Company Registration Process in United Kingdom (UK) | FinTax Corporate Professionals LLP

Company Incorporation in United Kingdom | Key Points to Note

Why United Kingdom is best choice for Business?

The UK is a flexible and business-minded location, historically recognised as a well-established and reputable jurisdiction in which to conduct business. Its open market and diversified economy present opportunities for new investors to access a domestic market and to use the location as a gateway to the rest of the world.

The UK is currently ranked seven among 190 economies worldwide on the World Bank’s ‘Ease of Doing Business’ survey, which said: “The UK is a good place to do business because it is simple and very affordable to start a new business. The tax burden on small and medium size businesses is low and easy to comply with, the process of importing and exporting is straightforward, and commercial courts are very efficient.”

UK company incorporation is governed by the Companies Act 2006 ("the Act"), under which the following types of companies can be set up:

Private Company Limited By Shares
Private Company Limited By Guarantee
Private Unlimited Company
Public Limited Company (PLC)

and some other type of business namely Limited Liability Partnership (LLP), Partnership or Sole Trader.

The most common structure used for international trading is a private company limited by shares. Such company may engage in virtually any legal business, but must obtain licenses for some regulated activities such as banking, insurance, money lending, or investment advice.

The UK does not impose restrictions on foreign ownership or management of companies. It is therefore possible to open a company in the UK for a non-resident. You will not even be required to visit the UK to incorporate your company and can do it from India.

We offer company formations in London and our team, skilled in company formation, international taxation, accounting and immigration services, will be glad to guide you through the process and requirements.

Why open a company in the UK?

Reputable jurisdiction
Stable tax system that avoids unnecessary changes to tax legislation
Low corporation income tax rate compared to core European countries
Exemption of dividends received from subsidiaries in most countries from corporation tax
Exemption from capital gains tax for trading companies
No withholding tax on distributions from the holding company to its parent company or individual shareholders
No capital gains tax on profit arising from sale of shares in the holding company by non-resident shareholders
Tax reliefs and incentives for early stage businesses
Tax reliefs for research and development companies
Extensive tax treaty network

How to set up a limited company? Step by Step process

First decide the appropriate type of Company

Once you’ve decided to set up a limited company, you have to choose which type you wish to form. The two main choices are:
# Private Limited Companies (LTDs)
# Public Limited Companies (PLCs)
Mostly startups and others prefer a Private Limited Company, as PLCs must have a minimum share capital of £50,000, at least two shareholders, two directors and a qualified company secretary.

Select a name

In general any name can be chosen for a company, provided that the name has not already been registered by another company and provided that the name is not misleading, offensive, or otherwise restricted or forbidden by company law. A company’s name can be changed at any time. It is the company’s registration number, rather than its name, that identifies the company throughout its life.

Choose Directors and a Company Secretary

You must appoint a director but you do not have to appoint a company secretary.
Your company must have at least one director. Directors are legally responsible for running the company and making sure company accounts and reports are properly prepared.

A director must be 16 or over and not be disqualified from being a director.

Directors do not have to live in the UK but companies must have a UK registered office address.

Directors’ names and personal information are publicly available from Companies House.

Directors must provide a service address (or ‘correspondence’ address), which will also be publicly available. If they use their home address, they can ask Companies House to remove it from the register.
You do not need a company secretary for a private limited company. Some companies use them to take on some of the director’s responsibilities.

The company secretary can be a director but cannot be:
# the company’s auditor
# an ‘undischarged bankrupt’ - unless they have permission from the court.
Even if you have a company secretary, the directors are legally responsible for the company.

Decide who the shareholders or guarantors are

You need at least one shareholder or guarantor, who can be a director.
And Identify people with significant control (PSC) over your company

Prepare MOA & AOA You need to prepare a 'memorandum of association' and 'articles of association'.
Directors/Shareholders Documents ID and Address proof documents ( Passport/Utility Bill, etc)

Registered office address

A company's registered office address is its legal headquarters and every UK registered company must have one registered office address. This address is used for all the government's official correspondence with your company, as well as for storing your company registers ready for inspections.
Following are some rules surrounding the type of address you can use, including:
1) It should be in the jurisdiction (England and Wales, Scotland or Northern Ireland) in which you are forming your company. Whilst you are free to change your registered office at any point after company formation, you cannot change the jurisdiction which your company has been registered in.
2) You cannot use a PO Box number or DX number
3) It should be a physical address.

A Service address

All company directors, subscribers, secretaries, PSC and LLP members need to give a service address while setting up a company. It is the official contact address when Companies House or HMRC need to contact you.

Rules applied to a service address is:
1) It should be a physical address
2) It can be anywhere in the UK or overseas
3) You cannot use a PO Box number or DX number
4) Your service address and registered office address can be the same
5) You are only eligible to use one service address at a time, however, you are allowed to change your service address at any time.

File Incorporation Papers to Companies House

You'll need to register an official address and choose a SIC code - this identifies what your company does.

Companies House is responsible for all limited company registration in the UK. Their website provides detailed information. The following documents must be completed and file with Companies House in order to complete the incorporation process.
1) Memorandum of Association – limited company name, location, business type
2) Form 10 – director’s names, addresses and registered limited company address (this doesn’t have to be where you work from but will be where the legal correspondence from HMRC and Companies House is sent)
3) Form 12 – states the limited company complies with the terms and conditions of the Companies Act
4) Articles of Association – outlines director’s powers, shareholder rights etc. (this is often provided by the formations company that sets up the limited company).

Most people can register for Corporation Tax at the same time as registering with Companies House.

If you cannot, register separately with HM Revenue and Customs (HMRC) after you’ve registered your company with Companies House.
UK govt company regn https://www.gov.uk/set-up-limited-company

What is Register of People with Significant Control (PSC)

In March 2015, the Companies Act 2006 was amended by the Small Business, Enterprise and Employment Act, which introduced the register of people with significant control – PSC register. The new legislation required UK companies and LLPs to maintain PSC registers starting from 6 April 2016.

A person with significant control (PSC) of the company is an individual who meets one or more of the following conditions:
An individual who holds more than 25% of shares in the company;
An individual who holds more than 25% of voting rights in the company;
An individual who holds the right to appoint or remove the majority of the board of directors of the company;
An individual who has the right to exercise, or actually exercises, significant influence or control over the company;

The information entered on the register must first be confirmed by the PSC and then be filed with Companies House, where it is made public and is kept indefinitely. Such information includes:

Name;
Date of birth;
Nationality;
Country where the PSC usually lives;
Service address
Usual residential address (this must not be disclosed when making the register available for inspection or providing copies of the PSC register)
Date when the person became a PSC in relation to the company
Which of the above conditions the PSC meets. For conditions (1) and (2) this must include the level of their shares and voting rights:
Over 25% up to (and including) 50%,
More than 50% and less than 75%,
75% or more;
Restrictions, if any, on disclosing the PSC`s information (whether an application has been made for the individual’s information to be protected from disclosure to the public).

Opening a bank account in the UK for a non-resident

Opening a UK company together with a banking solution is not an easy task because nowadays banks have to fulfill a large number of requirements and formalities. Account opening procedure is the same for practically all banks in the sense that you will have to submit personal and company data, alongside with a detailed description of your business, and the bank will consider these and decide if an account can be opened. Some banks will go as far as holding a personal interview with a beneficial owner and/or director of the company as part of their account opening requirements.

Some people may have a misconception that bank account opening is confined to the jurisdiction of incorporation. However, this is not always the case.

You don’t have to be a UK resident to open a UK business bank account and your company may open accounts with any bank worldwide. For instance, you may set up a company in London, but open an account for it in Cyprus, Hong Kong or any other jurisdiction.

We can assist with a UK company formation for a non-resident with a bank account. Depending on the type of your business, we can recommend you the most convenient bank, and then guide you through the account opening process.

Taxation in UK

Value-Added Tax (VAT)

VAT in the United Kingdom is levied in accordance with the Value Added Tax Act 1994 and COUNCIL DIRECTIVE 2006/112/EC of 28 November 2006 “On the common system of value added tax”.

VAT is applied to most of import transactions, sales of goods and provision of services. The standard rate is 20%. Some types of goods are taxed at the rate of 5% or are exempt from VAT.

To work with VAT you need to register with HMRC.

VAT registration is mandatory if:

your VAT taxable turnover is more than £85,000 over the last 12 months, or
you realize that your total VAT taxable turnover is going to be more than £85,000 in the next 30-day period.
Your company purchases goods for more than £85,000 from EU VAT-registered suppliers, or
If neither you nor your business is based in the UK, then you must register as soon as you supply any goods and services to the UK (or if you expect to in the next 30 days).

You can register voluntarily if your business turnover is below £85,000. You must pay HMRC any VAT you owe from the date they register you.

CORPORATE TAXATION

After incorporation, a UK company shall have statutory tax obligations.

All companies, regardless of size, shall pay the same rate of corporation tax, which is 19%. It is proposed that this rate will fall to 17% starting from the 1st of April 2020.

Dividends (and distributed profit) paid by a company are typically exempt from taxes.

Interest: Interest paid to a non-resident is subject to withholding tax at a 20% rate, unless the rate is reduced pursuant to a tax treaty or the interest is exempt under the EU Interest & Royalties Directive. Reduction under a tax treaty is not automatic and advance clearance must be granted by HMRC.

License payments (Royalties): Royalties paid to a non-resident are subject to withholding tax at a 20% rate, unless the rate is reduced pursuant to a tax treaty or the royalties are exempt under the EU Interest & Royalties Directive. Advance clearance is not required to apply a reduced treaty rate.

There are highly competitive benefits and reliefs for innovative and high-tech industries and businesses dealing with intellectual property, such as tax deductions for qualifying R&D expenditures, lower rate of Corporation Tax to profits earned from patented inventions and certain other innovations (Patent Box) etc.

However, in view of Brexit taking place on the 29th March 2019 we recommend to get updated information on taxes because if the UK leaves the EU without a deal, the way that interest, royalties and dividends are paid between UK and EU companies may change.

Double Taxation Treaties

The United Kingdom has agreements for avoidance of double taxation with more than 100 countries (including India and USA). Despite that, you will not be able to use such agreements if the UK company is nominal, i.e. if it is an agent of another company in a tax-free jurisdiction that receives the most of income. Thus, there is no point in UK company creation only for the sake of application of a tax treaty.

It is also necessary to have economic substance in the territory of the United Kingdom, i.e. to have a real office and manage the company’s affairs from the territory of the UK etc. The company may use international tax agreements only if the income is considered as the income of the UK company. It is not possible to use tax agreements if the company files so-called “dormant accounts”.

TAX DEDUCTIBLE EXPENSES

The following table shows which items of business expenditure are deductible against a company’s profits for UK corporation tax purposes, and which are not. The list is written in general terms, so specific advice should always be taken.

Personal income Tax

An individual is tax resident in the UK if he or she spends at least 183 days in a year within the country or his or her only home is in the UK for at least 91 days in a year or work full-time in the UK or fulfills one of the previous conditions during the three preceding years.

If the individual is resident but not domiciled (permanent home) in the UK, his or her investment income and capital gains will be only taxed if are remitted to the UK.

Personal income tax rates are progressive up to 45% on income exceeding GBP 150,000. Dividends are also taxed at progressive rates (7.5%, 32.5% and 38.1%) with an allowance of GBP 5,000.

Interest income is taxable as ordinary income, but a 0% may apply to the first GBP 5,000. Rental income is taxed depending on the location of the property.

Capital gains are taxed separately. The first GBP 11,700 may be tax-exempt. Gains exceeding this amount up to 34,500 may be taxed at 10% and 20% on the excess.

Labor Taxes

Employers and employees are required to make contributions to the National Insurance at 13.8% and 12%, respectively, on employees’ income above GBP 157 per week. Businesses may be exempt from the first GBP 3,000 per year.

Tax credits and Incentives

A tax credit for foreign tax paid is usually available, either under a tax treaty or through the unliteral relief rules.

There are several tax incentives for companies in the form of enhanced tax depreciation allowances.

There is also usually available an annual investment allowance of 100% on the first GBP 200,000 per year of capital expenditure incurred.

SMEs may claim a deduction equal to 230% of the qualifying expenditure on R&D in the year in which it is incurred, which can be surrendered for a cash payment (at a rate of GBP 33.35 for each GBP 100 of qualifying R&D spend) by companies that are trading at a loss or have not yet started to trade.

If taxable profits can be attributed to the exploitation of patents, a lower effective tax rate of 10% may apply. Profits may include a significant part of the trading profit from the sales of a product that includes a patent, not just income from patent royalties.

Legal Requirement and compliances in Mauritius Companies

Shares and Shareholders

There is no minimum share capital for a private limited company. Only one shareholder, and one share, is required. As shares are most commonly designated as £1 ordinary shares, the minimum share capital is, in reality, normally £1.
A PLC, however, has a minimum share capital of £50,000, of which 25% must be paid up. So effectively, the minimum share capital for a plc is £12,500. Nearly all start-up companies in the UK are private companies, so you can probably ignore the share capital requirement.
Shares can come in various shapes and sizes. For example, they can be ‘voting’ or ‘non-voting’, ‘ordinary’ or ‘preference’, and ‘redeemable’ or ‘non-redeemable’. A company can also have multiple classes of ordinary shares, for example ‘A’, ‘B’, ‘C’ or ‘D’ shares, which can be useful in some circumstances.
Generally though, most companies are set up with £1 ordinary shares only. We will be pleased to advise on the share structure.

Directors

A private company must appoint at least one director, who is responsible for the conduct of the company and the filing of accounts and returns. For the vast majority of smaller companies, the directors are also the shareholders, though this does not have to be the case. Where a UK company is a subsidiary of an overseas company, the parent company will be the only or main shareholder.
A PLC must have at least two directors. Full details of the legal obligations placed on company directors are available from Companies House www.companieshouse.gov.uk

Company Secretary

Appointing a company secretary is optional for a private company, unless its Articles of Association require one. For a plc, it is compulsory to appoint a company secretary who holds an appropriate qualification, details of which can be found in the guidance notes on www.companieshouse.gov.uk

Registered Office

Every company must have a registered office. This is the address
to which Companies House and HM Revenue & Customs will send
correspondence. The registered office can be changed at any time.

Company Registers

All companies are required to keep a company register, showing the names of its directors, secretary (if applicable) and shareholders, and recording all changes. A company must also keep a Register of People With Significant Control. The statutory records also include the Certificate of Incorporation and the Memorandum and Articles of Association.

Bank Accounts

There is no legal requirement for a UK company to open a bank account, but it would be very unusual for a company not to, if it is active. A UK company can have as many bank accounts as the directors decide to open, and these can be inside or outside the UK. There are no currency controls in the UK so money can pass freely between international accounts. There are however money laundering regulations in the UK so it is important to be able to account for the source of all funds brought into the UK.

VAT Registration

UK-based companies, as with most UK businesses, generally need to register for VAT (Value Added Tax) if their turnover (sales income) exceeds the VAT registration threshold prevailing at the time. There are exemptions for certain types of business activity. In many cases it is advantageous for a UK business to register for VAT even if the VAT registration threshold has not been reached.

Annual Accounts/Financial Statements

Every company, whether or not they are trading, shall keep accounting records and prepare annual accounts reflecting the company’s state and operating result for the given year. After incorporation, a date for the company’s end of financial year will be determined. It will be the last day in the month of the company’s incorporation.
The first accounts should be submitted within 21 months from the date of registration with Companies House. Subsequent accounts should be filed within 9 months after the end of each financial year.
Untimely submission of accounts may lead to high penalties. Failure to provide such documents is considered as a criminal offence. All the company’s directors may be prosecuted.

Audit

A UK limited company is generally not required by law to have its accounts audited unless:
# Its turnover exceeds £10.2m and it has more than 50 employees, or
# Its turnover exceeds £10.2m and its assets exceed £5.1m, or
# Its assets exceed £5.1m and it has more than 50 employees, or
# It is a plc, or
# Shareholders holding at least 10% between them request an audit, or
# The company is part of a group which exceeds set limits. Auditors, when appointed, are responsible for reporting on whether the company’s accounts are prepared in accordance with UK accounting standards and whether they comply with the Companies Act 2006.

Corporation Tax

UK companies pay UK corporation tax on their profits. With the rate of corporation tax being as low as 19%, and about to become even lower, the UK is a very attractive tax jurisdiction for companies. Most UK companies pay their corporation tax 9 months after their accounting year end. Some larger companies are required to make quarterly payments on account.

Distributing Profits

There are two main ways of distributing company profits. One option is for company owners who are also directors or employees of the company to take a salary. In this case, PAYE and NI need to be deducted as described earlier in this guide.
An alternative is for shareholders, who for this purpose do not need to be a director or employee of the company, to take a dividend. A dividend, unlike a salary, comes out of the company’s post-tax profits and therefore does not reduce the company’s tax liability. It can in some cases be more tax-efficient than a salary because there is no employee’s or employer’s NI on a dividend, and because there is a dividend allowance that can make a dividend tax-free up to a certain point.

Reporting to Companies House

Companies House is the government office where companies are incorporated, and where company secretarial forms and accounts are filed. Documents filed at Companies House are available for public inspection (in most cases for a very small fee), and these are most commonly accessed online.

A) Accounts:- A company’s annual accounts must be filed at Companies House. For most private companies, other than those above a certain size, less detailed accounts can be filed, rather than fuller accounts, although it is still necessary to have fuller accounts prepared for the tax authorities.

B) Confirmation Statement:- Every company must submit a Confirmation Statement to Companies House annually. Although it is the responsibility of the company’s directors (and the company secretary, if there is one) to deal with company secretarial matters, Glazers handles the Confirmation Statement on behalf of most of our clients. The form is normally filed electronically at Companies House.

C) Notifying Changes:- There are numerous forms for notifying Companies House of changes that may take place from time to time, such as appointment of directors, termination of directors, changes in address for the company or directors, share issues and changes relating to “People With Significant Control.”

Reporting to HM Revenue & Customs (HMRC)

HMRC administers all taxes in the UK, including corporation tax, VAT and PAYE (Pay As You Earn).

A) Corporation Tax Return and Accounts - The corporation tax return is prepared using the figures in the company’s accounts, and filed electronically at HMRC each year, together with a copy of the full accounts.

B) VAT Returns - Companies that are registered for VAT need to file VAT returns with HMRC. These are most commonly filed every three months, though a company can opt to file these monthly or annually, which is appropriate in certain cases.

C) PAYE and NI Returns - PAYE is a system of deducting tax payments from salaries paid by an employer to its directors and employees. Any company that operates a payroll must file monthly PAYE returns. These returns also include NI contributions.

D) P11D Forms - As mentioned earlier in this guide, companies that provide benefits in kind, or reimburse expenses to its directors or employees, are required to report these details to HMRC each year.

Employing Staff

As you would expect, there are responsibilities that go with employing staff in the UK.

A) Payroll, PAYE and National Insurance - You will need to deduct Pay as you Earn (PAYE) and National Insurance (NI) from your employees’ salaries or wages, and pay this over to HM Revenue & Customs. PAYE is a deduction of income tax. NI is the equivalent of what is known as social security in many countries. As the employer, you will be responsible for calculating these amounts and you will need to keep tax deduction records for everybody that you employ. You will also be liable to pay employer’s NI contributions.

B) Employment Law - Limited companies have the following obligations as employers: -
# Employer’s liability insurance is compulsory by law if the company employs anyone. It covers personal injury and damage to personal property of employees.
# The company needs to comply with UK Health and Safety legislation.
# Employment contracts are generally a legal requirement once an employee starts work.

C) Tax Concessions for Employees - While employees from overseas are usually liable to UK tax and national insurance on their salary and benefits in the UK in the same way as UK nationals, certain concessions are available where an employee of an overseas company has been seconded to the UK for up to two years. This allows the employer to provide accommodation, travel and other similar benefits tax-free. There are also certain concessions for employees serving longer in the UK, entitling them to tax relief on travel.

D) Staff Pension Schemes - Subject to certain exemptions, employers in the UK must set up a workplace pension scheme for its employees.

E) P11D Forms - If a company provides benefits in kind to any of its directors or employees, (such as a company car, private health insurance, etc.) or reimburses a director or member of staff for company expenses that they have paid for personally, then the company is required to file an annual P11D form for that director or employee.

General Meeting

Annual general meetings are not mandatory. If they take place, they can be held be anywhere and by electronic means or by proxy.

Disclosure of Information

After incorporation, you will be obliged to disclose information. According to the Companies Act 2006 companies shall notify Companies House of all significant events, and namely:
change of directors or their personal details;
# change of the registered office address;
# information regarding the capital (statement of capital);
# change of the main type of activity;
# information regarding the shareholders (included in the register of the company’s members). Number of their shares, details of transfer of such shares;
# information on the company’s decision to keep a PSC Register information on the public register;
# information regarding the persons having significant control (PSC), if the company decided not to keep such information on the public register.

IMPORTANT COMPLIANCES AND DUE DATE IN UK FOR COMPANIES

COMPLIANCE CALENDAR

The following table contains a summary of the dates and time limits for filing documents and paying tax. The list is written in general terms, so specific advice should always be taken.

Company Registration Documents

Certificate of Incorporation

This is effectively the company equivalent of a birth certificate. It shows the company registration number, which is permanent, and the date on which the company was incorporated. It also shows the company’s name. If the company’s name is subsequently changed at any time, Companies House will issue a ‘Certificate of Incorporation on Change of Name’.

Memorandum and Articles of Association

This is effectively the company’s constitution, and can be varied at any time, subject to the necessary resolutions being passed by the shareholders.

FAQs

How long it takes to incorporate a company in UK?
- Normally 1-3 workings days.
Can I open an offshore enterprise in United Kingdom?
- There are no offshore companies in the UK. All local companies are considered as the tax resident organisations in the UK, and are required to declare their profits, submit their accounts and tax return and pay the tax in the Great Britain from its worldwide income.
How it is easy to open a bank account in England or Scotland for overseas clients?
- Local banks tent not to open accounts for entities which are owned and managed by non-British residents. For clients from overseas Coddan can offer banking introduction service with the various banks in across the EU.
Being a Non-resident, Why you need a local Nominee Director?
- Most of the Reputed Banks in the UK do not accept the applications for non-UK residents. So hiring a British Director will enable the possibilities to get a Bank account with those highly reputed & fully licensed Banks for your UK Company.
  
  Moreover, having a British director in your Company will increase your customer trust, giving your Company a reliable presence in the UK.
  
  Note: All the rights and decision for your company will be solely yours and protected by the Nominee Director agreement, where you will be a beneficial shareholder.
How it is easy to register for VAT?
- Application for VAT registration can take between 2 to 8 weeks. For entities which do not have physical place of business in the UK and managed from overseas, processing of the VAT application can take up to 4-8 weeks.
Do I need to have a seal or a stamp?
- By law, companies do not require to use a seal. If the seal is essential for the business, then a special resolution of the board of directors will be required to about the seal and to approve its image. Documents which are certified by the seal will have to bear two signatures: of two directors, of director and a secretary, of director and a witness.
Do I need to have the certificate of good standing?
- Certificate of good standing is usually not required for newly registered entities but may requested by your bank. Should this document be needed, Coddan will be glad to assist. Document can be issued as certified by the Companies House or can be legalized with apostille stamp as well.

Company Incorporation in United Kingdom | Key Points to Note

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Why open a company in the UK?

How to set up a limited company? Step by Step process

What is Register of People with Significant Control (PSC)

Opening a bank account in the UK for a non-resident

Taxation in UK

Legal Requirement and compliances in Mauritius Companies

IMPORTANT COMPLIANCES AND DUE DATE IN UK FOR COMPANIES

Company Registration Documents

How long it takes to incorporate a company in UK?

Can I open an offshore enterprise in United Kingdom?

How it is easy to open a bank account in England or Scotland for overseas clients?

Being a Non-resident, Why you need a local Nominee Director?

How it is easy to register for VAT?

Do I need to have a seal or a stamp?

Do I need to have the certificate of good standing?

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