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1. First destination of foreign investment in Europe
The UK is the leading destination for foreign investment in Europe and remains a top destination for investment globally, with an open and liberal economy, a flexible and dynamic labor market, favorable tax and regulation for businesses and a strong and transparent rule of law.
Ease of business
The World Bank ranks the United Kingdom among the top ten in the world for ease of doing business. In order to support investment and economic growth, the government proposes a corporate tax of 19%, the lowest G7 and the lowest common G20.
A flexible economy
The Cities of Opportunity Report, published in 2016 by the well-known PWC firm, shows that London is again at the top of the list of 30 global cities. The report noted that the city was one of the most cosmopolitan in the world, a global hub with a large flexible economy and rich in human resources to continue building its future.
PwC’s latest forecast, “The World in 2050”, indicates that by 2030, the United Kingdom and Germany will be the only two European economies in the top 10 global purchasing power parity (PPP) economies and the largest in the world. United Kingdom will still be the sixth largest on the market exchange rate.
The United Kingdom in a few lines:
- A strong international business community
- The United Kingdom is a gateway to the rest of Europe;
- Excellent transport links with the rest of Europe and internationally;
- Part of the best environments for research and development work;
- First world financial center;
- Access to capital through the UK markets
- Tax rate on the weakest companies in the European Union.
- Country overview
| Geographic location | Island country west of Western Europe |
| Capital | London |
| Area and population | Area of 242495 km2 and population of 65 million |
| Language | English |
| Currency | British Pound (GBP) |
| International dialing code | +44 |
| Fellowships | London Stock Exchange |
| Political structure | Unitary state and parliamentary monarchy |
3. How to start a business in the UK
Creating a business in the UK is simple with transparent and easy to do procedures. As a first step, it will be necessary to choose the legal status according to the needs of the latter then to respect the various legal formalities to be accomplished.
3.1 – The choice of the legal structure
There are different legal status of companies in the United Kingdom.
- Limited liability partnership (LLP)
This status allows several natural or legal persons to associate to carry out their activity. This status is similar to partnerships in France such as Societe en Nom Collectif (SNC) for example.
Legal criteria:
- Minimum capital: £ 1;
- Minimum number of partners: 2.
Tax system
From a tax point of view, this structure is fiscally transparent. This means that associates must register individually and tax their share of income on a personal basis.
Responsibility
The liability of the partners is limited to the amount of their contributions.
Advantage and inconvenient
The advantage of this status is the limited liability as well as its flexibility in particular because the distribution of the profits can is determined by the statutes. However, it can be expensive from a fiscal and social point of view.
- Private Limited Company (LTD)
The LTD can be compared to the French limited liability company (SARL). This structure has a legal personality distinct from that of its associates. This legal form is most prevalent in the United Kingdom with over one million LTD.
Legal criteria:
- Minimum capital: £ 1;
- Number of partners minimum 1;
- Leader: he must be a natural person. He is paid by wages and dividends.
Responsibility
The liability of the partners is limited to the amount of their contributions.
Tax system
The LTD is taxed in respect of its profits on corporation tax.
Advantage and inconvenient
The advantage of this status is the limited liability as well as the optimization from a tax point of view between wages and dividends. The disadvantage is the more complex work and the higher costs.
- Public limited company (PLC)
This structure makes it possible to offer its securities on the financial markets. This is the equivalent of public limited companies (SA) in France.
Legal criteria:
- Minimum capital: £ 50,000;
- Number of partners minimum 2;
- Leader: At least two directors, one of whom must be a natural person.
Responsibility
The liability of the partners is limited to the amount of their contributions.
Tax system
In the same way as for the Ltd, it is taxed in respect of its profits on corporation tax.
Advantage and inconvenient
The advantage of this status is the possibility of raising funds on the financial markets. The disadvantage is the stricter regulation to which this company is subject and the vulnerability to hostile takeover bids (OPA). In addition, the accounts must be audited by an auditor.
3.2 – Registration formalities
3.2.1 – Legal requirements
Registration formalities
A company that wishes to be incorporated as a limited liability company must file with the relevant department “Companies House” the following:
- a Memorandum of Association Memorandum of Association: this is a statement that subscribers wish to incorporate a company and have agreed to become shareholders of the corporation;
- the articles of association or articles of association: these are the rules by which the company will carry on its business;
- a completed form “IN01”: this document contains the contact details of the head office, the director (s) and secretary, first shareholders;
- registration fees: £ 14 for standard service electronically, £ 40 for standard service in paper format, £ 30 for same day registration electronically and £ 100 for same-day registration on paper for support .
The registration certificate
When all these formalities have been completed, the Companies Register issues a certificate of incorporation. This is conclusive evidence that the corporation is properly incorporated and incorporated, so that the corporation can begin operating immediately.
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3.2.2 – Additional requirements
In addition to legal formalities, certain requirements must be met. Indeed, each company must in particular:
- have at least one director natural person (ie a real person) rather than a company);
appoint auditors, unless its turnover and balance sheet total is below the specified thresholds; - keep a register of its shareholders (called members), including their names and addresses, the number and class of shares they hold, etc. ;
- keep a register of expenses;
- keep a register of its directors and secretary;
- submit the accounts for each financial year / period to the Companies’ Register, no later than the filing deadline.
4. Taxation in the United Kingdom
4.1 – The tax on profits
4.1 – The tax on profits
Companies that carry on a business, profession or business in the United Kingdom are subject to income tax.
- Tax base
Profits attributable to corporate income tax are calculated by adding together all revenues from various sources. These mainly include commercial profits, rents, investment income, deposits, interest and allowable gains.
Taxable business profits are calculated in accordance with generally accepted accounting principles, with certain deductions, such as expenses incurred wholly and exclusively for commercial purposes.
- Income tax rate
The corporate tax rate on profits is 19%, making it one of the lowest rates in the region (for example, compared with 33.33% in France). It is proposed that this rate falls to 17% for the year beginning April 1, 2020.
4.2 – VAT
Three rates are applicable depending on the situation:
- Standard rate of 20%;
- Reduced rate of 5%: applicable to a limited list of goods and services;
- Zero rate: used to deduct VAT upstream, that paid to your supplier for example.
- Some small operators (supplies of less than GBP 150 000 per year (and with limited expenditure) may adopt a special flat-rate scheme which calculates VAT at a flat rate specific to the sector.
4.3 – Income Tax
Individuals are subject to a tax on wages at a progressive rate ranging from 19% to 46% from an annual income of £ 11,851.
4.4 – Capital gains, dividends
Capital gains
Capital gains are taxed at the standard rate of corporation tax, which is 19% for companies.
The dividends
0% – A tax exemption on dividends received in almost all circumstances was introduced as of July 1, 2009. Unlike other countries, the exemption is 100%, there is no holding nor a minimum tax rate.
4.5 – The advantageous tax status of “non-dom”
The particularity of taxation in England is its system of territorial taxation in which the focus is on the taxation of profits made in the United Kingdom. Thus, the non-domiciled status that allows to exclude foreign income from taxation.
Indeed, “non-dom” is taxed only on income from British sources, or global income repatriated to British soil, while a resident domiciled is taxed on all of its income, British and global.
Condition: born of a non-British father and resident in England for less than 15 years.
5. Audit and Accounting of an Offshore Company in the United Kingdom
5.1 – Accounting requirements
The law requires all companies to maintain adequate accounting records. There is no requirement as to the form in which these records must be kept, but they must be sufficient and allow:
- show and explain the company’s transactions;
- disclose with reasonable accuracy, at any time, the financial position of the company;
- allow directors to ensure that the annual accounts comply with the requirements of the law.
5.2 – Statutory Audit Requirements
At present, all incorporated UK companies are subject to legal controls unless they qualify for an audit exemption.
When a company has to have its accounts audited, it must appoint an auditor. An auditor must be appointed for each fiscal year of the company. The first auditors of a company are usually appointed by the director.
6. Employment and Human Resources Law
6.1 – Hours of work
Labor legislation in the United Kingdom provides for the obligation not to allow a worker to work beyond 48 hours per week (on average more than 17 weeks) without express consent.
6.2 – Minimum wage
The national minimum wage is a fixed hourly rate that is increased each year.
Currently, it’s £ 7.38 an hour for 21 and up. Since April 2016, a new rate applies to workers aged 25 and over, known as “National Living
Salary “, which is currently £ 7.83 per hour.
6.3 – Contract
Employees are also entitled to benefits such as, in particular, days off, paid vacation.
7. Trade in the United Kingdom
7.1 – Restrictions on foreign investment
There are relatively few restrictions as to who can acquire or operate a UK public or private company. In general, legitimate foreign investors should be able to make acquisitions without legal impediment.
In addition, foreign investors have reaffirmed their confidence in the United Kingdom, which is reflected in the figures, with incoming funds that reached £ 1,199 billion in 2016.
7.2 – Import and export
If your company involves importing goods into the UK outside the EU, the goods will have to be declared for customs services and may be subject to customs duties and import VAT.
While the Brexit negotiations are still ongoing, the UK government has committed to a very simplified customs regime between the UK and the EU, with the simplest possible customs requirements.
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Frequently asked questions
What kind of legal presence do I need to start my company in the UK?
There are three main ways for a foreign investor or company to operate in the UK. You can :
- to practice your activity via a British institution;
- establish a limited liability company;
- create your company through a limited liability partnership.
What regulatory issues should I consider to create my company?
Several elements must be considered before creating your company:
- The regulatory environment;
- What are the accounting and auditing requirements?
- Consumer credit;
- Money Laundering Regulations 2017;
- Financial penalties;
- Data protection;
- The 2010 Corruption Act;
- Competition rules of the EU and the UK;
- Financial services
- Is it complicated to set up a company in the UK?
Hoping that this article summarizing why and how to create an Offshore Company in the United Kingdom has brought you maximum clarity for your project, we remain at your disposal for any additional questions.
