Tips for Growing Your eCommerce and Online Business: Starting an Online Business in London

Among the challenges of running an e-commerce business, something pops ups called the income tax return online. E-commerce deals tend to be multi-jurisdictional in aspect and generally require buyers from around the world.

As an e-commerce business proprietor you should be aware of the UK tax advice regulations that could arise when running an online business. Generally, the UK income tax return online plan is very liberal and very generous for entrepreneurs.

You can find two principal options for the income tax return online for e-commerce business owners in London, UK: company tax returns and individual income tax returns.

Income tax return online

The primary concerns about the application of income tax on e-commerce trades are:

1) Income tax return online problems with respect to source.

2) Income tax return online problems with respect to income classification.

Considering that the UK employs a territorial basis of income tax return online, duty is enforced on the income source (a) accruing in or produced from UK or (b) received in the UK from outside UK. However, there is some difficulty in making use of this concept to e-commerce as it handles electronic borderless rather than to the trade of physical goods and services. It eventually boils down to if the e-merchant is trading inside the UK firstly.

Our UK tax experts have provided clarifying views on certain income tax return online cases that are normal to e-commerce trade:

Scenario 1:

A firm using its business functions in the UK, creates a website in the UK. In cases like this the company provides tangible and intangible products in the UK; hosts its website with a UK web-hosting company; and the web site allows customers to put orders, make payments and have the delivery of tangible goods actually or intangible goods online. In cases like this, income produced from business conducted through the web site would be looked at as income sourced in the UK and become subject to income tax return online in the UK.

Scenario 2:

Company using its business functions in the UK, creates a website in a international country. In cases like this the company provides tangible and intangible products in the UK; will not operate a branch in a international country; hosts its website with a web-hosting provider in a international country; and the web site allows customers to put orders, make obligations and have the delivery of tangible goods literally or intangible goods online.

In cases like this, although the web site is managed in a international country, the fulfillment of the business enterprise obligations is performed through its businesses in the UK. For example, the UK structured company provides information on the site, answers queries, offers the tangible products, etc. Therefore, the income produced from its e-commerce deals via the web site will be looked at as income sourced in the UK and should firstly comply with UK tax obligations. 

Income Classification

Among the e-commerce income tax return online related issues is that of income classification.

More specifically, will license fees produced from the utilization of digitized information (e.g. software applications) classify as trade income or royalty income?

Based on the UK tax advice, certificate fees payable to obtain software applications is royalty income as it is a repayment designed for the “use or to use any movable property as well as commercial, medical, technical or professional knowledge or information”.

Considering that permit fees is royalty income then it will attract tax if the repayment is made by a UK citizen customer (specific or long lasting establishment) to a non UK resident e-merchant providing the digitized information.

The withholding duty rate for royalty obligations is provided by the appropriate double income tax return treaty.

Notice however that royalty repayments for UK non-resident e-merchants for software (i.e. standard software such as operating-system software or office program software); downloadable software by an end-user; site certificate (a license which allows the licensee to set up the program on multiple pc’s or machines for procedure within its business, location or service); and software bundled with computers may be exempt from the income tax return online.

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