Your responsibilities when selling to UK consumers will differ depending upon whether you are selling from a fellow EU member state or from a country outside of the EU. Of particular relevance here are the EU E-commerce Regulations, which provide that the ‘country of origin’ principle does not apply to inter-EU consumer contracts.
In effect, these regulations mean that any EU-based e-commerce seller must abide by the consumer laws of every member state where it is the case that that state’s consumers can buy its products. Thus, if you are selling to UK consumers from an EU member state, you will need to be familiar with and abide by UK consumer laws. Whilst this might sound burdensome, the EU’s desire to create a level playing field across its members means that there are largely common rules operating across all member states, in fact making inter-EU trade easier and reducing the transaction costs involved.
By comparison, if you are selling to UK consumers from a country outside of the EU you will continue to be bound by your own domestic legislation. In this case, strict customs procedures must be complied with and customs duties will become payable. Please see our Logistics page for further information.
Thus, if you are selling to UK consumers from an EU member state, you will need to be familiar with and abide by UK consumer laws. Whilst this might sound burdensome, the EU’s desire to create a level playing field across its members means that there are largely common rules operating across all member states, in fact making inter-EU trade easier and reducing the transaction costs involved. By comparison, if you are selling to UK consumers from a country outside of the EU you will continue to be bound by your own domestic legislation. In this case, strict customs procedures must be complied with and customs duties will become payable. Please see our Logistics page for further information.
The EU directive on the VAT System, in effect from January 2015, is set to make a notable impact on anyone selling to EU-based consumers, irrespective of where they are trading from. This legislation provides that online merchants are now required to pay VAT on digital products sold according to the location of the consumer. Therefore if you are selling to UK consumers you will need to be registered for and pay VAT in the UK. The administrative burden resulting from these new rules is somewhat alleviated by VAT MOSS (Mini One-Stop Shop), which eliminates the need to register for VAT in every country to which you sell, enabling you to register for all in one place.
A number of options exist if you wish to establish a physical presence in the UK without setting up a distinct legal entity. These include both representative and branch offices wherein your existing legal entity will remain liable for any debts or obligations incurred by this UK office. Representative offices are also prohibited from undertaking any commercial activities. Alternatively, you may wish to operate via a franchising agreement, commercial agency or distribution agreement. In all cases, it is crucial to consult specific legal advice before contracting.
The legislative framework of the UK offers a range of corporate forms to choose from should you decide to set up a separate legal entity in the UK. The most common form selected is a limited company, to which minimal restrictions apply on incorporation. These companies are also low cost, quick and simple – although you will need a registered office in the UK. Taking this approach offers limited liability, thus reducing your risk by protecting both your personal assets and the assets of your existing entity.
Limited companies also enjoy certain tax benefits in this territory. It is worth noting, however, that public limited companies (plc), as opposed to private limited companies (ltd), are subject to stricter regulations on incorporation, and incur more onerous auditing, corporate governance and listing rules. Alternative corporate forms include partnerships, sole trader status or limited liability partnerships. Whichever you pick, naturally you will be subject to UK domestic legislation and so expert legal advice is essential to ensure your compliance.
The UK has adopted a generally relaxed approach to foreign direct investment, although some restrictions do apply to sensitive industries such as banking and financial services. Investors will also need to consult EU competition laws and industry-specific regulations.
| Tax | Rate | Notes |
|---|---|---|
| Corporation Tax | 20% | The corporate profits tax rate is 20% for all companies, effective from 1st April 2015. |
| Capital Gains Tax – For Companies | 20% | Capital gains are subject to tax at the normal corporation tax rate. |
| Withholding Tax – Dividends | 0% | There is no withholding tax on dividends. |
| Withholding Tax – Other Interest | 20% | This tax applies to payments to non-residents and non-corporate residents. |
| Value Added Tax | 0-20% | The standard rate of VAT is 20% which is charged on goods sold and services rendered. A reduced rate of 5% is charged on utilities for domestic use and some energy saving products, as well as some health and environmental products. Some items, such as certain food and drink products, are exempt from VAT altogether. |
| Social Tax on Employee’s Salaries | 13.8% Employer | All weekly payments to an employee of more than £153 are charged at 13.8% on the employer. |
| Currency Exchange Control – Cash | €10,000.00 | Individuals are permitted to carry a maximum of €10,000 in cash into and out of the United Kingdom. There are no limits for travel to and from other European Union (EU) member states. |
| Currency Exchange Control – Bank Transfer | N/A | There are generally no restrictions on payments to foreign entities or individuals through normal banking channels. |
The privacy and data rules laid out in the DPA 1988 are regulated and enforced by the ICO (Information Commissioners Office). All organisations processing ‘personal data’ have to comply with 8 key principles. These include:
*Unfair Contract Terms Act 1977, Consumer Protection from Unfair Trading Regulations 2008, Consumer Rights (Payment Surcharges) Regulations 2012, Sale of Goods Act 197
Mobile devices now account for over 50% of all traffic to UK e-retail sites, so optimising for this channel is key.
Bank cards are the preferred e-payment method for a massive 75% of UK consumers.
The UK's logistics infrastructure is well developed and relatively straight-forward to negotiate.