You don't live in the UK and want to start a company here? Not a problem. Our guide will tell you all you need to know about how to establish your own business in the UK, no matter where you're based.
This guide will focus on:
Why is it beneficial for you, as a foreigner, to create a UK company
The process involved in registering a company in the UK as a non-resident
Key legal and tax considerations for foreign business owners
Tips for managing your UK business from abroad
By the end of this article, you will have a clear understanding of why and how you should tap into the UK’s market.
Why Create a UK Company?
As a foreign investor, the question you are probably asking yourself is, “Why do I need to create a company in a country I don't reside in?” The answer to this lies in the many advantages the UK offers for businesses, especially for foreign entrepreneurs. Let's look at some of them.
Access to the global market: The UK might not be a member of the European Union again, but the country is still the gateway to Europe and the rest of the world. The UK is an ethnically diverse society, which means that if you create your company in the United Kingdom, you will have access to a large and diverse customer base.
Business-friendly environment: Despite all the recent political changes, the UK is still one of the most business-friendly countries in the world. As of 2024, the UK was ranked 6th by the World Bank on the list of the easiest countries to do business in. This is a testament to the various economically friendly regulations and policies that make it easier for businesses to operate smoothly.
Enhances business credibility: As a foreigner, setting up your business in the United Kingdom is one of the best references you can ever have. This is because the human mind is already conditioned to associate UK-based companies with stability, trust, and professionalism. So, using that to your advantage will not only help boost your company's reputation but will also add to its credibility.
Attractive tax system: a favourable tax regime is another advantage of setting up a UK company. Currently, the UK corporate tax rate is pegged at 25%—the lowest among the G7 countries. Additionally, there are various tax incentives and reliefs available to businesses, including Research and Development (R&D) tax credits, which can significantly reduce how much you will pay on the tax.
Favourable timezone: This might sound rather odd, but another reason why UK company formation for non-residents is not a bad idea is the fact that the UK's geographic position and time zone will offer you some strategic advantages. The UK's location, for example, provides easy access to Europe, North America, and beyond. This will make international trade and business more possible. Additionally, the UK time zone allows for convenient overlap with both European and North American business hours, making it easier to coordinate with clients, partners, and stakeholders across different regions.
Types of UK Companies
As a foreign investor, you are limited in the types of companies you can set up in the UK. Below are the most common options available to you:
Private Limited Company (LTD)
This is the most common type of company that non-residents form in the UK. The reason why this is so common is because this type of business structure offers limited liability to its shareholders, meaning personal assets are protected. Any debt incurred during the business will be repaid in proportion to each individual's shareholding. Additionally, in this business structure, you can be a shareholder or even be made the director even if you don’t reside in the UK.
Public Limited Company (PLC)
This type of company can offer shares to the public and is ideal for larger businesses looking to raise capital through public investment. However, it has stricter regulations and requires at least two directors before it can be allowed to function.
Representative Office
If you are looking to test the UK market without conducting commercial operations, you can set up a representative office. This type of setup can only engage in non-commercial activities such as market research or promotional work but cannot trade or generate income as they have no legal status.
Branch Office
If you already own a company in your country of residency, you can consider opening a branch in the UK to act as an extension for the parent company. By doing this, you will be able to tap into the UK market while not living in the United Kingdom.
Legal Requirements
Business Structure
If you are starting a business in the UK, the UK corporate law for non-residents mandates that the company must have at least one director who must be at least 16 years old. As a foreigner, you are also eligible to be named the company’s director.
Regarding shareholders, a foreign-owned company in the UK must also have at least one shareholder, who can also be the director.
Registered Office
You will need a valid UK address if you want to create and register a business in the country as a foreigner. Just like your business name and structure, your company’s address is equally important for various reasons:
The address you use will be where your letters and important documents will be mailed.
It is also the location where authorities will visit if they want to inspect your company.
A valid address is also essential in ensuring that your business is closer to your target customers.
Company Name
As a foreign investor, the name you give your company must follow the following guidelines:
It must be unique and comply with specific rules.
It must not be the same as or similar to another registered company.
You are prohibited from including sensitive words unless specific permission is granted.
Compliance and Reporting
Once your company is established, you must meet ongoing compliance requirements, including tax and annual filing. For your annual filing, you are to submit an annual confirmation statement and financial accounts to Companies House. For tax filing, you must register for and file corporate tax returns with HM Revenue and Customs (HMRC).
Step-by-Step Guide to Company Formation
Starting a business in the UK can be straightforward with the right guidance. Below is a step-by-step guide to register your company in the UK:
Business Structure
Before starting your business in the UK, you need to first of all determine the kind of structure you want to run. Ultimately, the type of business you are trying to create will determine the structure. For example, if you're aiming to raise capital from the public, a public limited company (PLC) would be the appropriate structure, as it allows you to offer shares to investors. Also, if you already have a partner, a partnership could be your best bet.
Registering the Company
After you have decided on the company’s name and structure, the next step is to register the company online via Companies House. The process takes about 24 hours, and you will need information such as the company’s share structure, office address, and details of the company’s shareholders and directors.
Opening a UK Bank Account
After the online registration, you would be required to open a UK bank account to help manage the company’s finances. While this is not a legal requirement, opening a UK bank account does have some perks. For example, the account will come in handy if a financial institution needs proof of identity, proof of address, and company registration documents.
Getting Legal Assistance
Consulting with legal professionals can save you from making costly mistakes. Whether it’s for registering your company, understanding tax obligations, or navigating UK compliance rules, legal advisors can provide invaluable guidance.
Tax Considerations
Non-resident businesses in the UK must comply with the country’s tax regulations, such as the payment of corporate tax (25% rate), value-added tax (VAT), and others. VAT registration is not for every business, so check if your business requires it.
Many countries also have tax treaties with the UK to prevent double taxation. So, check whether your country has such a treaty in place, and consider consulting a tax advisor to maximise tax efficiency.
Challenges for Non-residents
Although the UK economy is welcoming for foreign investors, non-residents of the country may still face some challenges, including:
Opening of bank account: As a non-indigen, you may struggle to own a UK account balance because most of these UK banks require face-to-face meetings for account openings. The alternative way to get out of this mess is to open an account with a bank that does all the registration online.
Navigating UK Bureaucracy: UNon-residents may struggle with the paperwork and procedures required to register a business. Understanding the processes for submitting documents to Companies House, handling legal documentation, and interacting with various UK agencies can be overwhelming.
Understanding Local Business Laws: UK business laws cover areas like taxation, employment, and contracts, which may differ significantly from the regulations in other countries. Non-residents often need to familiarise themselves with these laws to ensure they are compliant from day one.
Taxation and Accounting: Non-residents must comply with UK tax laws, including VAT registration, corporation tax, and other tax obligations. Misunderstanding these requirements can lead to fines or penalties, making professional tax advice essential.
Maintaining Compliance: UK companies must meet ongoing legal obligations, such as submitting annual financial reports, confirming company details, and maintaining proper records. Non-residents may struggle with these requirements due to a lack of familiarity with UK compliance standards.
Distance and Communication: Operating a UK business from abroad can make it harder to stay on top of day-to-day operations, respond to legal notices, and communicate effectively with local authorities. Using local representatives or services may be necessary to overcome these hurdles.
How Legal Advisors Can Help
Consulting with legal advisors is important for non-residents looking to form a company in the UK. A legal advisor who is familiar with the UK law and tax system can help you meet the legal requirements and avoid fines. They can also help you understand your tax obligations and how you can take advantage of double taxation treaties. Additionally, they can also offer assistance with opening a bank account or understanding visa requirements for non-resident directors.
Conclusion
While creating a UK company as a non-resident can open doors to significant business opportunities, doing so also requires careful planning and adherence to UK regulations. To ensure that you are on the right side of the law, it is always advisable to consult with legal and financial professionals who specialise in UK business law.
At Lawhive, our team of corporate solicitors is readily available to guide you every step of the way and make the process of establishing your business in the UK as smooth and efficient as possible.
Get in touch with us today for a free case evaluation and a no-obligation quote.