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Attractiveness of the UK as International Holding Company Centre |
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The UK has introduced an exemption on capital gains arising from the disposal of substantial shareholdings. The exemption applies for disposals after 1 April 2002. The exemption relates to all or part of a substantial shareholding - more than 10% of the ordinary shares of the investee company. The investment must have been held for at least 12 months in the two years before the sale of the shares. Both the investing company and the investee company must be trading companies or members of a trading group both before and after the sale. Following these new provisions, the attractiveness of the UK as an international or regional holding company jurisdiction can be summarised as follows:
- Access to one of the largest networks of double taxation treaties;
- No withholding tax on dividends received in the UK from companies in other EU jurisdictions under the EU Parent / Subsidiary Directive;
- No withholding tax on dividends paid from the UK to foreign shareholders, unlike most other major countries who impose a withholding tax;
- Exemption from capital gains tax as outlined above;
- Credit relief in the UK for foreign taxes suffered. Dividends received in the UK are subject to local tax, but qualifying companies receive credit for underlying tax paid on the profits out of which the dividend was paid. As the UK has a relatively low tax rate, the result could be no further tax liability;
- No minimum capitalisation or capital duties payable. UK companies are simple and cheap to incorporate compared to those in many European jurisdictions;
- Low corporate tax rates and one of the lowest social security tax structures in Europe;
- Availability of various approved and unapproved share schemes that are tax-efficient for both the company and its employees;
- Availability of executive incentives and deferred remuneration schemes such as Employee Benefit Trusts, Enterprise Management Incentives etc;
- Start-up incentives such as Venture Capital Trusts;
- Availability of unique non-domiciliation status for foreign executives assigned to the UK, enabling them to structure part of their pay package tax-free.
- Availability of various tax-advantageous payroll schemes for foreign assignees coming to the UK for work;
- Availability of tax-advantageous Limited Liability Partnerships and UK administration companies in international trading arrangements;
- Excellent security, infrastructure, communication and access to global markets by being in a prestigious location such as the UK.
The above has now made the UK as one of the most attractive places in the world for transacting business or holding investments in subsidiaries. |
