THE UK REMAINS ONE OF THE MOST ATTRACTIVE DESTINATIONS FOR FOREIGN COMPANIES TO INVEST IN AND TO EXPAND THEIR GLOBAL BUSINESS.
As a world leader in innovation, with a highly skilled workforce and a competitive tax regime, many businesses look to the UK for growth opportunities.
It is not only an investment destination in its own right but also a key location for those who would like to gain access to other markets across Europe. At GIA, we work with many foreign individuals and companies who are attracted by the UK’s reputation as one of the most open economies in the world and a country that boasts a stable business and political environment.
This guide is a practical document providing valuable guidance to foreign companies setting up in the UK. The contents have been developed based on GIA’s experience of having assisted a large number of organisations to establish and grow their footprint in the UK.
We hope this guide will give you a broad introduction to the key considerations when looking to expand into the UK, such as entry strategies, corporate structure, taxation, talent and immigration, real estate and corporate finance matters.
We can guide and advise on each stage of the journey and would be very happy to discuss any aspect of this guide with you in more detail.
THE UK, AND LONDON IN PARTICULAR, CONTINUES TO BE A DESTINATION OF CHOICE FOR FOREIGN COMPANIES WITH GLOBAL AMBITIONS.
The UK has a reach that stretches far beyond its borders to every sector and business capital in the world.
It has given rise to major advancements in every field, from Technology to Automotive to Creative Services. And this wide-ranging expertise has created a global magnet for talent.
This is a country at the forefront of the next generation of business, from AI to Clean and Sustainable Growth. Where you will find financial technology visionaries working hand-in-hand with Industry 4.0 pioneers.
Principal Corporate Legislation
Companies Act 2006, Limited Liability Partnership Act 2000, The Income and Corporation Taxes Act 1988 as amended.
Type of Law
Language of Legislation and Corporate Documents
Publicly Accessible Records
Personal Presence Required
FOREIGN COMPANIES USUALLY STRUCTURE THEIR OPERATIONS IN THE UK AS EITHER A UK ESTABLISHMENT OR AS A COMPANY INCORPORATED IN THE UK.
This section focuses on the most commonly encountered corporate structures for companies looking to enter the market independently through organic growth. The two most common corporate structures are the UK incorporated company and UK Establishment.
For some types of business – for example, private equity or other investment firms – an alternative corporate structure, such as a partnership, may be more appropriate.
The main UK legislation relating to UK corporate structures is the Companies Act 2006. The UK government agency responsible for the incorporation and registration of companies is the Registrar of Companies, and the company registry is commonly known as ‘Companies House’ https://www. companieshouse.gov.uk
An overseas organisation wishing to set up a Permanent Establishment in the UK, such as a branch or representative office, must register it with Companies House. Registration is not required if the business does not have a physical presence in the UK.
A UK company must be registered at Companies House as part of the process of incorporation.
UK Establishment of a company incorporated outside the UK
A company incorporated outside the UK (an ‘overseas company’) may set up a UK Establishment in the UK. UK Establishments are governed by the Overseas Companies Regulations 2009 (which are made under the provisions of the Companies Act 2006).
Registering a UK Establishment
An overseas company must establish a permanent physical presence in the UK before it registers its UK Establishment with Companies House. Having established a physical presence it must then register it within one month.
Prior permission to register is not required. However, there are restrictions on the use of certain words and expressions in business names. Advice should be taken on whether a particular proposed corporate name is likely to be accepted by the Registrar, before a formal application for registration is submitted to Companies House.
An overseas company setting up an Establishment in the UK must submit to Companies House, with its formal application for registration:
- A certified copy of its constitutional
- A copy of its latest financial statements, if the company is required by the laws of its ‘parent country’ to prepare, audit and disclose financial statements (for companies incorporated outside the European Economic Area (EEA) or if it is required to prepare and disclose financial statements (for companies incorporated within the EEA).
If these original documents are not in English, certified English translations must be provided.
The application for registration is submitted on a UK Establishment Registration Form (OS IN01), which requires the following information:
- Details about the overseas company (including corporate name, trading name if different from its corporate name, official or registered company number, jurisdiction, governing law, legal form, capital structure and statutory accounts obligations).
- Details of the directors and secretaries (names, residential addresses, service addresses if applicable, and other personal details).
- The address of the UK Establishment, the date on which it commenced activities and a brief explanation of its activities.
- Details of the UK resident individual (if any) nominated to accept official correspondence on behalf of the company.
- Details of the individual(s) (wherever resident) with authority to represent the company’s UK establishment.
- Details relating to compliance with accounting
- A registration fee is payable. This is currently £20 for registration in approximately five business days or £100 if same day registration is required.
Once the required documents have been filed and accepted, the Registrar of Companies registers the UK Establishment and issues a certificate. The certificate provides evidence of the registration and states the unique registration numbers assigned to the overseas company and its associated UK Establishment.
Continuing obligations of UK Establishments
After registering a UK Establishment with Companies House, the overseas company is required to submit annual financial statements to Companies House.
The accounts that must be filed at Companies House (and which will be made available for inspection by any member of the public) are those of the overseas company as a whole, and not those relating only to the activities of the UK Establishment. The rules vary regarding the form and content of the accounts that should be filed. For overseas companies incorporated in a country outside the EEA, the rules depend on whether the company is required, in its home country, to prepare accounts, to have them audited and to disclose them publicly. For overseas companies incorporated within the EEA, if the company is required to prepare and disclose accounts (irrespective of whether they must be audited), then those accounts required in the home country must be filed at Companies House.
Statutory changes (including changes to details provided in the initial UK Establishment registration papers) must be notified to Companies House on an appropriate form. These include changes to details of the company directors, address changes, and changes to the company’s name or constitution.
The accounts and details of changes must be submitted to Companies House within certain statutory deadlines. Information about deadlines is available from the Companies House website.
Permanent Establishments have an obligation to notify the UK tax authorities of their chargeability to UK tax, and to file tax returns. Further details are available in the Taxation section.
A UK incorporated company
The legislation governing the incorporation of companies in the United Kingdom is the Companies Act 2006. There are several different forms of company structure, but a foreign‑owned subsidiary incorporated in the UK is most usually a company (either private or public) limited by shares.
The principal differences between public and private companies are:
- Only public companies may offer their shares to the public and have their shares traded on a recognised stock Private companies cannot offer their shares for sale to the public.
- Statutory requirements for public companies, including accounts reporting and disclosure requirements and capital maintenance rules, are stricter and more extensive than those for private companies.
- There is a minimum paid up share capital requirement of £12,500 (£50,000 nominal capital issued and at least a quarter paid) or the equivalent in euros for a public. There is no minimum capital requirement for a private company.
When an overseas company incorporates a subsidiary company in the UK, the subsidiary is usually formed as a private company. However, incorporation as a public company may be more suitable when there is an intention in the foreseeable future to list the company’s shares on a stock exchange or offer its shares or debt capital to the public.
Registration of limited companies
The registration requirements are similar for both public and private companies. Registration documents may be submitted to Companies House in either printed (hard copy) form or in electronic form for review and approval, together with a statutory fee (currently between £13 and £100, depending on the delivery method and the required speed of registration), prior to incorporation being effected.
The documents that must be filed at Companies House (together with the statutory fee) are:
- The proposed constitution (memorandum and articles) of the company.
- A statutory form (IN01), providing, among other things, the proposed name of the company, details of the first officers (directors and company secretary), the location of the registered office and the initial amount of share capital. From June 2016, the identity of any individual(s) with significant control (whether direct or indirect) over the capital of the company in order to disclose, for transparency purposes, who controls the company or, ultimately, the wider corporate group that it sits within.
Electronic registration eliminates the need to obtain signatures on various documents, but certain director specific identification details must be supplied, for security purposes.
On registration, Companies House issues a certificate of incorporation, showing the company’s registered name and its unique registration number. The company is then formally incorporated.
Continuing obligations of a UK incorporated company Once registered, the company is subject to various ongoing obligations. These include requirements to:
- Maintain certain statutory registers (for example, a Register of Members and a Register of Directors).
- Maintain a registered office.
- Notify Companies House of any statutory changes, including the appointment/resignation of directors, changes in their personal details, issues of additional shares and changes to the company’s constitution or company name.
- Submit an annual return to Companies House (containing, among other things, details of the company’s registered office address, principal activity, its directors, share capital and shareholders). Note that this long‑form annual return will be replaced with a simplified on‑line confirmatory statement with effect from June 2016.
- Prepare and submit annual accounts to Companies The form and content of the accounts will be determined, among other things, by the status of the company (whether private or public), the scale of its operations, the corporate group it is part of, the nature of its activities and any associated regulatory requirements.
UK companies also have ongoing obligations to the UK tax authorities, which are outlined in the Taxation section.
COMPANIES OPERATING IN THE UK, SHOULD COMPLY WITH UK TAXATION RULES.
In the UK, the most important are:
- Corporation tax on company profits;
- Value Added Tax (VAT), which is a sales tax;
- Pay As You Earn (PAYE) and National Insurance Contributions (NICs).
PAYE is a tax on the earnings of employees. It is deducted from pay by the employer, and paid to the tax authorities. NICs are social security payments, payable by employees and employers to the tax authorities.
NICs payable by employees are deducted from pay by the employer, together with PAYE income tax, and paid to the tax authorities.
Companies pay corporation tax on their taxable profits. Taxable profits are based on the company’s reported profit in its annual financial statements, but with some adjustments. These adjustments could relate to one or more of a number of UK tax incentives – for example, to support innovation or encourage investment in capital assets.
Corporation tax is payable on the worldwide profits attributable to the UK company, but with adjustments. For example, an election can be made to exempt from UK tax the profits of an overseas branch. .
The UK has double taxation agreements with many countries.
Permanent Establishment Corporation tax is payable on UK attributable profits only.
The overseas company does not have a taxable presence in the UK and is not subject to UK corporation tax. However, if it earns income in the UK, such as interest or rent, this may be liable to income tax.
Capital gains arising from the disposal of capital assets at a profit are subject to tax, assuming an exemption does not apply, at the same rate as trading profits, and this tax is included within the overall computation of corporation tax payable to HMRC.
Rate of taxation
The main rate of corporation tax is 20% (from 1 April 2015). The rate reduces to 19% from 1 April 2017 and further reduces to 18% from 1 April 2020.
- The loss may be offset against any other non trading profits of the company in the same year.
- The loss may be carried back one year to be offset against any profits of the company arising in the previous year.
- The loss may be carried forward and offset against profits in a future year that arise from the same Restrictions may apply on the ability to carry forward a trading loss into a future year where there is a change of ownership of the company and within three years, a major change in the nature and conduct of the company’s trade.
- Another option is to surrender losses in the year through group Group relief allows losses of a company in a UK group to be surrendered to, and used by, any other UK company or UK Permanent Establishment in the group (broadly companies are considered to be part of a UK group where one is a 75% subsidiary of another or both are 75% subsidiaries of the same corporate parent).
HMRC filing requirements
A UK incorporated subsidiary or a UK Permanent Establishment of an overseas company must provide HMRC with certain initial information within three months of starting up in business.
A corporation tax return must then be submitted to HMRC annually within 12 months of the end of the entity’s financial year. Returns must be filed electronically, with financial statements submitted in in line Extensible Business Reporting Language (iXBRL).
For larger companies, corporation tax is payable in quarterly installments and the first payment is made before the end of its financial year. The corporation tax liability of smaller companies must be paid within nine months and one day from the end of the entity’s financial year.
HMRC may charge penalties for late payment and interest on overdue amounts.
PAYE and NICs
The UK taxes the earnings of ‘migrants’ (a UK government term for individuals obtaining permission to move to the UK) who live or work in the UK. There are statutory rules for determining whether an individual is resident in the UK (and, if so, whether resident in Scotland or the rest of the UK). A UK resident generally pays income tax on worldwide earnings. A non‑resident working in the UK pays tax on earnings attributable to duties performed in the UK, so far as they are not exempt under a double tax treaty. Social security (NICs) charges may also apply, subject to possible overrides for employees who remain insured abroad while on UK secondment.
The UK operates a tax withholding system called PAYE. It is the employer’s or UK host employer’s responsibility to report PAYE information, as well as deduct tax from the employee’s income and remit the funds to HMRC.
In addition, certain ‘benefits’ enjoyed by the employee are subject to income tax, such as the private use of a company owned car and company payments for private medical insurance. In addition to the annual statement of gross pay and tax deducted (P60) the employer must also provide the employee with a statement of the benefits provided from which tax was not deducted, as notified to HMRC on the P11D.
Migrants who are seconded to the UK for a ‘temporary purpose’ (not more than two years) may be allowed certain reliefs from liability to income tax, such as tax relief for:
- The cost of accommodation in the UK.
- Subsistence and travel expenses in the UK.
- In both cases attributable to working at a temporary workplace.
The benefits of being non‑domiciled include relief from tax on:
- An individual who is not domiciled in the UK can enjoy favourable tax treatment in respect of income and assets outside the UK.
- Income from employment for work days outside the UK for up to three years.
- The cost of flights for the employee to and from their home country (and limited trips for accompanying family members).
Domicile is a concept distinct from residence.
Unless given a specific exemption, an individual who is on assignment in the UK for a temporary purpose must complete an annual personal tax return and submit it to HMRC, disclosing the full extent of their income.
Individuals who are assigned to the UK for a temporary purpose may be exempted from UK social security payments (NICs) for the first 52 weeks of their work in the UK if they are from a non treaty country outside of the European Economic Area (EEA) or Switzerland.
The employer and tax affairs of migrant workers When an organisation is planning to set up a company or Establishment in the UK, it will have to deal with various issues relating to migrant workers. Issues to consider are:
- Compliance with PAYE and NIC
- Securing cost efficient accommodation and salary arrangements for the
- Issues relating to visitors to the UK on business visitor visas, and ensuring that the work they do in the UK is permitted by the visa
- The tax implications of assignments of non UK residents to carry out work in the UK.
- Supporting the employee by providing information to enable them to submit an annual personal tax return to HMRC.
Other tax considerations
UK transfer pricing rules require that transactions between affiliates (such as an overseas parent company and its UK subsidiary company) should be conducted on an arm’s length basis. This means that the pricing of transactions between them should be the same as if the two affiliates were completely independent from each other.
The rules equally apply to UK‑UK transactions.
Where transactions between affiliates are not made on an arm’s length basis, an adjustment to the prices may be required for corporation tax purposes.
Base erosion and profit shifting (BEPS)
The Organisation for Economic Cooperation and Development (OECD) and G20 countries, which the UK is part of, have launched an Action Plan on base erosion and profit shifting (BEPS).
The aim of the BEPS project is to address concerns that current principles of national and international taxation were failing to keep pace with the global nature of modern trading and business models, in particular, a perception that existing rules give businesses too much opportunity for arbitraging tax rates and regimes.
The outcome of the Action Plan will include changes to international tax rules, such as Double Tax Treaties and the OCED’s Transfer Pricing Guidelines, and also recommendations from the OECD for tax legislation that should be adopted by countries in their national tax law.
Thirteen reports were issued on 5 October 2015. Further work will be undertaken in some areas. The timing for the multilateral instrument is the end of 2016.
The agreed BEPS actions will generally start to be implemented by countries from 2016 onwards.
Powers over certain taxes have been devolved to the Scottish Parliament, Welsh Assembly and Northern Ireland Assembly. Most notably, the exercise of these devolved powers may result in the rate of income tax for Scottish taxpayers deviating from UK rates; and/or a rate of corporation tax for certain profits earned in Northern Ireland distinct from the main UK rate.
VAT is the UK’s sales tax. Goods and services that are subject to VAT are known as taxable supplies. Non taxable supplies may either be VAT exempt or outside the scope of UK VAT.
Registering as a VAT trader
A business must register with HMRC as a VAT trader if the value of its sales of taxable supplies exceeds a minimum threshold level. This level is currently £82,000 in any 12 month period.
- A business must register for VAT if at any time it expects its taxable supplies to exceed the threshold in the next 30 days alone. In addition, due to a special rule called the reverse charge, a business can exceed the threshold as a result of services bought in from suppliers outside the UK.
- A business that has not exceeded the threshold (and is not required to register) may register voluntarily for VAT.
- Where it is known that taxable supplies will be sold at some point in the future, it is possible to register as an ‘intending trader’. This will enable the entity to recover VAT on purchases made wholly for business use.
Charging VAT on sales
Businesses that are registered for VAT must charge tax on the taxable supplies that they sell, at the appropriate rate. The standard rate of VAT is currently 20%, but some goods and services are taxed at a different rate.
Reclaiming VAT on purchases
Businesses registered for VAT may also reclaim the VAT that they have paid on purchases of taxable supplies from other VAT registered businesses. However, if the business makes exempt supplies there is a restriction on the amount of VAT on purchases that it can recover.
Settlement of VAT payments or refunds
The net amount of VAT payable or recoverable is usually settled every three months, when the business submits a VAT return to HMRC. For more information on VAT, visit https://www.gov.uk/business-tax/vat
Requirements for registering a company in the UK
A company can be formed in the UK by anyone, although directors must be over 16 years of age. To form a UK registered company limited by shares, you will need the following:
- A Registered Office in the UK. We provide a London address
- 1 shareholder and 1 director. They can be the same person
- Issued share capital: This can be as little as £1.
There can be more directors and shareholders, and there is no limit to the number of shares that can be issued.
Directors and Shareholders
- Directors and Shareholders can be corporate i.e. another limited company can be appointed as a director.
- A company must have at least 1 natural person as a director so; there must be at least 1 named individual acting as a director.
- There is no requirement for directors and shareholders to be UK resident.
VAT registration for companies controlled by non-UK residents
As a non-resident owner of a UK company, you may find it difficult to register for VAT if you don’t have proper trading premises in the UK. HMRC does not consider a Registered Office or business/ virtual mail address as a business establishment. Notwithstanding your UK registration, you company will be classified as a “non-established taxable person”.
Identification documents and Money Laundering Regulations
Although we do not require documents at the time an order is placed, anyone using our registered office service will be asked to supply identification documents once the service has been set up. We will need 1 document providing proof of name; passport or drivers licence etc. and 1 document providing proof of address; utility bill etc. In some circumstances, we will ask you to have the documents notarised.
The U.K. is party to the Hague Convention and can issue Apostilled documents that will be accepted in the other 100+ countries that are signed up to the agreement. An Apostille certificate is issued by the U.K.s Foreign and Commonwealth Office (FCOH) and states that a document is authentic. Not all documents can be apostilled;
Some may first need to be legalised. If you wish a document to be Apostilled, you can order the service at our checkout when you place an order.
Certificate of Incumbency
Our non-resident clients sometimes ask us to arrange the issue of a Certificates of Incumbency. However, UK Government agencies do not officially recognise the term or issue a document by this name. It is, of course, possible to create such a document and have it notarised, but it will not be issued by a government agency. The nearest alternative is a Certificate of Good Standing.
Certificate of Good Standing
Certificates of Good Standing are issued by Companies House and confirm that a company’s statutory filings are up to date, and no action is being taken to strike off the company. The Certificate will also confirm the date of Incorporation, the name of the company and the Company number.
The Certificate can also include; details of directors; the Registered Office address, the share capital of the company, and details of the subscribers to the memorandum.
If you wish to buy a Certificate of Good Standing, it is an option that we make available at checkout when you place an order.
You may need a document Apostilled that has not been issued by a Government Agency. If that is the case, the document will first need to be legalised by a notary or lawyer. We will arrange this; our charge for the Apostille service includes the cost of the notary or lawyer.
Objects clause and the Memorandum and Articles of Association
The majority of companies formed in the UK use the model Memorandum and Articles of Association contained in the Companies Acts 2006. They are the constitution of the company. One significant feature of the model Memorandum and Articles are the omission of an objects clause. The last Companies Act removed the requirement to include the objects of the company in its constitution. The practice of drafting the objects so widely as to ensure that no conceivable legal activity could possibly be excluded had, for many years, made the clause obsolete.
The omission of an objects clause can cause problems in overseas jurisdictions. Owners who are intending to open a branch office outside the UK often have to supply a copy of the company’s constitution to get permission. Authorities may insist that an objects clause is written into the constitution.
Companies can be formed with Memorandum and Articles of Association that include an objects clause. Clients can ask us to use articles that they have drafted themselves. To include bespoke Articles, simply contact us before placing your order.
Certifying Model Articles of Association
The process of forming a company online involves notifying Companies House that the newly formed company will adopt model Articles of Association. Companies House do not have a document they can certify.
Clients requiring an official certification of their Articles of Association should supply their own document that can be uploaded with the electronic application to form a company. Companies Hose can then be asked to certify the supplied document.
Companies House splits the UK into 3 jurisdictions; Scotland, Northern Ireland and the joint jurisdiction of England and Wales. The location of your Registered Office determines the jurisdiction of your company. Although you can have places of business in all the jurisdictions, your Registered Office must stay in the jurisdiction of your registration.
UK Limited Liability Partnerships
UK Limited Liability Partnerships (LLPs) are used by international businesses as tax efficient vehicles for non-UK international trading purposes.
Key Features of UK LLPs :
- Corporate status- owners (partners) assets are protected because of the partnerships liability is limited.
- Tax Neutral – No UK tax is payable by overseas partners on the partnership’s overseas earnings.
- The UK’s “light touch” approach to regulation means that statutory filing requirements are not onerous for small companies.
- Partners can be individual or corporate bodies.
- There are no restrictions on the residence or nationality of the members of an LLP
An LLP is formed by registration at Companies House in the UK. It must have its official address (Registered Office) in the UK. An LLP must have two or more partners and must be a lawful, commercial venture operating for profit. Partners can be individuals or corporate persons, and there is no restriction relating to their nationalities, residency or place of registration.
Companies House will not allow an LLP to use the same name as another company or LLP on its register and the name must end with the words ‘limited liability partnership’ or the abbreviation ‘LLP’.
Partnership Agreement :
Partnerships do not need to file a written constitution with Companies House when they are registered; there is also no legal requirement to have a partnership agreement. However, to ensure a clear understanding between partners, it is recommended that a written agreement be entered into between the parties.
Usually, a partnership agreement would be expected to include details of the nature of the business, members’ shares and contributions, profit and loss sharing arrangements and management formalities as well as the duties of each respective member.
Even in the absence of a written partnership agreement, or if there are certain items not covered by the partnership agreement, default provisions are contained in the Limited Liability Partnership Regulations.
These provisions address, amongst others, the following matters:
- That all members are entitled to have equal share of capital and profit.
- That all members participate in management.
- That the LLP would indemnify members in respect of expenses incurred on behalf of the LLP.
An LLP must have at least two designated members. Designated members are responsible for the management of the LLP and have statutory duties which ordinary members do not, such as:
- Signing the annual accounts.
- Ensuring accounts are filed at Companies House.
- Notifying Companies House of changes in the membership, location or name of the LLP.
- Appointing an auditor, if necessary.
A partner ceases to be a member when the LLP is dissolved. Membership also ceases in the event of death or by agreement. The partnership agreement can include provisions for the removal of a partner for breach of the partnership agreement.
Where the number of partners falls below 2 for a period exceeding 6 months, the remaining partner is liable for any the payment of any debts arising after the 6 month period has expired.
Accounts and audit :
An LLP must maintain records of its financial transactions in sufficient detail to enable the financial position of the LLP to be determined at any time.
Accounts must be delivered to the Registrar of Companies no later than 9 months after the relevant period end. There are penalties for late delivery.
Only LLPs that do not qualify as small are required to have their accounts audited. To be considered as small an LLP must meet 2 of the following three conditions for two out of the last three years:
- Annual turnover £6.5m or less.
- Balance sheet total £3.26m or less.
- Average number of employees not more than 50.
LLPs are ‘tax transparent’ which means that each member, not the partnership, will be assessed to tax on their share of the LLP’s income or gains. Any non-UK source profits or gains made by an LLP will not be subject to UK tax unless the members are UK resident individuals or companies.
There are no restrictions on the residence or nationality of the members of an LLP. If the members of the LLP are non-resident and the income of the LLP is derived from a non-UK source, the LLP will not be subject to UK taxation. It is, therefore, possible to have an LLP set up in such a way as to not be liable to any UK taxation.
There is an obligation for an LLP to file an annual partnership tax return whether the partners are taxed or not.
Branch Office or Representative Office
Register a branch office in the UK, or open a representative office: setting up a branch or representative office with GIA is a great way for overseas companies to generate business growth within the United Kingdom while ensuring the legal entity of the firm remains outside of the country.
Branch offices are treated as an extension of a foreign corporation, and the corporation remains liable for all activities from its home domicile – this is particularly beneficial for companies who wish to operate a branch from the UK but still do business at home (although representative offices are only permitted to earn profits within the Great Britain).