by investing £200,000 in the project in the UK he would be able to gain an entry visa permitting him, his wife and two minor children to enter and reside in the UK for up to three years and four months.
Prior to emigrating, Petrus a South African tax payer of good standing, was able to invest ZAR10 million (approximately £600,000 equivalent) abroad, having received a tax clearance certificate. He was able to use some of these funds to meet the investment requirement detailed above.
What Happens After Three Years and Four Months?
Dixcart advised Petrus that before the initial three years and four months visa expired he would need to apply for "Leave to Remain" in the UK. He would need to demonstrate:
- That he was still engaged in the business detailed above on the date of the extension application, and
- That the business had created two full time jobs for people settled in the UK (these jobs must have existed for at least 12 months immediately prior to the Leave to Remain application).
Petrus's visa would then be extended for a further two years.
A Thriving Business and its Effect on Petrus' Leave to Remain in the UK
The business went very well. Petrus engaged software engineers, sales personnel and accounts staff, and quite rapidly the business had created ten full time jobs.
This entitled Petrus to "Accelerated Indefinite Leave to Remain" in the UK after three years, rather than the normal five years (if only two jobs had been created). In fact, as the turnover of his organisation was in excess of £5 million after two years, Petrus qualified for Accelerated Leave to Remain in any event.
Petrus was so involved with his business in the UK that he did not spend much time abroad. Over a five year period he was outside the UK for less than 90 days each year. This meant that he was able to apply for UK Citizenship once he had been in the UK for five years and he happily received his UK citizenship at a ceremony in London.
How was Dixcart Able to Help?
Dixcart was able to help Petrus with the following:
- We worked with the immigration lawyer on the original visa application.
- We helped draft the business plans, incorporated the UK company and provided a comprehensive range of accounting and taxation services.
- Initially Petrus used the Dixcart Serviced Offices in the South East of London between Heathrow and Gatwick airports, as the initial location for his business.
- As Petrus started to employ staff, Dixcart drafted employment contracts and relevant procedures.
- We drafted Petrus' commercial contracts and licensing agreements.
- When the business really started to expand it needed more capital. We were able to advise on tax efficient investment schemes that made investing in the company even more attractive to potential investors.
- We ensured that Petrus received research and development tax relief on the advances and technological developments that he had made. This significantly reduced the company’s tax liability.
- We were able to give Petrus pre-immigration planning advice, enabling him to enjoy the maximum advantage from his UK resident non-domiciled status.
Petrus’ business continues to expand. He is now developing technology that could be patented and Dixcart has therefore advised him that he will be able to make use of the UK’s Patent Box Regime. This would enable Petrus to enjoy a low rate of 10% corporation tax while exploiting the new patented technology.
The character in this case study is fictitious but this example illustrates how Dixcart has been able to assist a variety of clients, applying for UK Entrepreneur Visas to exploit a number of opportunities.
If you would like additional information regarding the advantages available to companies and individuals seeking to move to the UK, and the professional advice that can be provided by Dixcart, please contact Paul Flude.