As business becomes more global, and digital business means work and sales can be increasingly performed anywhere, companies face a growing range of taxation challenges and can see fresh benefits through leverage tax advantages in different regimes and structures.
The United States has one of the lowest business tax rates compared to major competitors, which is why it is home to so many companies, and why companies look to do business there. Since the U.S. is the U.K.’s largest single trading partner, since the U.K. left the European Union and now trades only with individual nations, it is a natural home for many growing businesses.
While both the U.K. and the U.S. are undergoing various political turmoils, these figures can change, and likely will under the new Trump administration, but the desire to attract business is a key feature of any government’s plans.
In the U.K., companies pay:
- 19% tax on profits up to £50,000 ($62,529)
- 5% on profits between £50,001 – £250,000
- 25% tax on profits over £250,000 ($312,643)
In the U.S., companies pay:
- A federal tax flat rate of 21%
- Plus state corporate taxes (varying, for example):
- California 8.84%
- New York 7.75%
- Florida 5.50%
- Illinois 9.50%
- North Carolina 2.50%
Some U.S. states charge zero corporate tax, so there is a cautious approach required when moving a UK business to the U.S. and setting up operations in a state for tax purposes. Companies on the move will also have to consider staffing availability, utility bills, political opposition (notably in the health sector), and other factors.
Doing Business the U.S. and the U.K. Way
Some U.K. firms are thriving with a move to the U.S., notably in business services, the financial sector, the insurance industry, and travel. However, there’s a difference between exporting, selling digital services, and setting up operations as a tax base.
Further complications can arise when VAT is taken into account, with the UK offering a standard rate across goods and services (20% for most products). And then there are the various tax incentives larger organizations can get for moving to a specific state or tax credits, economic development funds, and research and development credits.
The switch goes both ways with U.S. brands and businesses coming to the U.K. in regular waves. When considering tax incentives as a motivator to move, you should partner with local accountants who can provide in-depth U.K. experience to get the lay of the land and identify key benefits. For example, London accountants Accounts and Legal states, “As a UK-focused business, we can identify the financial details, and help U.S.-firms weigh up the benefits of moving to the U.K., or support a U.K. firm deciding if it is better to remain here, rather than risk a move to the U.S.”
Given the increasing tax burden on U.K. businesses, some will look to move abroad with the U.S. a tempting destination for leaders and entrepreneurs. But in the U.K. a push to more U.S.-style tax incentives might change the local landscape rapidly.
Strategic Reasons For British Businesses to Move to the U.S.
Looking to the future, the U.K. is set to drop out of the world’s top 10 economies by 2030. While China and India could overtake it, the U.S. will remain a superpower for English-focused trade and is more immune to global economic shocks than a reduced Great Britain will be.
And while the UK has a government industrial investment strategy for 2035, the U.S. retains its allure as the place to do business today. Reasons can be found in many areas of work, from recruitment to manufacturing, subsidies and opportunities continue to tempt firms.
Strategic Reasons For U.S. Businesses to Move to the U.K.
To compete in Europe without being in Europe, U.S. firms will find a warm welcome in the U.K., thanks to a common language and other ties. If they are prepared to put up with the extra costs and delays of shipping to the continental EU, the U.K. remains a powerful proposition.
With a simpler tax burden and high-quality infrastructure in the major cities, the U.K. is keen to attract investment and can still provide a huge advantage in knowledge, skills, research, cultural benefits, and a strong work ethic, whatever the market.
