United Kingdom, Is it wise to invest despite Brexit?

First of all, the United Kingdom receives that name because it is made up of several countries. Which are: England, Scotland, Wales and Northern Ireland. Where they share legislation, language and economic regimes.

The United Kingdom is the fifth economy in the world, reigns in technological innovation and little bureaucracy in its public bodies. It also has a lot of fiscal flexibility with new companies.

It is considered one of the easiest countries to open companies, not only in Europe but throughout the world. This is because companies can be opened online without the need to travel to this country, and these procedures are characterized by their speed.

This country offers a wide range of tax exemptions to micro-companies. In addition, there are institutions such as the Department of International Trade, which supports foreign businessmen in consulting, paperwork and incentives.

Although lately his departure from the European Union has caused consternation among businessmen. Due to the uncertainty of the new economic measures that Brexit brings and if you will be able to choose some economic benefits that you previously enjoyed with belonging to the European Union.

Don’t stress because of that, that even these measures are mediated and the United Kingdom will always be a great economic ally for Europe. Also, in this post we will explain everything about Brexit later.

What are the advantages and disadvantages of investing in the UK today?

I know that many people will not find it convenient to invest in the United Kingdom today, due to the introduction of Brexit. But that is a very individual decision and we help you make it based on the advantages and disadvantages of investing that the UK offers you today.

Advantages of investing in the UK:

• The ease of opening companies quickly and easily.
• A solid and transparent financial system.
• The legal tender is the pound sterling, which is a strong currency that does not suffer devaluation effects.
• It has one of the most competitive export regimes in the world.
• The corporate legal framework is very flexible.
• Tax rates or rates are relatively low.

Disadvantages of investing in the UK:

• The economic outlook is difficult to pin down due to Brexit.
• The UK economy only stays on one axis, the financial one. In other words, it is only maintained thanks to banking activity.
• The industrial sector is very competitive due to the high number of foreign companies.
• Productivity growth is relatively low.
• The United Kingdom suffers from a trade deficit.
• Lack of investment in infrastructure and construction.

Having mentioned this, we can proceed to Brexit, which will greatly influence your decision to invest in this Kingdom.

What can we expect from Brexit?

First of all, Brexit is an agreement that contemplates the exit of the United Kingdom from the European Union. Its name is the combination of two words Britain and exit, which mean Great Britain and exit respectively.

The United Kingdom seeks with this agreement apart from independence, it is the migratory control of its borders. Since with the European Union they enjoyed the free transit of European foreigners, goods, services and capital.

Brexit is currently in a period called Post-Brexit, where each and every one of the trade and economic agreements that the United Kingdom had with the European Union are being evaluated. Said evaluation leads to the termination or renewal of economic and commercial treaties with the European Union.

But in this period these agreements are still in force until January 31, 2021. So, if you decide to do business now in the United Kingdom, you still enjoy the advantages that the European Union offers for six more months.

What we can expect:

• Is that the activity of companies that depend on the free movement of people or trade without restrictions to Europe will be reduced.
• Increase in public spending due to Covid-19.
• Economic losses due to the fall of the pound, which will increase import prices and inflation.
• That Britain remains as a country in the European Economic Area, even with benefits.
• Investment in British banks is expected to be relatively low.
• Britain will open more favorable markets towards Latin America and China. Since Latin America is a strong buyer from the United Kingdom, and in turn mineral products such as coal, diamonds, bauxite, iron and aluminum will be strong and convenient imports for Britain from Latin American countries. And China as the world’s leading producer, this Kingdom will not stay without importing cheaper products from China.

Before investing in the UK, take the following considerations into account:

The currency of the United Kingdom is the pound sterling, its value has always been above the euro.

The annual variation rate of the CPI Consumer Price Index in the United Kingdom in April 2020 was 0.8%, according to data established by the newspaper Expansión.

Accumulated inflation in 2020 is 0%, a fairly good value despite the uncertainty of Brexit, according to the newspaper Expansión.

The interannual variation of the Gross Domestic Product GDP was -1.6%, and was valued in 2019 at 2,523,314 million euros, with a rate of 1.4% Annual. This is based on the information provided by the Expansión newspaper.

In this segment I will explain what each consideration means:

• The CPI Consumer Price Index, this indicator measures and analyzes all the prices that users consume in a geographical area (country), during a certain time. It is said that if the index is positive, the cost of living in that region has increased, while if it is negative, prices in the basic basket have decreased.
• Inflation is an indicator that measures the increase in generalized prices in a certain time and in a specific place. The inflation percentage measures how fewer products and services can be purchased for each unit of currency.
• The Gross Domestic Product is the monetary amount that reflects the value of the final demand, of the production of products and services in a country during a determined period. It is like saying how much that country is worth and its percentages only indicate variations in that value.

Specifying the above concepts, we can say that the United Kingdom has a stable economy, despite Brexit. Because its indicators some equals zero and others are negative, that is, it does not have abrupt economic variables.

In my consideration if these data are included in the financial structure of a business plan, the profitability indicators would be quite positive for the current year. If the values are projected there is the uncertainty. Because we would have to wait for the behavior of the year 2021 when trade agreements are established and we see how the economy fluctuates in the United Kingdom.

We name these nine profitable investments in the UK

The United Kingdom is a country with three important economic sectors: financial-banking, tourism and technology.

So you have to focus on those sectors to invest, but with innovative ideas. Because they are very competitive markets and whenever you can add value to your products and services, you can stand out in these markets.

Here I name nine investments:

• In investment funds and savings in banks: in the UK there are very flexible banks both physically and online. And they allow foreigners to invest in a hard currency like the pound, where the investment is guaranteed at very good interest rates like in Malta. Furthermore, they are the strongest financial institutions in the world.
• Bicycle and vehicle leasing: as the UK is highly visited by tourists every year. A part of them love to ride a bicycle to enjoy London spaces. As there are other more practical that rent vehicles to walk. These two businesses are very profitable, but competitive, if you can add a plus to these services, it would be wonderful and very competitive.
• Restaurants: There are tourist diners and British citizens, who love traditional UK food. Although gastronomically it is not very attractive to some, but tourists always want to try the traditional one of that country. If you can open a restaurant with traditional British menus and add touches of decoration and innovative services to the place, you will succeed with this business.
• 3D article printing: This market is very new in the UK, it is quite innovative. These 3D printers are capable of life-size printing of gifts, souvenirs, furniture, vehicle parts. All these products are highly demanded in this country, having a 3D printer, your production costs are minimized, only you have to invest in that equipment. You can establish a physical or online store to sell these products.
• Electronic articles: this country is one of the most important consumers of technology in the world. British citizens love having the latest models of Smartphone, Tablet, Desktop Pc, Video Game Console, so it is a market in high demand there. You can not only sell these devices, you can also sell their parts and accessories.
• Mobile apps or applications: as the British market consumes technology in all its areas, mobile applications do not escape that. In the UK the internet is of such excellent quality that it encourages these digital products to be successful. The most popular apps in the UK are transport, money management, information, product delivery and games for children.
• The ecommerce: this is related to the two previous businesses. The United Kingdom facilitates not only at the connection level but at the legal and financial level the online stores. This is a favorable market in that country, since people are immersed in their jobs and on the internet all day, they always buy things online to make life easier. They buy from food, clothes, gadgets, among others.
• Employment advice: Many people migrate to the UK for the great job and life opportunities it offers. Apart from the fact that the best financial and technological companies operate there. So if you become an expert in advising on resumes, job interviews and job profiles, you can get the most out of it.
• Buying and Selling Used Cars: New cars in the UK are extremely expensive, and the taxes on buying them are quite exorbitant. This is why many citizens buy used vehicles to get around. What you can do is find people who sell their cars, check the operation and legality of the vehicle, and then sell it.

Programs and incentives to invest in the UK

Financial incentives:

• Bank loans with interest and reasonable fees for new companies, with operating times of less than one year. You can apply for these loans at the British Business Bank.
• State subsidies or contributions to businesses that support the development and growth of a region. These can be applied for in the Regional Growth Fund program.
• Bank or private financing (people), to new companies such as SMEs or start ups. You can find these financings in the Business Angels program.
• Monetary contributions of Investment Capital companies. These companies evaluate new companies with a high growth potential, and invest so that these new companies develop.
• Scholarships and monetary aid to companies that work in the Research and Development (R&D) area. These are sponsored by the Eureka program. In addition, that in each country that makes up the United Kingdom, it has its own body to provide these aids:
  • England.
  • Scotland.
  • Welsh.
  • North Ireland.
• There are national grants for projects that will contribute to the development and growth of the United Kingdom. You can present your business projects to the British state and get financial aid to start, for more information you can do it here.

Tax incentives:

• Tax breaks for large companies and SMEs involved in the Research and Development (R&D) sector. This benefit translates into a tax credit applied to direct expenses of R&D activities, this credit is 13%, which reduces the amount of taxes to be paid.
• There is also a tax relief for companies that engage in Research and Development (R&D) activities, whose financial statements present earnings can deduct 230% of their expenses as reliefs. If the company produces a loss, it can request a tax credit of 14.5%. This can be applied for as an R&D Expenditure Tax Credit, in UK finance.
• A 10% corporation tax through the Patent Box. This is in order to encourage companies to maintain and market intellectual property in the UK. This benefit is granted to companies that patent their innovations, whether physical or intellectual.
• Tax, legal and financial advice from UK Trade & Investment (UKTI).
• Corporate tax is the lowest in Europe at just 20% on UK earnings.
• VAT rates are relatively low, VAT returns and payments are very flexible for small businesses.

Business areas:

They are certain areas in the United Kingdom that offer companies tax advantages, financial aid, access to markets, transport facilities and better planning schemes. In addition, you will be surrounded by similar companies and consultancies willing to provide you with knowledge on business and legislation in those regions.

These areas are located in:

• England.
• Welsh.
• Scotland.

Organizations that encourage foreign investment:

• UK Trade & Investment (UKTI): This is the quintessential British body that supports foreign investment across the UK.
• The LEP Network. This body is tasked with promoting small business development in Britain.
• London & Partners. This institution supports consultancy and financing for entrepreneurs in London.
• Invest Northern Ireland. This body encourages investments in Northern Ireland.
• Scottish Development International. This institution encourages and develops business in Scotland.
• Business Wales. This body facilitates and encourages projects to be carried out in Wales.

Visas in the UK

Firstly, European citizens and people originating from countries that make up the EEA European Economic Area (Iceland, Norway, Switzerland and Liechtenstein) do not require a visa to enter the United Kingdom. However, we must see in January 2021, how these migration agreements with the rest of Europe are.

Visas in the United Kingdom are a somewhat complicated subject, because they are as complex as those in the United States and Canada. The good thing is that some can be applied for online and others in person at the UK embassy in your country. To verify the information of the embassy in your country you can visit this government link.

Visas in the UK are:

• Stay visa for family, tourist or professional reasons.
• Study visa.
• Residence visa.
• Residence and work visa for own or others.
• Job search visa.
• Transit visa.
• Courtesy visa.

Regarding business, European citizens belonging to the EEA European Economic Area do not require a visa to establish business in the United Kingdom. If you are a citizen outside this environment and wish to invest in any British company over 25% of its capital, you require a business or investor visa.

In the UK you can apply for two types of visas:

Investor (level 1):

To apply for this visa you must have at least £ 2,000,000 available to apply. You must show that the funds are your own or your partner’s (if they are married) and that you opened a bank account in a bank regulated by the United Kingdom with that amount of money. In addition to being over eighteen years old.

For this visa they request a valid passport at least three months before the trip, and a page available in your passport to print the visa stamp.

You can apply for this visa outside the UK, online at this link. If you apply online you will need to take your fingerprints and photographs at a visa application center (to obtain a biometric residence permit) as part of your application. In addition, you must collect her biometric residence permit within ten days of the date she said she would arrive in the UK.

This visa is priced at £ 1623 and you can be in the UK for three years and four months, plus you can apply for a two year extension.

With this visa you will be able to work, invest and study in Great Britain, less in some professions or trades such as medicine and dentistry, or as a sports coach or professional athlete. You can consult this guide to apply for this visa.

Visa for business representatives abroad:

Requirements:

• Be a citizen originating from countries that do not belong to the European Union or the European Economic Area. And apply outside these countries.
• Have enough money to stay in the UK and evidence of it.
• Have an adequate level of English and take an English exam here. If you come from an English speaking country please ignore the exam.
• Be hired and employed outside the UK by a company whose headquarters and main place of business are outside the UK.
• Have extensive experience and knowledge related to the industry of the company you work for.
• Have an important position in the company (but not be a major shareholder) and have full authority to make decisions on their behalf.
• A complete description of the activities of the parent company, including details of assets and accounts.
• A letter confirming that the foreign company will either establish a wholly owned subsidiary or register a UK branch in the same business activity as the parent company.
• your job description, employment contract and salary details
• A letter confirming that you are familiar with the company and that you have the power to make operational decisions.
• Intends to establish the company’s first commercial presence in the UK, for example a registered branch or wholly owned subsidiary. (Include papers from the parent company).
• Pay the fee of £ 610.
• Valid passport at least 6 months before the trip.
• Pay for a healthcare service in the UK.
• Details of where you will stay during your stay
• The results of your tuberculosis test if you are from a country where you have to be tested.
• You must provide a certified translation of any document that is not in English or Welsh.
• Not be a majority shareholder of the company.

With this visa you can stay for three continuous years and request a two-year extension. If you are already over five years old in the UK, you can apply for a permanent residence permit.

Be clear that with this visa you cannot:

• Work for you or for any other business.
• Remain in the UK if your employer terminates the exclusive representative agreement.
• Change to this visa from any other visa category.
• Obtain public funds.

You should read the guide for foreign business representatives before submitting your application.

You can request it online. And comply with the steps for taking biometric data, detailed in the previous visa.

Classification of companies in the United Kingdom

Main companies:

• Sole Trader: it is a company without legal formality, which is made up of a single partner. Who wants to develop a commercial or commercial activity and wants to invoice. This is the equivalent of a freelancer or freelancer who wants to bill for your products and services. This partner is responsible for his partnership as assets, assets, income and debts. This company is personally registered in the British Commercial Register.

• Limited Company: This is a commercial company where the liability of the partners is limited by the number of shares it owns. The partners are part of the company, but with their own distinct legal personality, that is, they are two different people with different obligations, unlike the Sole Trader. To open this type of company a memorandum and bylaws are required.
  • This type has four types of sub-companies, which vary in the number of partners, their responsibility and the minimum capital for the opening. They were named in the previous table. These companies can be incorporated online at the Companies House or UK Commercial Registry.

• Partnership: is a company without legal personality, where two professional partners or two companies come together to carry out a commercial or commercial activity. The partners are responsible for the obligations of the company. It is used by professional associations of lawyers, doctors or engineers, among others. This company is registered in the Mercantile Registry in person.

• Limited Liability Partnership: is a commercial company where the responsibility is limited to the contributed capital. It is registered in the same way as a limited company in Companies House, and for its opening they request the same memorandum and statute requirements. It is not recommended for foreign companies, since they are used to form medium and large national companies for certain economic activities.

• Branch: it is a mercantile company where its liabilities and debts must be paid by the company’s headquarters. This must be registered in the UK Commercial Register in person with all the roles of the main company and the business representative (roles described in the visa segment). Your accounting accounts must be submitted in the UK by the parent company.

A very important fact:

• The Commercial Register for England, Wales and Scotland is the Companies House.
• The Commercial Registry for Northern Ireland is the Companies Registry.
• You can check the physical addresses at the following link.

Steps to opening a company in the UK

The procedure for opening companies in the United Kingdom is basically the same, only the requirements, forms and presentation of documents for opening before the British Commercial Registry change.

The rest of the companies in the United Kingdom require that the information for the opening of companies is mandatory, in the British Commercial Registry, located at: Crown Way, Cardiff, CF14 3UZ, DX 33050 Cardiff, United Kingdom.

Or through inquiries in this email: enquiries@companieshouse.gov.uk. The documents must be prepared by lawyers and filed with the Public Registrar.

Procedure for Limited Company:

1. Prepare and organize the documentation of the partners, directors, administrators and secretaries.
2. Choose the name of the company.
3. Choose the address of the company.
4. Deposit capital (if capital is required) in a UK bank.
5. Write the Memorandum of Association.
6. Prepare the Articles of Association.
7. Fill out all the forms detailed in the table above according to the type of Limited Company you want to open, sign them and save them in PDF format.
8. Enter the registry to enter all the documents and complete the company details. This has a cost of £ 15.
9. Wait for approval online, it takes no more than 12 hours.
10. Hold a shareholders meeting to appoint the director.
11. Submit the confirmation statement online.
12. Register the company in the treasury or HM Revenue & Customs. For the company to register later in the Corporate Tax and VAT.
13. If the company is going to employ people in the United Kingdom, it must register with PAYE, the body that controls social security in the United Kingdom.

Procedure to open a branch:

1. Prepare and organize the documentation of the partner or business representative (if you require administrator and secretary, theirs are also prepared).
2. Prepare and organize company documentation and translate it with a certified translator.
3. Choose the address of the company.
4. Deposit capital (if capital is required) in a UK bank.
5. Fill out, print and sign all the forms described in the previous table.
6. Go to the headquarters of the Commercial Registry in the United Kingdom, leave the entire file for review and approve the opening of the branch. This can take up to four weeks.
7. Wait for approval and start trading.
8. For tax matters you must hire a resident accountant in the United Kingdom, to contrast the accounts and taxes of the head office, as well as the commercial and commercial operations of the branch.

Taxes in the UK

The tax scheme in the UK is very simple, they can all be reported online and are the lowest in Europe.

Corporate Tax (corporation tax):

This is a tax that is levied on the profits of any company that:

• Trade commercially.
• Invest.
• They sell assets and goods for more than they cost.

When the company is headquartered in the United Kingdom, you must report and pay this tax based on profits made in and out of this country.

In the case of branches, these only declare and pay this tax based on the profits obtained in the United Kingdom.

The rate of this tax is 20% and it is declared and paid annually. You can declare it online at this link.

Value Added Tax VAT (VAT):

This is the Tax that is imposed on the purchase and sale of products and services, its value is added to the price of the good or service in the billing.

This may have different rates for some products and services, which are:

• General rate: 20%.
• Reduced rate: 5%.
• Rate 0% and exemptions for imports and exports outside the European Union.

To verify what rates are used for each good and service you can visit this link.

The frequency to declare and pay this tax depends on the accounting scheme you choose, which can be quarterly, quarterly or annual. You can declare and pay it online at this link.

To declare this tax, they ask you to list a part called EC Sales List, where you detail all sales within the European Union.

Value Added Tax VAT MOSS (VAT):

This Tax is applied to digital services within the European Union. Their rates vary according to the destination country of the services and can be declared online quarterly through the following link.

If you want to know the rates for each country you can enter the following link.

PAYE or social security:

It is a tax detailing the scheme of social security in the UK. It establishes from salaries, payroll calculations and retention rates to employees.

This must be declared monthly and its amount and rate depend on the type of company and the employees and their salaries.
For more information you can enter this link.

In conclusion, we can tell you that the United Kingdom offers the best legal, economic and tax conditions to establish business. However, Brexit has generated a lot of uncertainty around this issue, due to possible changes in trade agreements from January 2021. It is recommended that you wait until you have clear rules to start your business there, but I do not think that the The European Union disintegrates powerful trade agreements with Great Britain because it is its main financial partner.

I hope it has been of great use to you.

Atte .: Mariajosé.

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