Import Procedures

The Brexit transition period ended on 31 December 2020 and new rules applying for businesses and citizens in the EU and the UK came into force on 1 January 2021. Since 1 January 2021, businesses in England, Wales and Scotland must make customs declarations when importing goods from the EU, as well as checking that they have the appropriate import licences and certificates and finally obtain an EORI number to move goods between the EU and UK.

Since 1 January 2021, the UK applies the UK Global Tariff (UKGT), which replaces the EU’s Common External Tariff. For more information about the tariffs applied to imports coming into the UK since 1 January 2021, please visit the UK government's website.

For an overview of the impact that the UK’s withdrawal from the Single Market and EU Customs Union will have in the areas of taxation and customs, consult the European Commission's document BREXIT: End of Transition Period FAQs on Tax and Customs. For further details on actions required from businesses to continue importing from EU countries, please visit the UK government platform as well as the European Commission's guidance EU-UK: A new relationship including sectorial guidance notices for different sectors and the guide ‘BREXIT Readiness Checklist’ for companies doing business with the UK. For guidance on moving goods into, out of, or through Northern Ireland, click here.

Specific Import Procedures

Customs Freight Simplified Procedures (CFSP) are electronic declaration methods designed to enhance and simplify customs procedures for clearing imported goods either at the border or upon removal from a free zone or customs warehouse. A limited range of goods requires import licenses. These include firearms and explosives, nuclear materials, controlled drugs and certain items of military equipment. Products imported temporarily (for re-export, examination and testing, repair, sample display, etc.) may be admitted without payment of duties and taxes.

Distribution channels

According to the Office for National Statistics, retail sales volumes fell by 1.4% in March 2022, following a fall of 0.5% in February, but were 2.2% above their pre-coronavirus February 2020 levels. Retail sales values fell by 0.2% in March 2022, following a rise of 0.4% in February, but were 10.1% above their pre-coronavirus February 2020 levels. The largest contribution to the fall came from non-store retailing in which sales volumes fell by 7.9%. The proportion of retail sales online fell to 26.0% in March 2022, its lowest proportion since February 2020 (22.7%). Food store sales volumes fell by 1.1% over the month to March 2022 and have fallen each month since November 2021.

According to the figures provided by USDA Foreign Agricultural Service, the UK grocery market was valued at $297 billion (£205 billion) in August 2020. This is an increase of 6.7% on 2019. Groceries account for 11% of total household spending in the UK, making it the third largest area of expenditure, following housing and transport. Food and grocery sales account for more than 40% of total UK retail sales (Retail Economics, 2020). There are more than 87,000 grocery stores in the UK. These are split into four sectors:

• Supermarkets: Four supermarket chains dominate UK food retailing, accounting for 66% of the market.
• Discounters: In the 12 weeks ending April 17, 2022, the discounters combined market share reached 13.4 percent of the British grocery market.
• Internet or Online Shopping - The value of the UK online grocery market has seen tremendous growth in recent years and in 2019 was valued at $15.2 billion (£12.7 billion).
• Click and Collect - With the increasing popularity of online retailing, supermarkets and other retailers introduced Click and Collect which has become hugely popular and is rapidly growing. Click-and-Collect is a concept, that brings together the benefits of online retailing with the advantages of maintaining a store-based retailing presence.
• Convenience stores: the UK’s convenience store market is highly fragmented, with a large number of retail operators. It can be divided into : Co-operative stores, Gas stations, Convenience outlets  at supermarkets, Non-affiliated independent, Traditional convenience store.

Distribution market players

Grocery sales in the UK are dominated by Tesco, Sainsbury's, Asda/ Wal-Mart and Morrison's. These four trademarks had a combined market share of 66% of the UK grocery market, divided as followed (Kantar World Panel, April 2022):

• Tesco - 27.3% market share
• Sainsbury's - 15% market share
• Asda/ Wal-mart - 14.1% market share
• Morrison's - 9.5% market share
• Aldi - 8.8% market share
• Lidl - 6.6% market share

Retail Sector Organisations

British Retail Consortium
Institute of Grocery Distribution

Consumption Taxes

Nature of the Tax

Value-Added Tax (VAT)

Tax Rate

20%

Reduced Tax Rate

A reduced VAT rate of 5% applies to: fuel and power supplied to domestic users and charities; building materials for certain residential conversions; sanitary protection products; children’s car seats; smoking cessation products; grant-funded installation of heating appliances and qualifying security goods; certain larger holiday caravans; small, cable-based passenger transport systems; etc.

Hotel, tourism and accommodation were subject to a reduced rate of 12.5% from 1 October 2021 to 31 March 2022.

Some goods and services are zero-rated: books, newspapers and periodicals (also in a digital format; certain foodstuffs; children’s clothing and footwear; drugs and medicines supplied by prescription; new housing; transport services; exports of goods and related services; certain international services; intra-Community supplies of goods; services supplied to customers outside the EU (an exempt-with-credit supply); etc.

Other Consumption Taxes

Excise duties are chargeable on wine and made-wine; beer; cider and perry; spirits; imported composite goods containing alcohol; tobacco products; hydrocarbon oil; Climate Change Levy; and biofuels.

The Soft Drinks Industry Levy (Sugar Tax) is applied at two rates: GBP 0.18 per litre of drink if it contains between 5–8 grams of sugar per 100 millilitres, GPB 0.24 per litre of drink if it contains 8 grams of sugar per 100 millilitres or more.

There are several environmental taxes, including: a Landfill tax, a Climate change levy and an Aggregates levy.

Individuals leaving the United Kingdom by air are required to pay a duty, which is generally included in the cost of the air ticket.

Corporate Taxes

Company Tax

19% (where the taxable profits can be attributed to the use of patents, a reduced rate of 10% applies)

Tax Rate For Foreign Companies

A company is considered resident for tax purposes if it is incorporated in the UK or if its place of central management and control is in the UK.

A foreign company will be deemed to have a permanent establishment in the United Kingdom if:

• it has a fixed place of business in the UK through which the business of the company is wholly or partly carried on, or
• an agent acting on behalf of the company and habitually exercises authority to do business on behalf of the company in the UK.

Capital Gains Taxation

Capital gains of a company are considered taxable profits but are exempt if they arise from the disposal of substantial shareholdings in both UK and foreign companies. Substantial shareholding is often defined as an interest in a minimum of 10% of an investee company for a period of 12 months in the six years preceding the purchase. Non-resident companies are generally not subject to capital gains tax unless gains are obtained by their permanent establishment in the UK.
From April 2019, gains from the disposal of UK property and certain UK property-related investment assets by non-residents are subject to UK tax. For disposals prior to April 2019, the scope of the charge is restricted to disposals of UK residential property only, and to narrower categories of non-resident persons.
Capital losses are allowed only as an offset to capital gains.
Gains realised on certain types of assets - such as land and buildings used for a trade - can be deferred where all or most of the proceeds are reinvested in other assets of those types within a certain period (generally three years - so-called "rolled-over").

Main Allowable Deductions and Tax Credits

For company taxation purposes, total profits are the total of (i) the company's net income from each source (trade, property business, interests, dividends, etc.) and (ii) the company's net chargeable gains arising from the sale of capital assets. The rules governing expenses deductibility vary according to the type of income the expenses relate.
In general, all expenses that are not capital in nature and that are used for trading purposes are deductible. Local municipal taxes are generally deductible. Interest is deductible within the debt cap rules that apply to companies that are members of large groups. Most donations to charities are tax-deductible. Provisions for future costs can be deducted for tax purposes under certain conditions.

An R&D tax credit is available at 13% of R&D expenditure for large companies (such credit is taxable so that the net benefit to the company is 10.5%), while SMEs can claim a tax deduction of up to 230% of their R&D expenditure. A patent box regime is gradually being introduced over 5 years to allow companies to apply an effective 10% rate to all profits derived from qualifying patents. Special tax reliefs are available for expenditures on the production of movies, animation, video games, high-end TV shows and orchestral concerts.

Operating losses can be offset by the profits of the current fiscal year while the exceeding loss can be carried forward to the previous year. Operating losses incurred prior to 1 April 2017 can be carried forward indefinitely and offset by operating profits from future tax years. Operating losses incurred after 1 April 2017 can be offset by any type of profit. In both cases, the carryforward is capped at 50% of profits above an intra-group limit of GBP 5 million per year.
Capital losses can only be offset by capital gains and their carryback is prohibited. For accounting periods ending on or after 1 April 2020, the use of carried-forward capital losses is limited to 50% of gains above a groupwide GBP 5 million allowance per year (shared between capital and non-capital losses).

Other Corporate Taxes

A general anti-abuse rule (GAAR) applies across a range of taxes on transactions made after 17 July 2013.

Profits that arise from oil or gas extraction, or oil or gas rights, in the United Kingdom and the UK Continental Shelf ("ring-fence profits") are subject to tax in the United Kingdom (a full rate of 30% for profits over GBP 300,000 and a reduced rate of 19% for profits below that amount). Such activities also attract 100% capital allowances on most capital expenditure. A supplementary tax charge of 10% applies to "adjusted" ring-fence profits in addition to ordinary corporate income tax.

An annual tax on enveloped dwellings (ATED) is charged on the acquisition and holding of high-value residential properties (property over GBP 500,000) through a company or other "non-natural" person. The minimum charge is GBP 3,800 for a property valued at GBP 500,000 (minimum value for 2022/23).

A bank levy is applied at 0.1% for short-term chargeable liabilities and 0.05% for long-term chargeable equity and liabilities (does not apply to overseas branches and subsidiaries held by the UK business). The first GBP 20 million or chargeable liabilities is exempt. Bank profits are also subject to an 8% supplementary tax charge on profits above GBP 25 million.
Most insurance premiums are taxed at 12% (life assurance and other long-term insurance are exempt).

There are several environmental taxes, including: a Landfill tax, a Climate change levy and an Aggregates levy.

Social security contributions made by the employer amount to 13.8% on all earnings above GBP 169 per week (the first GBP 3,000 being exempt). For 2022/23, the national insurance contributions rates for earnings and/or profits that are subject to employee, employer, or self-employed contributions are temporarily increased by 1.25%, so that employers will pay at a rate of 15.05% on all income in excess of GBP 175 per week.

Employers are required to pay 0.5% of their total payroll in excess of GBP 3 million to create a fund to support apprenticeships (with an annual allowance of GBP 15,000 to offset against payment of the levy).

The stamp duty land tax (SDLT) is charged in England and Northern Ireland on transfers of real property, with rates varying between 0% and 12% for residential properties (15% if the property is valued at more than GBP 500,000) and 0% to 5% for non-residential properties.
Similar taxes - the land and buildings transaction tax (LBTT) and land transaction tax (LTT) - are charged on Scottish and Welsh property, respectively.
A stamp duty payable by the transferee is charged at 0.5% on instruments effecting sales of shares.

A Digital services tax (DST) is levied at a rate of 2% on the revenues of large businesses that provide a social media platform, search engine, or online marketplace to UK users. The tax applies to companies with an annual turnover above GBP 500 million, of which more than GBP 25 million is linked to the participation of UK users.

A diverted profits tax, at a rate of 25%, applies where multinational companies use artificial arrangements to divert profits overseas to avoid UK tax.

Shipping companies can choose to pay tonnage tax in lieu of the normal corporation tax.

For further details, consult the dedicated page on the official governmental portal.

Other Domestic Resources

HM Revenue & Customs

Consult the Doing Business website, to obtain a summary of the taxes and mandatory contributions.

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed

UK Tax Treaties

Withholding Taxes

Dividends: 0% (20% for dividends paid by a real estate investment fund on its tax-exempt rental income), Interest: 20% for non-residents, Royalties: 0% (resident company)/20% (resident individual and non-residents).

Rates can be lower as part of a tax treaty.