UK business terms, in plain English.

AIA

The Annual Investment Allowance (AIA) is the UK's most-used capital allowance, giving a 100% first-year deduction on most plant and machinery purchases up to £1 million per accounting period.

AML

Anti-Money Laundering (AML) is a body of UK regulations requiring regulated firms to identify the people they do business with and report suspicious activity to the National Crime Agency.

AML Supervisor

An AML Supervisor is the body responsible for monitoring a UK regulated firm's compliance with the Money Laundering Regulations 2017 — typically a professional body (ICAEW, ACCA, ICAS, CIOT, SRA, Law Society) or HMRC for unregulated sectors.

APA

An Asset Purchase Agreement (APA) is the contract by which specific business assets (rather than the shares of the owning company) are transferred from seller to buyer — used when the buyer wants to acquire the trade but not all the historical liabilities of the company.

ARR

Annual Recurring Revenue (ARR) is the normalised annualised value of a SaaS business's recurring subscription revenue — the headline metric most investors and benchmarks reference when sizing a SaaS company.

Articles of Association

A UK company's Articles of Association are the constitutional document setting out the internal rules of how the company is run — director appointments, shareholder rights, share transfers, dividends, decision-making procedures.

AST

An Assured Shorthold Tenancy (AST) is the default form of residential tenancy in England and Wales for most private landlords letting to individuals as their main home.

BADR

Business Asset Disposal Relief (BADR), previously called Entrepreneurs' Relief, is a UK Capital Gains Tax relief that reduces the CGT rate to 10% on the first £1 million of qualifying lifetime gains from selling all or part of a business.

Beneficial Owner

A beneficial owner is the natural person who ultimately owns or controls a company, regardless of the legal ownership structure on paper.

Capital Allowances

Capital allowances are the UK tax mechanism that lets businesses deduct the cost of qualifying capital assets — plant, machinery, equipment, integral features — from taxable profits, in place of accounting depreciation.

Certificate of Sponsorship

A Certificate of Sponsorship (CoS) is a reference number issued by a UK sponsor licence holder that a migrant worker uses as part of a visa application.

CGT

Capital Gains Tax (CGT) is the UK tax payable when an individual sells or disposes of an asset for more than they paid for it.

CIC

A Community Interest Company (CIC) is a UK type of limited company designed for social enterprise — a company that uses its profits and assets to benefit the community rather than enriching shareholders.

Civil Penalty (Illegal Worker)

A civil penalty for employing an illegal worker is the financial penalty UK Visas and Immigration can impose on a UK employer who is found to be employing someone without the right to do the work — up to £45,000 per worker for a first offence and £60,000 per worker for repeat offences.

Class 1 NIC

Class 1 National Insurance Contributions (NIC) are the UK NICs paid on employee earnings — Primary Class 1 paid by the employee, Secondary Class 1 paid by the employer on top of the gross salary.

Class 4 NIC

Class 4 National Insurance Contributions are paid by self-employed UK individuals on their trading profits — 6% on profits between £12,570 and £50,270, then 2% above (2024/25 rates).

Companies House

Companies House is the UK government agency that registers and stores public information on every UK company, LLP, and limited partnership.

Confirmation Statement

A confirmation statement is the annual return UK companies file at Companies House to confirm that the public record of the company is accurate.

Cooling-Off Period

A cooling-off period is the mandatory wait after a UK sponsor licence has been revoked, surrendered with action pending, or refused — during which the company (and certain related individuals) cannot apply for a new licence.

Corporation Tax

Corporation Tax is the UK tax payable by limited companies on their taxable profits, due 9 months and 1 day after the end of the accounting period.

Customer Due Diligence

Customer Due Diligence (CDD) is the UK regulated-firm process of identifying a client, verifying their identity using reliable independent sources, identifying the beneficial owner, and understanding the nature and purpose of the business relationship.

Deposit Protection

Deposit protection is the UK legal requirement that a residential landlord must protect any tenancy deposit in a government-approved scheme within 30 days of receiving it, and give the tenant prescribed information about the scheme.

Director's Duties

Director's duties are the statutory and fiduciary obligations every UK company director owes to the company under the Companies Act 2006 — codified into seven specific duties in sections 171-177.

Director's Loan Account

A Director's Loan Account (DLA) is the running record in a UK company's books of money owed to or by a director — anything other than salary, dividends, or repayment of business expenses.

Dividend

A dividend is a distribution of a UK company's post-tax profits to its shareholders, paid in proportion to their shareholding.

Dividend Allowance

The Dividend Allowance is the amount of dividend income a UK individual can receive each tax year before paying any tax on it, currently £500 (down from £1,000 in 2023/24 and £2,000 previously).

DPA 2018

The Data Protection Act 2018 is the UK statute that sits alongside UK GDPR, implementing the GDPR in domestic law, covering law enforcement processing, and providing UK-specific derogations.

DPO

A Data Protection Officer (DPO) is the named individual responsible for overseeing an organisation's data protection strategy and ensuring GDPR compliance, mandatory for some organisations and recommended as best practice for many others.

Due Diligence

Due diligence is the structured investigation a buyer carries out on a target business before acquisition to verify its financial, legal, commercial, and operational position.

Earn-out

An earn-out is a deferred portion of the purchase price in a UK M&A transaction, payable to the seller(s) only if the business hits specified financial targets — typically revenue, gross profit, or EBITDA — over a 2-4 year period after completion.

ECCT Act 2023

The Economic Crime and Corporate Transparency Act 2023 is the UK statute that strengthened Companies House from a passive registry into an active gatekeeper, introducing director identity verification, ACSP-mediated filings, and new failure-to-prevent fraud offences.

EIS

The Enterprise Investment Scheme (EIS) is a UK government tax-relief scheme designed to encourage individuals to invest in qualifying small, higher-risk trading companies, offering up to 30% Income Tax relief plus CGT deferral and tax-free gains.

EMI Scheme

The Enterprise Management Incentive (EMI) is a UK tax-advantaged share option scheme for SMEs that lets companies grant employees options over up to £250,000 of shares each, with favourable Income Tax and CGT treatment.

Employment Allowance

The Employment Allowance is a UK tax break that lets eligible smaller employers reduce their annual Class 1 NIC bill by up to £5,000.

Enhanced Due Diligence

Enhanced Due Diligence (EDD) is the deeper level of customer checks UK regulated firms must apply to higher-risk clients — including PEPs, clients in high-risk jurisdictions, and any client where standard CDD raises concerns.

EPC

An Energy Performance Certificate (EPC) is a UK document showing how energy-efficient a property is on a rating from A (most efficient) to G (least efficient), valid for 10 years.

Failure to Prevent Fraud

Failure to Prevent Fraud is the new UK corporate criminal offence introduced by the Economic Crime and Corporate Transparency Act 2023, holding large organisations criminally liable if an associated person commits fraud intending to benefit the organisation, unless the organisation can show it had reasonable fraud-prevention procedures in place.

Flat Rate Scheme

The VAT Flat Rate Scheme (FRS) is a simplified UK VAT scheme for small businesses where you pay HMRC a fixed percentage of your gross VAT-inclusive turnover, rather than calculating output VAT minus input VAT on each transaction.

Fraudulent Trading

Fraudulent trading is the UK offence of carrying on the business of a company with intent to defraud creditors or for any other fraudulent purpose — both a civil claim (under section 213 Insolvency Act 1986) and a criminal offence (under section 993 Companies Act 2006).

Furnished Holiday Let

A Furnished Holiday Let (FHL) was a UK tax category for short-term, commercially-let holiday accommodation that historically qualified for significant tax advantages — but the FHL regime was abolished from 6 April 2025.

GDPR

The General Data Protection Regulation (GDPR), incorporated into UK law as the UK GDPR, is the UK's primary data protection framework — governing how personal data about individuals is collected, stored, used, and shared.

Genuine Vacancy

A "genuine vacancy" is the Home Office requirement that a role being sponsored must be a real position that genuinely exists, with the duties and salary matching the Certificate of Sponsorship description — not a constructed role to provide visa cover.

Going Rate

The "going rate" is the Home Office's published median salary for a specific SOC code, used as the minimum salary a UK sponsor must pay a Skilled Worker visa holder in that role — or the general Skilled Worker threshold, whichever is higher.

Goodwill

Goodwill is the value of a UK business above its identifiable net asset value — representing the reputation, customer relationships, brand, location, workforce, and other intangibles that make the business worth more than the sum of its physical and contractual assets.

Heads of Terms

Heads of Terms (also called a Term Sheet, Memorandum of Understanding, or Letter of Intent) is the non-binding outline document signed early in a UK M&A transaction setting out the key commercial terms before formal contracts are drafted.

HMO

A House in Multiple Occupation (HMO) is a UK rental property let to three or more tenants from two or more households who share kitchen, bathroom, or toilet facilities.

ICO Registration

ICO registration is the legal duty for most UK businesses processing personal data to pay an annual data protection fee to the Information Commissioner's Office, ranging from £40 to £2,900 depending on size and turnover.

ILR

Indefinite Leave to Remain (ILR) is permission to live and work in the UK indefinitely without immigration restrictions — sometimes called "permanent residence" or "settlement".

Immigration Skills Charge

The Immigration Skills Charge (ISC) is a UK levy paid by employers sponsoring Skilled Worker and Senior or Specialist Worker visa holders, designed to fund UK skills development.

Inheritance Tax

Inheritance Tax (IHT) is the UK tax charged on the value of an estate above the nil-rate band when someone dies, currently set at £325,000 with an additional £175,000 residence nil-rate band for property passed to direct descendants.

IR35

IR35 is the UK's off-payroll working rules — a set of tax rules that treat a contractor working through their own intermediary (typically a personal service company) as an employee for tax purposes if the underlying relationship looks like employment.

Issued Share Capital

Issued share capital is the total value of shares that a UK company has actually allocated (issued) to shareholders — distinct from authorised share capital, which is obsolete under the Companies Act 2006.

KYC

Know Your Customer (KYC) is the practice of verifying a client's identity, ownership structure, and source of funds before and during a business relationship.

Limited Company

A UK limited company is a separate legal entity whose owners (shareholders) have liability limited to the unpaid amount on their shares — the company's debts are not the shareholders' personal debts.

LLP

A Limited Liability Partnership (LLP) is a UK business structure that combines the flexibility of a partnership with the limited liability of a company — partners are not personally liable for the LLP's debts beyond their capital.

Marriage Allowance

The Marriage Allowance lets a UK basic-rate taxpayer transfer £1,260 of unused Personal Allowance to their spouse or civil partner, reducing the recipient's tax bill by up to £252 per year.

Memorandum of Association

A Memorandum of Association is the historical document by which the original subscribers agreed to form a UK company and take at least one share each — under modern company law it has been reduced to a simple statement filed at incorporation.

MLRO

The Money Laundering Reporting Officer (MLRO) is the senior person at a UK regulated firm responsible for receiving internal money-laundering concerns and filing Suspicious Activity Reports with the National Crime Agency.

MTD

Making Tax Digital (MTD) is HMRC's programme to require businesses and individuals to keep digital tax records and submit returns through compatible software, rather than on paper or via the HMRC portal directly.

National Insurance

National Insurance (NI) is a UK tax paid by employees, employers, and the self-employed that funds the state pension and certain benefits.

NDA

A Non-Disclosure Agreement (NDA), also called a Confidentiality Agreement, is a contract restricting the parties from disclosing or misusing confidential information shared between them for a defined purpose.

P11D

A P11D is the UK form an employer must file each year reporting benefits in kind (company cars, private health insurance, expenses outside normal travel) given to directors and certain employees.

P60

A P60 is the year-end summary an employer must give every employee still on payroll at 5 April, showing total pay and tax deducted for the tax year.

PAYE

Pay As You Earn (PAYE) is the UK system through which employers deduct Income Tax and National Insurance from employees' wages and pay it to HMRC on the employee's behalf.

Payments on Account

Payments on account are advance payments towards your next year's UK Self Assessment tax bill, payable in two equal instalments on 31 January and 31 July, each typically equal to half the previous year's tax.

PEP

A Politically Exposed Person (PEP) is someone who holds, or has held within the last 12 months, a prominent public function — heads of state, senior politicians, senior military or judicial officers, central bank officials, or senior executives of state-owned enterprises — plus their family members and close associates.

Personal Allowance

The Personal Allowance is the amount of income a UK taxpayer can earn each tax year before paying any Income Tax, currently £12,570 (frozen until April 2028).

PSC

A Person of Significant Control (PSC) is an individual who ultimately owns or controls more than 25% of a UK company, or who exercises significant influence over it by other means.

R&D Tax Relief

R&D tax relief is a UK Corporation Tax incentive that gives companies extra tax deduction (or a payable credit) for spending on research and development that aims to make scientific or technological advances.

Renters' Rights Bill

The Renters' Rights Bill is the UK legislation introduced in 2024 to overhaul private rental sector law in England — abolishing Section 21 "no-fault" evictions, replacing Assured Shorthold Tenancies with a single periodic tenancy, and introducing a Private Rented Sector Database.

Reverse Charge VAT

Reverse Charge VAT is a UK accounting mechanism where the customer (rather than the supplier) accounts for the VAT on a transaction, used mainly in cross-border services and the domestic construction industry.

Right to Rent

Right to Rent is the UK legal duty on private landlords in England to check that all adult occupiers have the right to be in the UK before letting them a residential property — a similar concept to the right-to-work check but for tenancies.

Right to Work Check

A right to work check is the UK employer's legal duty to confirm that every new hire has the right to do the work they're being employed for, before their first day of work.

RTI

Real Time Information (RTI) is the UK system through which employers report payroll information to HMRC on or before each payday rather than once a year.

SaaS

Software as a Service (SaaS) is a software delivery model in which the customer accesses an application over the internet, typically paying a recurring subscription, with the vendor handling hosting, updates, and infrastructure.

Sanctions List

A sanctions list is an official register of individuals, companies, and jurisdictions that UK businesses are legally prohibited from dealing with — most commonly the OFSI Consolidated List in the UK, plus equivalents from the UN, EU, and US OFAC.

SAR

A Suspicious Activity Report (SAR) is the disclosure UK regulated firms must file with the National Crime Agency when they know or suspect (or have reasonable grounds to know or suspect) that a person is engaged in money laundering or terrorist financing.

SDLT

Stamp Duty Land Tax (SDLT) is the UK tax payable when you buy property or land over a certain price threshold in England and Northern Ireland — Scotland uses Land and Buildings Transaction Tax (LBTT) and Wales uses Land Transaction Tax (LTT).

Section 21

A Section 21 notice is the "no-fault" eviction route in England and Wales by which a private landlord can recover possession of a residential property at the end of an Assured Shorthold Tenancy, without having to prove the tenant has done anything wrong.

Section 8

A Section 8 notice is the "fault-based" eviction route in England and Wales by which a private landlord recovers possession from an AST tenant on one or more specified grounds — most commonly rent arrears, anti-social behaviour, or property damage.

SEIS

The Seed Enterprise Investment Scheme (SEIS) is a UK tax-relief scheme aimed at very early-stage startups, offering investors 50% Income Tax relief on up to £200,000 per year plus CGT exemption on gains from qualifying shares.

Selective Licensing

Selective licensing is a UK regime under which a local authority can require every privately-rented property in a designated area to hold a council-issued licence, regardless of the property's HMO status.

Self Assessment

Self Assessment is the UK system HMRC uses to collect Income Tax from people whose tax can't be automatically deducted from wages, pensions, or savings — typically the self-employed, company directors, landlords, and high earners.

Shareholders Agreement

A Shareholders Agreement is a private contract between the shareholders of a UK company that governs the rights and obligations between them, sitting alongside (but not replacing) the Articles of Association.

SIC Code

A Standard Industrial Classification (SIC) code is a 5-digit code that describes the nature of a UK company's business activity, used on the Companies House register.

Skilled Worker Visa

The Skilled Worker visa is the UK's main work visa route for overseas nationals to take up a job offered by a UK employer holding a valid sponsor licence.

SMS

The Sponsor Management System (SMS) is the Home Office portal that UK licensed sponsors use to manage their licence — assigning Certificates of Sponsorship, reporting changes, and storing compliance records.

SOC Code

A SOC (Standard Occupational Classification) code is a 4-digit UK government code that classifies an occupation by its skill level, duties, and typical entry requirements — used by the Home Office to determine whether a role qualifies for visa sponsorship and what salary threshold applies.

Sole Trader

A sole trader is an individual who runs an unincorporated UK business in their own name, with no legal separation between the business and the person.

SPA

A Share Purchase Agreement (SPA) is the principal contract by which the shares of a UK company are sold from one owner to another — the document that effects the change of ownership and contains all the legal terms of the deal.

Sponsor Audit

A sponsor audit is a UKVI compliance visit to a UK sponsor licence holder — either pre-licence (assessing the application) or post-licence (assessing ongoing compliance) — examining records, systems, and the genuineness of sponsored roles.

Sponsor licence

A sponsor licence is a permission granted by the UK Home Office that allows a UK employer to employ overseas nationals on certain immigration routes, including the Skilled Worker route.

Tenant Fees Act 2019

The Tenant Fees Act 2019 banned most fees that English landlords and letting agents could charge residential tenants — restricting permitted payments to a defined list including rent, refundable deposits (capped at 5 weeks' rent), and damages for breach of contract.

Tipping Off

Tipping off is the UK criminal offence of disclosing to a third party that a Suspicious Activity Report has been made, or that an investigation is contemplated or in progress, where the disclosure is likely to prejudice the investigation.

Trading Allowance

The trading allowance is a UK £1,000 tax-free allowance against income from self-employment, casual services, or hobby trading — if your total trading income for the year is £1,000 or less, you don't need to declare it or pay tax on it.

UTR

A Unique Taxpayer Reference (UTR) is the 10-digit number HMRC issues to every individual and company registered for Self Assessment or Corporation Tax.

VAT

Value Added Tax (VAT) is a UK consumption tax charged on most goods and services, payable to HMRC by VAT-registered businesses on their sales (less VAT they've paid on their own purchases).

VAT Threshold

The UK VAT registration threshold is £90,000 of rolling 12-month taxable turnover — at which point a business must register for VAT within 30 days.

Verification of Identity

Verification of Identity is the new statutory requirement under the Economic Crime and Corporate Transparency Act 2023 for every UK director, PSC, and member of an LLP to have their identity verified at Companies House — either directly or via an Authorised Corporate Service Provider.

Wrongful Trading

Wrongful trading is the UK insolvency-law offence committed by a director who continues to trade a company knowing (or who ought reasonably to have concluded) that there was no reasonable prospect of avoiding insolvent liquidation, and who fails to take every step a reasonable director would take to minimise creditor losses.