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The United Kingdom of Great Britain and Northern Ireland, sometimes known as the United Kingdom (UK) or Britain, is a sovereign entity in Europe located off the continental mainland's northwestern coast. England, Wales, Scotland, and Northern Ireland are all part of it. The United Kingdom consists of the island of Great Britain, the northern half of the island of Ireland, and a number of other islands within the British Isles. Northern Ireland is bordered by the Republic of Ireland on the land; otherwise, the United Kingdom is encircled by the Atlantic Ocean, the North Sea, the English Channel, the Celtic Sea, and the Irish Sea. The United Kingdom has a total size of 93,628 square miles (242,500 km2) and a population of more than 67 million people in 2020.
The United Kingdom is a constitutional monarchy and a unitary parliamentary democracy. Queen Elizabeth II has been the queen since 1952. London, the capital and biggest metropolis, is a worldwide city and financial center with a metropolitan population of over 14 million people. Birmingham, Manchester, Glasgow, Liverpool, and Leeds are among the other significant cities. Scotland, Wales, and Northern Ireland each have their own devolved administrations with various levels of authority.
Over many hundred years, the United Kingdom has developed via a sequence of annexations, unions, and separations of component nations. In 1707, the Kingdom of Great Britain was founded by the Treaty of Union between the Kingdom of England (which included Wales, which was acquired in 1542) and the Kingdom of Scotland. Its merger with the Kingdom of Ireland in 1801 resulted in the formation of the United Kingdom of Great Britain and Ireland. In 1922, the majority of Ireland seceded from the United Kingdom, resulting in the current United Kingdom of Great Britain and Northern Ireland, which legally adopted that name in 1927.
The adjacent Crown Dependencies of the Isle of Man, Guernsey, and Jersey are not part of the United Kingdom and are accountable to the British Government for defense and international representation. There are also 14 British Overseas Territories, which are the remaining relics of the British Empire, which at its peak in the 1920s comprised about a quarter of the world's area and a third of the world's population, making it the biggest empire in history. The language, culture, and legal and political institutions of many of Britain's former colonies bear evidence of British influence.
The United Kingdom has the world's sixth-largest economy in terms of nominal GDP and the eighth-largest in terms of purchasing power parity (PPP). It has a high-income economy and ranks 13th in the world on the human development index. The United Kingdom was the world's first industrialised nation and the world's leading power throughout the nineteenth and early twentieth century. Today, the United Kingdom remains one of the world's major powers, wielding significant economic, cultural, military, scientific, technical, and political clout. It is a recognized nuclear power and ranks fourth in the world in terms of military spending. Since the inaugural session of the United Nations Security Council in 1946, it has been a permanent member.
The Commonwealth of Nations, the Council of Europe, the G7, the Group of Ten, the G20, the United Nations, NATO, AUKUS, the Organisation for Economic Co-operation and Development (OECD), Interpol, and the World Trade Organization are all members of the United Kingdom (WTO). It was a member of the European Communities (EC) and its successor, the European Union (EU), from 1973 until its exit in 2020, after a vote in 2016.
Employers are required to provide a minimum of 28 days of paid vacation every year. Public holidays can be included in the 28-day leave allowance; nonetheless, it is standard practice for companies to provide more than 28 days of vacation.
Employees who were unable to use all of their accrued vacation time due to COVID-19 are permitted to transfer it over to the next two years.
In England, Wales, and Scotland, there are eight recognized public holidays, whereas Northern Ireland recognizes ten public holidays.
If a worker is too unwell to work, they can get £95.85 per week in Statutory Sick Pay (SSP) for up to 28 weeks. An employee must be sick for four or more days in a row to qualify. Employees are entitled to the statutory minimum, but depending on the company's sick pay policy, they may be eligible to more.
If an employee takes sick absence for more than 7 days in a row, they must provide a doctor's letter to their employer. Non-working days, such as weekends and holidays, are included.
Statutory Sick Pay may be available to employees who are sick with the COVID-19 virus or who reside with someone who is.
Statutory maternity leave is 52 weeks and is comprised of both the ordinary and additional maternity leave. The first 26 weeks is the ordinary maternity leave, and the next 26 weeks are the additional maternity leave.
Mothers are required to take off at least 2 weeks’ leave after the baby is born (or 4 weeks for factory workers) out of the entitled 52 weeks. Unless the child is born early, the earliest that leave can be taken is 11 weeks before the expected week of childbirth.
Statutory Maternity Pay (SMP) is paid by the employer for up to 39 weeks with the employee receiving:
90% of their average weekly earnings (before tax) for the first 6 weeks, and
£148.68 or 90% of their average weekly earnings (whichever is lower) for the next 33 weeks
Employees have the option of taking one week or two weeks off in a row. Regardless of the number of children, the amount of time off remains the same (for example twins). Leave cannot begin before the baby is born.
Paternity Pay is a statutory weekly payment of £148.68, or 90 percent of average weekly wages (whichever is lower).
Any money received is paid in the same manner as wages, such as monthly or weekly. Tax and NI will be taken out of the equation.
Employees who are expecting a child or adopting a child are entitled for Shared Parental Leave (SPL) and Statutory Shared Parental Pay (ShPP).
The first year of a child's life must be spent on leave. The pair can share up to 50 weeks of leave and up to 37 weeks of compensation.
Leave can be taken in chunks, all at once, as a pair, or individually.
Employers are generally required to offer notice to employees prior to terminating employment. The notice period is between one and twelve weeks, depending on the duration of employment of the employee. Employers frequently include extended notice periods in contracts. Employers may also give compensation in lieu of notice and quickly terminate an employee if the employment contract provides for it or if the employer and employee agree on this arrangement.
When employees are laid off as a result of redundancy, special processes apply. Employers must make every effort to avoid redundancy whenever possible by reassigning superfluous staff, reducing or eliminating overtime, discontinuing the use of contractors and freelancers, or implementing temporary or short-term layoffs rather than permanent ones.
If no alternative to layoffs exists, or if the company still needs to lay off employees after all other options have been exhausted, the employer must pursue the legal process for redundancy terminations. Employees who are eligible for statutory redundancy get a payment based on their age and duration of service.
In certain cases, employers are compelled to provide severance.
In the United Kingdom, there are two types of notice. The first is statutory notice, which is required by law, and the second is the notice period specified in the employee's employment contract. The statutory notice period is calculated based on the length of service. The notice period is one week for each month of service between one and two years. The notice period is one week for each year of service between two and twelve years. The length of notice specified in the employment contract is up to the employer, but it is typically one month for employees and up to three months for senior employees.
The duration and terms of any probation period are determined by the terms of an individual's employment contract, but they are typically three or six months long and may include formal or informal assessments.
When an employee is laid off due to redundancy and has worked for the employer continuously for at least two years prior to the layoff, severance pay is paid according to the following schedule: half a week's pay for each year of service if the employee was under the age of 22; one week's pay for each year of service if the employee was between the ages of 22 and 40; 1.5 weeks' pay for each year of employment if the employee was 41 years or older. A weekly wage cap is in place for redundancy pay purposes, and it is adjusted annually.
Employers are free to set daily work hours based on business needs. By law, an employee may work no more than 48 hours per week on average over a 17-week period. Employees may, and frequently do, opt out of this.
Overtime work must be specified and agreed upon in the employment contract. Employers are not required to pay overtime unless specifically stated in the contract.
The minimum wage in the United Kingdom of Great Britain and Northern Ireland is set at 1,598.69 EUR per month.
In the United Kingdom, the main statutory benefit is given via the employers' share of National Insurance Contribution, NIC, which is the national social security program through which all employers and workers pay to the public health care system. The employer's share of the national insurance payment is typically 13.8 percent of total pay. Employees must also pay national insurance payments, which are deducted by the employer via the PAYE system.
In addition to the NIC, many employers provide other benefits such as medical, vision, dental, and life insurance to their workers. Although there is no legal obligation, market factors suggest that workers may expect their company to offer extra perks. Approximately 75% of UK businesses offer supplemental insurance coverage.
Resident companies are subject to UK corporation tax on their worldwide profits (subject to an opt-out for non-UK PEs), whereas non-resident companies are subject to UK corporation tax on trading profits attributable to a UK PE, trading profits attributable to a trade of dealing in or developing UK land (regardless of whether there is a UK PE), and gains on direct and certain indirect dividends. In reality, the implementation of a broad variety of tax treaties, along with the dividend exemption, makes the UK corporate tax system more like a territorial system for many businesses.
For the fiscal year starting 1 April 2021, the standard rate of company tax is 19%.
When taxable gains can be traced back to the exploitation of patents, a lower effective tax rate applies. The percentage is 10%. Profits may comprise a substantial portion of the trade profit from the sale of a patent-protected goods, as well as revenue from patent royalties.
Individuals who are resident and domiciled in the United Kingdom are taxed on their global income and capital gains.
If a person is not a UK resident, they will typically be taxed on their UK-source income, but not on capital gains, save in the case of UK property/'property-rich' businesses or carried interest, even if the asset is situated in the UK. Gains on UK residential property held by non-residents have been subject to UK CGT at a rate of 28 percent for a number of years, and the tax charge has been extended to all UK property disposed of by non-UK residents, as well as shares in 'property-rich' non-UK businesses, beginning in April 2019.
Furthermore, any profits are liable to UK CGT if the asset is utilized for commercial purposes in the United Kingdom via a UK branch or agency. There are additional specific provisions for income and capital gains tax if a person becomes a non-UK resident then returns to the UK within five years.
If a person is resident but not domiciled (or considered domiciled) in the UK, they may choose the remittance basis of taxes, which means that their non-UK investment income and capital gains are only taxed if they are remitted to the UK.
For a taxable income of up to GBP 5,000, the taxpayer is imposed with the starting rate of 0 percent.
For a taxable income between GBP 5,000 and GBP 37,500, the taxpayer is imposed with the basic rate of 20 percent.
For a taxable income between GBP 37,500 and GBP 150,000, the taxpayer is subject to the higher rate of 40 percent.
For a taxable income of over GBP 150,000, the taxpayer is subject to the additional rate of 45 percent.
The normal VAT rate of 20% applies to the majority of products and services, with the exception of residential fuel and electricity and some other reduced-rate suppliers, which are subject to VAT at 5%.
Certain small merchants (supply less than GBP 150,000 per year) with a restricted range of costs may opt for an unique flat-rate system that calculates VAT at a sector-specific flat rate.
Most exports, most food, most public transportation, most books and publications (including e-publications from 1 May 2020), and some critical products and services are zero-rated. Some suppliers are excluded, including the transfer of certain property interests, insurance, financial services, betting and gambling, education, some sports services, cultural activities, and health and welfare. The VAT on expenses spent in producing a zero-rated delivery may be recovered, while the VAT on costs incurred in making an exempt supply cannot.
When a taxable person's taxable turnover exceeds the registration criteria, VAT is levied on the supply of most goods and services produced in the United Kingdom by 'taxable people' in the course of business. Individuals, corporations, partnerships, clubs, organizations, and charities are all taxable entities.
Taxable persons who are not normally resident in the United Kingdom, do not have a business establishment in the United Kingdom, and are not incorporated in the United Kingdom, but who make taxable supplies, sales to unregistered persons in the United Kingdom, or acquisitions of goods in the United Kingdom in excess of the relevant limits, may be required to register and account.
If the value of taxable supplies exceeds a certain threshold, registration for VAT is required, unless the taxable supplies are entirely or mostly zero-rated, in which case exemption from registration is available. Businesses that are not based in the United Kingdom have a zero VAT registration threshold.
The laws governing VAT and territoriality vary from those governing direct tax in that they are based on the principles of supply under EU law, as embodied in European Commission (EC) VAT Directives. After determining that a supply of goods or services occurred, the second criterion to establish, if the transaction is to be subject to UK VAT, is whether the supply occurred inside the United Kingdom. The regulations governing the location of supply vary for commodities and services. A person or company from outside the United Kingdom with no place of business in the United Kingdom may nevertheless be required to register for UK VAT if the location of supply of such products or services is in the United Kingdom.
The fundamental rule for commodities is that a supply of goods is taxed in the area where the items are physically situated at the moment of supply. As a result, if a non-established taxable person provides goods in the United Kingdom, the person will still be liable for VAT purposes, and the person must register for VAT in the United Kingdom if the taxable supplies exceed the existing UK VAT registration limits. Businesses that are not based in the United Kingdom have a zero VAT registration threshold.
The fundamental concept for services is that services are regarded as being provided where the customer 'belongs' or is established for VAT purposes, and the client is responsible for accounting for the VAT owed via the reverse-charge process. This is, however, subject to a variety of specific restrictions and exclusions. The location of a company for VAT purposes is determined using EU legislation criteria.
The fundamental concept for business-to-consumer (B2C) supply is that services are regarded as being made where the provider 'belongs' or is established for VAT purposes. B2C telecommunications, broadcasting, and electronic services are taxed in the jurisdiction where the client is situated or is usually resident.
In the United Kingdom, there is no standard format for employment contracts. The parameters of a British employment contract may be spelled forth in an employee handbook, offer letter, or collective agreement (if one applies to the employment relationship), among other locations, in addition to a written or spoken agreement. In most cases, employment contracts include:
Contracting parties' rights and duties
Regardless of the form of the employment contract, all employers in the United Kingdom are required to give workers with a written statement of particulars that contains a primary statement. The following must be included in the main statement:
The employer's title
The employee's name and work title
A description of the work to be done as well as the place where it will be done
The start and finish dates (if the contract is for a fixed-term)
The duration and terms of the employee's probation period, if one exists.
Salary and payment frequency
Working hours and days (the principal statement must also specify if the employee is expected to work overtime, nights or on Sundays)
Leave, as well as any other benefits to which the employee may be entitled
Whether there is any obligatory training the employee must complete
There is no set length for assignments. This is usually indicated in the employment contract for fixed-term employments.
Setting up a UK subsidiary correctly is a lengthy legal procedure. If your UK organization will have a different title than your main office, start by settling on an official name. You'll also need a registered office location, a statement of capital, and other documents. Following that, you must confirm your Standard Industrial Classification of Economic Activities (SIC), which assists in identifying exactly what your corporation performs. You will also be required to compile and maintain an annual PSC register comprising information for the Persons of Significant Control who are shareholders.
Following that, you must register for VAT, which is required if your taxable products and services totaled more than £85,000 in the previous year. You must also register with Her Majesty's Revenue and Customs to pay Pay As You Earn (PAYE) tax in the UK, which contributes to national insurance (social security) (HMRC). Finally, you must locate an employer's liability insurance policy with a minimum limit of 5,000,000 GBP.
Your entity in the United Kingdom will be governed by UK subsidiary laws. These rules oblige you to deduct PAYE tax and National Insurance contributions from your workers' paychecks. You must also pay company taxes on your earnings earned in the United Kingdom. Depending on the size of your organization, quarterly payments may be required rather than yearly payments.
Other laws govern employment, salary, and benefits. It is critical to employ outstanding people while giving excellent perks and salaries throughout the UK subsidiary formation stage.
In the United Kingdom, you are required by law to prepare an employment contract and provide it to workers within two months of their start date. This contract ensures that you comply with UK subsidiary rules, and it allows you to specify what benefits workers will get.