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Digitisation of company incorporation and taxation drives UK competitiveness

The UK government’s digital drive in tax, along with online company formation processes, has helped make the UK one of the simplest places to do business in Europe, according to a new report from professional services firm TMF Group

The TMF Group’s annual Global Business Complexity Index 2020 ranks 77 jurisdictions across the world in order of ease of doing business, with the UK sitting mid table as 44th most complex. It places the UK comfortably ahead of our near neighbours France (ranked 12th globally and the most complex in Europe), Spain (29th), Italy (36th) and Euro powerhouse Germany, which is ranked 40th most complex worldwide.

One factor driving the UK’s relative simplicity include its tax system. The country has a single corporate rate of 19%, and just two employment taxes - PAYE (Pay as you earn) and NI (National Insurance for both employee and employer). By contrast, in Germany, companies wishing to establish must pay different taxes at federal, state, and local level.

Digitisation of the tax and accounting filing processes is another major driver for easing business complexity in the UK, alongside the ease at which accounting software can be customised to meet local accounting requirements – a factor that is more difficult in Germany, France and Spain.  In addition, extending the deadline for tax and statutory filings is not possible in France, Germany and Spain and postponing the start of a tax audit is not permissible in both France and Spain – practices that are acceptable in the UK.

TMF Group CEO Mark Weil said, “This year’s index shows that how jurisdictions are responding to trends driving standardisation across different operational frameworks, and the continuing growth of technology and digital practices, is a huge factor in determining the global landscape of business complexity. Any government looking to put its stake in the ground as an attractive place to do business would do well to take note of those trends. And any business looking to take advantage needs to ensure they can address the complexities of meeting all the rules of engagement both locally and globally.”

“UK companies have had a lot thrown at them, not least the ongoing uncertainty around Brexit, and the massive economic and social disruption caused by COVID-19. As the UK government looks to rebuild the economy, having an attractive and competitive market to operate in will play an important part in securing any new trade deals and building cross-border investments.

“Setting up, filing your accounts, conforming to regulations and paying your staff – these are simpler and done more efficiently in the UK than many of its European neighbours, according to this year’s analysis. These are powerful arguments for that investment.”

Other examples of efficient UK processes abound:

  • Companies can be incorporated in the UK in less than a week. Such a short start-up time is only the case in 25% of jurisdictions surveyed worldwide – and is far quicker than in Germany, for example, where the process can take about a month.
  • Companies also only have to register incorporation with national government. This is not the case for Germany where, along with 38% of other jurisdictions, they must register with City/local government too. 
  • Incorporation filings can be submitted digitally – and the new company can simultaneously be registered with HMRC. 
  • There is also no requirement to obtain a local business licence prior to becoming operational in the UK (only true of 25% jurisdictions globally) unlike Germany and in some cases France and Spain too.

Most and least complex globally

According to the Global Business Complexity Index (GBCI), Curaçao is the simplest country in which to do business and Indonesia the most complicated.

The report found that most of the ten least complex jurisdictions were in the Western hemisphere, with Curaçao joined by the United States of America, Jamaica, Denmark, the British Virgin Islands, the Netherlands, El Salvador, the Republic of Ireland, the Cayman Islands and Mauritius. The most complex jurisdictions, meanwhile, centred around South America and Asia, with Indonesia followed by Brazil, Argentina, Bolivia, Greece, China, Nicaragua, Colombia, Malaysia and Equador making up the top ten.

When analysing why Curaçao was the most straightforward location, the report pointed to how its regulatory system is aligned with international norms, as well as noting the jurisdiction’s adoption of technology, such as electronic tax filing. Conversely Indonesia has labour laws which outsiders find anarchic, and restrictions on foreign ownership which complicate investment in the country.

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