• 2nd December 2022

How to open a business in the UK

Main forms for conducting business in the United Kingdom

A foreign company can carry on its business in the United Kingdom directly (in other words by creating a branch or branch), or by creating a branch in the UK (“subsidiary”), or by joining an LLP or “Limited Liability” Partnership “.

The differences can be substantial.

Direct exercise

If a company decides to start a business in the UK through a branch, this branch will have its effective headquarters in the United Kingdom with all the consequences of the case. This means that, as a rule, you will still have to register with the Companies House under the Companies Act of 2006, the set of laws that govern the activities of the Companies in the United Kingdom. English legislation requires registration if there is “some degree of physical presence in the UK”.

Subsequently, it will be necessary to provide some fundamental documents, in particular the articles of association of the company in question, properly authenticated within the jurisdiction of incorporation and translated into English.

The company will also need to report any significant changes relating to the establishment and management structure of the Companies House.

The terms for the presentation of the financial statements in the United Kingdom for the branch will depend on the legal provisions relating to the verification and publication of the financial statements in the foreign country of reference.

The creation of a branch (subsidiary) or an LLP        

If you decide to open a subsidiary in the UK or an LLP the process is relatively simple; the British government has repeatedly stated that it wants to make the country open to foreign companies and the recent changes made to company law represent significant steps forward in this regard.

For business activities, the simplest (and most widespread) corporate form is the Limited Company. It can be established with a minimum share capital of one pound and includes limited liability for members.

At least one administrator is currently required. There are no restrictions on ownership, residence or nationality. The exercise year corresponds to the calendar year and begins when the Ltd is established and usually ends 1 year from the date of establishment

Over the past few years, some foreign companies have also operated through LLPs: they need at least two founding members, which can be natural persons resident anywhere in the world or legal persons validly registered in the United Kingdom or elsewhere.

LLPs enjoy legal personality and have the same obligations and obligations as LTD. The liability of members is limited to the company’s capital and no minimum capital is required by law.

In the event of insolvency, members may only be called to respond directly in specific cases under British law. Only the single member to whom this responsibility can be attributed will respond and not the other or any other members.

The requirements

Companies and LLPs must submit tax returns and financial statements annually, which must normally be checked and audited (if certain thresholds are exceeded).

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In addition to these fundamental requirements, it is necessary to communicate any changes: these include, for example, changes to the equity structure as well as any charges for the company.

The choice between branch, branch or LLP

As previously reported, the choice between branch, branch or LLP is the first, and perhaps the most important, question to be considered for foreign companies wishing to invest in the UK.

The decision is fundamental not only because it defines the structure of the company and influences its functioning, but also because it has important consequences on the fiscal level.

 

The branch

All branches of a foreign company operating in the United Kingdom are subject to taxation on both profit and capital gains, according to a tax rate which is calculated on an “arm’s length basis” or structured in such a way as to prevent companies that they operate internationally to manipulate their accounts in order to evade taxes.

A very interesting feature of the British tax legislation is that it does not provide for additional taxation on the export of profits from an activity established as a branch.

However, it is necessary to transmit the financial statements of the parent company to the UK authorities, as well as the names of the managers and the secretary director (if any) of the company, together with the name of the representative of the branch in Great Britain.

The branch (subsidiary)

If the subsidiary is established and administered in the United Kingdom, it will be deemed to be resident in the United Kingdom for tax purposes. If it was established abroad and administered in the United Kingdom, it could be considered as resident in both countries.

Double taxation treaties could consider society as resident in one country or another.

As in the case of the branch, the branch is subject to taxation on both profit and capital income based on the rate envisaged for companies, also in this case calculated on the basis of market conditions.

Companies with profits below £ 1.5 million must pay taxes within nine months of the end of the tax period.

Larger companies, with earnings in excess of £ 1.5 million, can pay tax in four quarterly installments of equal amount, spread over the year.

Dividends can be paid to the parent company net of tax on profits.

The LLP (Limited Liability Partnership)

In several respects, the calculation of the profits subject to taxation is similar to that made for the Ltds, however the profits can be calculated directly for each shareholder of the LLP.

An LLP is by definition a limited liability partnership. This limited liability legally protects the assets of individual partners, just as an Ltd protects the assets of its shareholders. An LLP is therefore a separate legal entity and can carry out economic activities independently of the individual partners that make it up and enter into contracts.

By setting up an LLP company it is possible to separate the shareholders’ assets from those belonging to the limited liability partnership.

Each member is called to respond in a limited way to the share capital of the LLP Company and each shareholder is taxed for their share of profit.

Business setup in united kingdom you need at least two partners (natural or legal persons with residence or registered office anywhere in the world). Revenues are distributed proportionally among the shareholders, unless they have expressly provided for a different solution in terms of the partnership agreement.

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