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UK: Country and Foreign Investment

BACK TO UK INFORMATION: BUSINESS, TAXATION AND INVESTMENT

UK Geography

The United Kingdom forms part of the British Isles, a group of islands situated in the north-west of Europe. Officially called the United Kingdom of Great Britain and Northern Ireland, the three jurisdictions that make up “Great Britain” are England, Scotland and Wales. Apart from Ireland, the United Kingdom’s closest neighbour is France, located just 22 miles (35 km) across the English Channel at its narrowest point.

The country has a varied terrain, from the mountainous Highlands of Scotland and areas of Wales, to the undulating fertile hills that characterise much of England, and the low-lying Fens in England’s most easterly region. The highest point is Ben Nevis in Scotland (1,343 metres); the lowest is 4 metres below sea level, in the Fens. There are over 20 main rivers and over 380 lakes (many artificial), as well as a canal network built in the Victorian era. The United Kingdom has a total land area of 94,526 sq miles (244,820 sq km), and a coastline of 7,723 miles (12,429 km).

The climate is temperate, and benefits from the warm, prevailing south-west winds over the North Atlantic Current. The west of the country receives the highest rainfall as a result of these winds; London, the capital, however, has lower rainfall than Rome, New York and Sydney, thus dispelling the city’s general characterisation as being grey, dreary and largely populated by umbrella-bearing city gents!

Natural resources include chalk, clay, coal, gold, gypsum, iron ore, lead, limestone, natural gas, petroleum, potash, salt, silica sand, slate, tin and zinc.

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UK History

Neolithic, Bronze and Iron Ages: Small permanent settlements were first developed in Britain between 4,500 and 3,000 BC. Between 3,300 and 1,200 BC, the first stone circles and henges were built, the most famous of which is Stonehenge in Wiltshire, England – an impressive piece of pre-historic engineering in that it is aligned on the midsummer sunrise and the midwinter sunset.

Roman Britain: Britain was invaded by the Romans in AD 43, who were met with fierce opposition. Perhaps the Roman’s most well known foe was the warrior queen Boudicca, whose uprising against the invaders led to the burning of the Roman towns Camulodunum, Londinium and Verulamium (Colchester, London and St Albans, to give them their modern-day names); she was, however, defeated in AD 61.

Viking and Anglo-Saxon Britain: After the Romans left in around AD 410, Britain was subject to numerous invasions by the Angles and Saxons from Germany, and the Vikings from Scandinavia. Meanwhile, Christianity began to spread across the country, with the first Archbishop of Canterbury, Augustine, ordained in AD 597.

At that time, Britain was divided into a number of kingdoms. Athelstan, who was crowned at Kingston-upon-Thames in 925, is said to have become the first king of all England having succeeded in defending the country against invasions by Constantine II of Scotland, Eógan of Strathclyde and Olaf Guthrinson, King of Dublin, at the Battle of Brunanburh in 937.

Norman Britain: In 1066, Harold, Earl of Wessex, who was crowned king of England on the same day as the funeral of his predecessor, Edward the Confessor, faced immediate challenges by two claimants to the throne: Harald Hardrada, King of Norway, and William of Normandy. Harold succeeded in defeating Harald Hardrada in battle, but he in turn was defeated by the latter at the Battle of Hastings. William of Normandy – commonly referred to as William the Conqueror – was crowned king of England on December 25, 1066. In 1085, under his direction, a survey was commenced across England, which became the most complete record of a country at that time, the Domesday Book. The book continues to be a legal document today.

The Middle Ages was dominated by various power struggles between the English and the French, referred to by historians as the Hundred Years’ War. King Richard II attempted to enforce English rule over Ireland, but his efforts were interrupted by a revolt in England. The 30-year War of the Roses between two branches of the royal family, the Yorkists and the Lancastrians, began in 1455. At the end of this period was the mysterious disappearance of 12-year-old Edward V and his brother – these became known as the Princes in the Tower, after being imprisoned in the Tower of London. It is presumed they were murdered, having been declared illegitimate by Richard III after he laid claim to the throne.

The Tudor period was dominated by the rule of King Henry VIII and, later, Queen Elizabeth I. Henry VIII’s divorce from the first of his six wives, Catherine of Aragon, caused a rift between the king and the pope. In 1534, the Act of Supremacy made Henry VIII head of the Church of England, leading to the English Reformation and the dissolution of the monasteries. Henry VIII’s son, Edward, became king at age 10, and his regents took the opportunity to push through further Protestant reform; his reign was short-lived, however, as was his successor’s, his cousin Lady Jane Grey. His devoutly Catholic sister Mary became queen. Nicknamed “Bloody Mary”, she attempted to undo her father and brother’s work, burning nearly 300 Protestants at the stake. When she died childless in 1558, Elizabeth, daughter of Anne Boleyn and a Protestant, became queen. Despite difficulties with the Catholic Church (she was declared a heretic by Pope Pius V), and faced with a country with near empty coffers and various attempts to overthrow her, her reign ushered in a golden era of wealth and trade.

Revolutionary Britain: James I of Scotland took the English throne on Elizabeth’s death. However, in 1605, Guy Fawkes led a group of English Catholics in the Gunpowder Plot, an attempt to blow up the king and his parliament; they were caught before the deed was carried out and were executed. Later, the English Civil War toppled King Charles I, who was beheaded in 1649. A period of non-royal rule, led by Oliver Cromwell, followed. Charles I’s eldest son was crowned Charles II of Scotland, having struck a deal with the Scots; however, he retreated into exile after being defeated by Cromwell’s army.

After Cromwell’s death, the country descended into political mayhem; with little choice but to restore the monarchy to quell the unrest, Charles II returned to England and was restored to the throne in 1660. His reign saw the Great Plague of London, followed by the Great Fire of London in 1666, and consequently the rebuilding of much of the City of London, including St Paul’s Cathedral.

Colonial Britain and the Industrial Revolution: In the 18th century, Britain’s seafaring dominance and its colonies, combined with scientific and technological advancements, led to the Industrial Revolution and the vast changes it brought about in manufacturing, transport, mining and farming. Factories were built, and in turn the UK’s major cities expanded with a population that shifted away from rural areas. This development continued into the Victorian era. The Great Exhibition of 1951, held in Hyde Park in London, was a showcase of British Empire, global trade and technological advancement, housed in one of the world’s first prefabricated buildings, the Crystal Palace.

Modern Britain: The First and Second World Wars saw the demise of the British Empire – which once spanned one fourth of the earth’s surface, and the rise of the Commonwealth. The Irish Republic withdrew from the United Kingdom; Northern Ireland, which remained part of the UK, became a bitter battleground in what was called The Troubles, between the Catholic Nationalists and Protestant Unionists, until the Good Friday Agreement ushered in hopes for peace. The UK was one of the founding members, and remains one of five permanent members, of the United Nations, as well as a founding member of NATO. The UK continues to maintain a close relationship with the United States, and is an active member of the European Union.

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UK Population, Language and Culture

The UK population was estimated to be just over 63m in 2012. The 2001 census found 92.1% of the population to be white, 2% black, 1.8% Indian, 1.3% Pakistani, 1.2% mixed, and with 1.6% making up “other”. Recent years have seen an influx of Eastern Europeans – and especially Poles – seeking employment opportunities in the UK. The main language is English, although around a quarter of the population of Wales speaks Welsh, and Gaelic is spoken by some 60,000 Scots. According to the 2001 census, Christianity is the predominant religion (71.6% of the population), followed by Muslim (2.7%) and Hindu (1%); 1.6% of the population indicated they belonged to other religions, while 23.1% did not specify a religion or indicated they had no religion.

The UK has a wide and varied culture. English literature is renowned throughout the world. In 1476, Chaucer’s “Canterbury Tales” was the first known work printed in the UK by William Caxton, who had set up a press in Westminster. The Elizabethan era saw a rise in playwrights and poets, including Christopher Marlowe, Thomas Wyatt and, of course, William Shakespeare. Literature has continued to play an important part in English culture, from Milton’s 1667 work “Paradise Lost”, to the likes of Jane Austen, Mary Shelley, John Keats, William Blake, Oscar Wilde, the Brontë sisters and Thomas Hardy, and to modern writers including Virginia Woolf, P.G. Wodehouse, T.S. Eliot, Graham Greene, Iris Murdoch and Iain Banks.

The UK has many art and historical artefact collections, with focus in London on the Victoria and Albert Museum, the British Museum, The National Gallery, Tate Modern and Tate Britain, among many others. Famous British artists range from the Elizabethan-era George Gower, the 17th century miniaturist Samuel Cooper, Rococo era painter Sir Joshua Reynolds, Romantic era painter George Stubbs, landscape artist John Constable, and impressionist artist Joseph William Turner, to modern artists Francis Bacon, David Hockney, Damien Hirst and Tracey Emin.

Music has been key to defining modern British style, from the Swinging Sixties with London’s Carnaby Street and Beatle Mania; to punk in the late 1970s and early 1980s; and the Britpop scene of the 1990s onwards. British classical music composers include Purcell, Elgar, Vaughan Williams and Benjamin Britten. The UK also has a long tradition of theatre, with world-famous playwrights from Shakespeare to Alan Bennett, and many famous theatre actors who have moved on to Hollywood – and Oscar-winning – stardom.

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UK Government

The UK government consists of a constitutional monarchy and a bicameral parliament, the House of Commons and the House of Lords. The current head of church, state and the Commonwealth (which is made up of former British colonies) is Queen Elizabeth II.

Politics in the UK is dominated by three parties: Labour, Conservative and, to a much lesser extent, the Liberal Democrats. However, recent years have seen a popular rise in smaller parties such as the Scottish National Party (the main remit of which is Scottish independence); the UK Independence Party (UKIP), which campaigns against European Union interference; the Green Party, which focuses on environmental issues; and the British National Party (BNP), a right-wing political party which has benefited from a public backlash against immigration.

Members of the House of Commons are elected by popular vote for a period of four-five years. The current prime minister is David Cameron. Each of the 646 members of parliament – which include the prime minister, and leaders of the opposition parties and the Speaker of the House –represents a different area of the UK. The main role of the House of Commons is to debate policy and legislation put forward by the serving government, and to vote for or against proposed legislation.

Members of Parliament’s second chamber, the House of Lords, are not elected by popular vote; instead the chamber consists of around 622 political and non-political “life peers” who are appointed as members; 92 hereditary peers (i.e. peers who have inherited their title – the automatic right to be a hereditary peer was abolished in 1999 in the first stage of House of Lords reform); and 26 clergy. The House of Lords’ main role is to check the work of government and legislation passed by House of Commons.

While the Crown Dependencies of the Bailiwick of Jersey, the Bailiwick of Guernsey and the Isle of Man belong to the British Isles, these jurisdictions are self-governing and are not part of the United Kingdom. Northern Ireland, Scotland and Wales have devolved regional governments.

In 2009, the Supreme Court replaced the House of Lords as the UK’s highest court, thus separating the judiciary from parliament at that level. The lower courts include the Court of Appeal, the High Court of Justice, the Crown Courts, and the Magistrates’ Courts. The UK is divided into three legal jurisdictions, each with slight regional variations in the law; these are England and Wales; Scotland; and Northern Ireland.

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UK Economy and Currency

The services sector is the largest in the UK economy in terms of GDP; the sector is dominated by banking, finance and insurance, predominantly based in the City of London. The manufacturing sector – historically an essential sector – has been in decline over recent decades, with services taking an ever larger share. The coal, oil and natural gas industries have also been in decline, and the UK now imports much of its energy needs. In terms of agriculture, the UK provides 60% of its own food requirements. Few sectors are in public ownership – the country experienced a major privatisation programme under Prime Minister Margaret Thatcher’s government in the 1980s, with the utilities put up for private share ownership. As a consequence, for the first time, many ordinary members of the public became shareholders in the utility firms, with flotations oversubscribed. The railways followed suit under John Major in the 1990s.

The UK is a key member of the Group of Seven (G7) industrialized nations, and is also a member of the European Union. Its currency is the Pound Sterling (GBP); there are currently no plans for the UK to join the euro.

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UK Entry and Residence

Generally, EU, US and certain Commonwealth country residents do not require a visa to enter the United Kingdom. The Home Office’s UK Border Agency lists those countries whose nationals must apply for a visa to enter the UK; there is a separate list for those who need a visa for transit via the UK.

A UK resident for taxation purposes is a person who spends a total of 183 days or more in the United Kingdom; the 183-day period includes days travelling to or from the UK for these purposes. An individual’s personal lifestyle may also decide his or her UK-residence status, i.e. where his or her family, property, business and/or social connections are largely in the UK (referred to as “ordinary residence”). An individual’s domicile may also affect his or her tax status where he or she receives foreign income and/or gains.

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UK Business Environment

The United Kingdom has excellent telecommunications, with widespread land telephone, mobile telephone and Internet use; however, concerns have been raised regarding development of high-speed broadband services, particularly in more rural areas, although the government is reviewing progress on this issue.

The country has extensive rail and road networks, including high-speed rail links to Europe via the Channel Tunnel – trains from London serve Paris, Lille, Calais and Brussels, as well as limited services to Avignon in southern France from July to September, and the French Alp ski resorts of Moûtiers, Aime-la-Plagne and Bourg-St-Maurice from December to April. Plans for Eurostar trains to travel direct to Amsterdam have been delayed, with no definite date for when this link will open.There are a number of airports in the UK, with London Heathrow said to be the world’s busiest in terms of passenger numbers. Other airports serving London are Gatwick, Luton, Stansted and London City; elsewhere, the main international airports include Manchester, Birmingham, Liverpool, Glasgow and Edinburgh.

The UK has a number of container ports, the largest being Felixstowe; others include Liverpool, London and Southampton. The Port of Dover is an essential ferry link with Europe in terms of passenger and cargo transport.

Banking is a key sector in the UK economy, with main banking groups including HSBC, Barclays, Lloyds and Royal Bank of Scotland. Lloyd’s of London is the world’s leading insurance market provider of specialist insurance services worldwide, and is central to the UK’s insurance sector. The City of London is home to a large number of national, foreign and international banking groups, insurance groups, law firms and finance companies.

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UK Investment Incentives

For corporate income tax purposes, the first GBP300,000 of profit is taxed at 20% (the standard corporate income tax rate is 24%). This lower rate was reduced from 21% from April 2011. Profits deriving from UK patents are, from April 2010, subject to a reduced corporate income tax rate of 10%; the aim of this reduced rate is to promote research and development in the UK.

There is also a holding company regime, whereby the holding company can benefit from capital gains tax exemption (including withholding taxes). To qualify, the holding company must own at least 80% of the voting stock of the company in which it holds a controlling interest.

Other incentives include a 40% first-year capital allowances regime (subject to conditions); tax credits on research and development; and the Business Premises Renovation Allowance, under which there is a 100% allowance for expenditure incurred on renovating or converting buildings in designated disadvantaged areas (available until April 2012).

BACK TO UK INFORMATION: BUSINESS, TAXATION AND INVESTMENT




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