The UK Limited Company

This is our most popular service package and includes all of the services you will need to set up and operate a UK limited company. This package includes:

  • Company set-up
  • Facilities provided by a Central London Virtual office (which includes mail forwarding and phone answering)
  • UK company bank account with debit and/or credit cards
  • VAT registration
  • Full accounting and bookkeeping

Annual fee £2,300 plus £500 one time expenses

Introduction

For many years the UK Limited Company has been the corporate vehicle of choice for many international entrepreneurs who choose to do business within the European Union. This is probably no surprise. The UK Limited company, when properly operated, offers distinctive advantages. These are:

  • A low level of bureaucracy and no capital requirements.
  • Relatively easy business start-up and closure. 
  • Unique solutions for tax optimisation.
  • Relatively low corporation tax rates (20%).
  • Businesses up to £6.5 Million turnover/sales are exempt from audit which reduces ongoing running costs for the entrepreneur.
  • Flexible, business friendly expenses and deduction rules.

If you do not live in the UK but plan to set up and operate a UK limited company there are a few things that you must bear in mind. If you fail to set up a UK limited company correctly, your country of residence is likely to tax any profits/gains, and not your place of business. UK taxation will not apply.

There are a number of optimisation solutions, below we set out several possibilities and their benefits. 

The 3 Key Benefits of a UK Limited Company

If your UK limited company is set up correctly, there will be many benefits but the three most likely to be crucial to its success are:

1. Low Capital Requirements and Set Up Costs

While most European countries require that you have substantial capital requirements to set up a limited company, there is no capital required to start-up in the UK. It should also be noted that lawyers and other notaries are absent from the start-up process which reduces the start-up costs significantly.

2. Unique Tax Optimisation Opportunities

In the last few years the traditional offshore jurisdictions and tax havens have experienced a relentless crack down. So-called 'Black' and 'Grey' lists have been published by the OECD and the G20 have vowed to fight tax evasion. Very few realise that the two biggest tax havens in the world are the US and indeed, the UK. Almost uniquely, for international clients there are a greater number of opportunities to set up tax efficient mechanisms especially in the UK and they are absolutely legal. Check out these three examples here:

  • No withholding tax: There is no withholding tax on dividends by UK companies even if they are distributed to offshore holding companies.
  • Non-domiciled taxation: Foreigners living in the UK don’t pay tax on overseas income (conditions apply).
  • Offshore solutions: Using offshore companies in the Channel Islands or the Overseas British Territories together with a UK Limited Company is day to day business in the UK and will not raise an eyebrow as long as it is done correctly.

3. Very Flexible on Tax Deductible Expenses

The biggest advantage of a UK Limited company, in our experience, is the method in which expenses can be handled.

Compared with other major European countries such as France or Germany, the UK has very flexible rules regarding tax deductible expenses. The UK authorities are much less rigid than their counterparts in other countries. The UK system has no fixed rules, tables or lists of tax deductible items. The principal is simple and straightforward. All business expenses are tax deductible (as long as they are genuinely business related). You obviously need to apply some common sense here. If you need to invite your clients to a Formula One Grand Prix and that expense is reasonable in relation to your total sales this would be fine in most circumstances. However, if you spend half of your annual sales on expensive restaurants this may raise some questions. The British believe in the value of common sense, as this shows.

Obviously this applies more rigidly to the more mundane day to day expenses such as mileage and travel for example.

The seasoned entrepreneur will understand that this is a huge benefit. In most instances this is even more important than the low corporation tax rates. You may not have large profits in the first few years of your business anyway (hence you don’t worry about the tax rate) but you have significant expenses. You want to be able to operate those expenses through your business without worrying too much and thus creating a carried-forward loss which you can offset against future profits.

Sounds Great! - What's the catch?

To make use of the benefits that come with a UK Limited Company you need to demonstrate that your business is actually UK based. Now the UK authorities will be happy to take your tax money so there is no problem from that end.

However if you are an international entrepreneur living outside the UK your local tax authorities will do everything they can do to make sure you pay taxes in your homeland. They can justify this based on international tax agreements. These rules say that a business must be taxed where it is managed, no matter where the corporate entity is domiciled.

The easiest way to get around this is to open an actual office or other business-related facility in the UK, to employ a local manager and a few staff. In this case you establish a proper UK trade and you won't have a problem, even if you - the owner/principal of the business -  live outside the UK. If you have no intention of opening an office in the UK at this time, this could be where problems begin. 

International Taxation & Double Tax Treaties

Many entrepreneurs believe that opening a company in the UK and operating it from their country of residence means they fall under the UK tax laws. This is not the case. The UK has double taxation treaties with all  its European Union neighbours as well as most of the other economically significant countries in the world.

Businesses are taxed where they are managed - 'Principal place of business rule'

While these agreements differ in detail, with regards to taxation of corporate profits, they are fairly similar; a business is taxed in the country from where it is managed, no matter where the corporate entity is domiciled.

This means if you are Greek, you live in Athens and you set up a company in the UK it will be treated as a Greek business by the Greek tax authorities and will fall under Greek jurisdiction. You will pay tax in Greece based on Greek tax rates, you will have to file accounts in Greece. This is true for all business that is generated from Greece, even if the revenues are generated outside Greece. This happens because you have automatically established a principal place of business (or a branch) in Greece, or a Greek trade. And this just by the fact that you as the owner/director of the UK company are based in Greece and manage the business from there.

Note: We have used Greece in this example to illustrate our point. There is no intention to single out Greece, similar laws are in place across most countries in Europe and the Western world with the exception of Switzerland. If you live in Switzerland you are allowed to manage businesses everywhere without constituting a Swiss place of business automatically.

It's not just management - read about production facilities etc. here

The governing jurisdiction of a business does not only depend on its place of management. If for example you have a production facility, a shop or a building site – all of these will automatically trigger a place of business in your home country (and thus a potential tax liability).

Equally if your business has customers solely in your home country and/or most/all of your marketing is directed towards potential customers in your home country, you also establish a place of business in your home country that will need to be taxed according to your local rules.

There is actually a whole list of activities defined in the double tax treaties, that define exactly what constitutes a principal place of business, that makes the business fall under local jurisdiction i.e. taxation where these activities are performed. The ones mentioned here are just some of the ones we deal with every day.

Why should they (the Tax authorities) ever find out that I am running a UK company?

Let us hypothesise for one moment that you are ready to take some short cuts i.e. evade tax, provided that the risk of getting caught is not very high. Obviously this is a purely academic discussion as you will always strive to be honest and to respect the law.

You decide to set up a UK Limited company and simply run it from where you live, let’s say Spain. You have clients and suppliers in Spain and across Europe. You do IT consulting work from your home office, no employees, just a few freelance consultants. As described on this page you do in fact run a Spanish business that falls under Spanish jurisdiction. But how would the Spanish tax authorities ever find out?

As far as we know from experience these are the main reasons entrepreneurs get caught:

  • Tax audit of suppliers or customers: One of your customers or suppliers in Spain has a tax audit and they find an invoice from or to your UK Limited company. As this is the only UK related invoice the investigator will start to ask questions. Your supplier/customer will say, “Yes, this is my friend Jose from Barcelona. He just uses a UK Limited company as it is easier for him'.
  • Disgruntled employee, competitor or ex-spouse: Do not underestimate the energy that is released by hate, anger and frustration. A simple act of revenge be it in a professional or personal realtionship could end up being your undoing. A small detail could instigate a full-on investigation into yoru company.
  • Research by the tax authorities: Believe it or not the tax man knows Google. If you are under investigation anyway they may just key your name into a search engine. If you are somehow involved in a UK Limited company your name will be everywhere as the public register is indexed, as are many other databases using that data.

We at St Matthew eAccounting, have a number of clients from countries such as Germany, Austria and Spain who have been in one or all of these positions, and got caught. They became our client at that point and asked us to help them mend what had been broken.

The risks described may not apply to your particular situation at this moment in time but when you run a professional business you may at some stage expose yourself, for that reason you need to ensure that you build in some safeguards.

Conclusion; you must avoid triggering a principal place of business in your native country

Keeping all of these factors in mind, it is important that you operate your UK Limited company according to the guidelines described below. If you don't you may easily be accused of tax evasion and will face significant criminal charges in your home country, you may even face a huge investigation into your affairs. Doing it the right way will allow you to explain and prove every detail requested should it ever come to a tax investigation. If you do it correctly there is nothing to be afraid of.

This is exactly where St Matthew eAccounting can help. We help you to demonstrate to the outside world that you have set up a legal and professional UK based business. We do this without the burden of having to rent your own office or employ your own staff. We have hundreds of clients across Europe and the world that work with us in this way, and they have managed to avoid any status related difficulties. Indeed, our solutions have been specifally designed to be fully compliant with local tax laws wherever necessary.

What do you require to prove the existence of a UK Trade?

Let's look at what you have to do to establish a proper UK trade. We can do this by just applying the rules used by tax investigators...should you ever be subjected to a tax investigation in your country of residence, these will be the factors the tax authorities will take into account when assessing if your UK Limited company is liable for tax your country of residence:

  • The company must have an actual UK office in which people can work (this must be accessible, no PO boxes!)
  • Incoming calls must be answered in the UK in your company's name. An answering machine or call re-direction will not suffice.
  • The company must have a UK based resident director. As a non-resident you cannot be the sole director without risking being liable for tax in your country of residence. Important business decisions by the board of directors must be made in the UK.
  • Some of your infrastructure (server, vehicles) should be located in the UK
  • Advertising, marketing and sales should not have your country of residence as it's main target.
  • Business operations should not be tailored to the market in your country of residence.
  • The majority of your clients should be international and UK based and must not be within your country of residence.

If you already operate a UK Limited company and realise that you don't meet most of the requirements specified above, there is a realistic risk that you are liable for tax in your home country. At some point you could potentially be the subject of a lot of scrutiny by your tax authority and you may indeed be charged with tax evasion. We recommend that you act now and discuss the situation with a local tax advisor.

Showstoppers - When is it impossible to set up a UK Trade?

Unfortunately there are some situations where it is impossible to establish a UK trade. In these circumstances you will always establish a principal place of business in your country of residence, hence you will always be liable for tax in your home country. Here are three main scenarios where this would be the case:

  • You operate a shop or store front or any similar outfit where you conduct business and see customers.
  • You provide services that are closely tied to your neighbourhood, such as cleaning services, plumbing services, delivery services.
  • You employ staff and need to be registered as an employer i.e. you have proper operations.

If any of these apply to your situation you may still be able to set up a UK limited company, however your business will need to be registered at a local branch in your country of residence. The consequences as stated above, are that you will not fall under the UK tax legislation but will instead be treated as a local business. Alternatively, if you are able to divide your business into local and international segments, you could run the local portion of the business through the branch in your country of residence and run the international work through the UK. We have clients who operate on that basis with great success.

General Rule -  You need to be able to run your business from the UK

As a general rule of thumb you need to ask yourself if you would be able to run your business from the UK. If you can answer this question with 'yes' it will be possible to establish a UK Trade without having a principal place of business in your country of residence. If you are running an Internet business this is perfectly fine, many consulting businesses can operate in the same way. Writers are a good example, as well as stock exchange traders etc. Import/Export businesses work where you are simply the middleman making the deal i.e. you never see the goods anyway. All these businesses work well with the solution that St Matthew eAccounting offers.

The role of the business Owner/Principal

When you become a client of St Matthew eAccounting. our firm will provide a UK resident director for your company, unless you can provide your own UK based director of course. This would be one of our own trusted advisors, who would go on to represent your company to the outside world. This is one of the most important requirements, to show that you have established a place of business in the UK.

As the business owner you can still be the official owner/shareholder of the company.  You are also allowed to perform certain activities in your country of residence such as sales, negotiations and business development. According to the tax treaties between the UK and most other countries these activities alone are not sufficient to establish a place of business (you want to avoid this, remember?)

This is important as you don't want to play hide and seek. You should be able to perform your duties openly because at the end of it you have a business which needs to be conducted responsibly and legally without compromise.

How it all works out tax-wise

The UK Limited Company pays UK corporation tax on all its distributable profits. This is between 22% and 28%, depending on how much profit you make. The UK will not impose any other taxes on these profits. You can decide to leave the profits in the company or distribute them as dividends to the shareholders. Tax-wise it makes no difference. The shareholder can be another company and can be based anywhere in the world. There is no withholding tax in the UK.

If you are the share-holder of the company you will normally have to pay personal or income taxes in your country of residence on dividends (on receipt). This is fairly elegant as you can decide the point of taxation yourself. Re-invest the money and there is no tax, or pay out the dividends to yourself when it is suitable. It is almost impossible to give an indication of how much tax you have to pay in your country of residence, in most countries this rate will be less than the income tax rate, some countries may even have no tax at all.

The UK does not inform your local tax authorities of how much dividends you have received from your UK company. You will have to declare that yourself when submitting your tax return in your country of residence (or whatever your local tax law defines as the process to declare those dividends).

How to get money out of your UK Limited Company

We have already discussed how dividends are distributed to the shareholders. This is the most common and straightforward way of taking money out of your company, but there are other ways too. Firstly however let us explore one avenue you cannot go down without causing potential trouble - it is not possible for you as a shareholder to just 'invoice' the company for your services. This would be viewed as distribution of profits and would be taxed accordingly.

What is possible and common are the following three options:

  • Salary: You can pay yourself a salary. As you don't live in the UK this would be paid out gross without further deductions in the UK. You will need to pay tax and social security in your country of residence, however that would be your responsibility and is of no concern in the UK.
  • Expenses: As mentioned before it is fairly easy to run expenses through your UK company. For example you can charge the company for mileage i.e. miles you drive in your own car on behalf of the business, or you can make certain purchases through the company, as long as they are business related (however this does not include company cars as it can become very complicated, it is much easier to charge mileage for your personal car useage).
  • Third Party Invoice: If you have another company you can invoice your UK Limited company from that company. The UK is fairly flexible, so even if your company is based in Switzerland or any other country your invoice will be accepted by the tax authorities, as long as it is appropriate. Note that transactions between related companies need to be mentioned in the year end accounts of the UK company, if you are the owner of both companies involved in such a transaction this would still be fine but this needs to be declared.

There are, of course, other more sophisticated options but these are better discussed in a face to face meeting with us.

The UK Limited Company package from St Matthew

Our accountancy firm is specifically authorised and licenced by the UK authorities to offer nominee and trust services. We have been offering this service for a number of years and have many clients who operate successfully with a UK Limited Company.

Our package is the most comprehensive package on the market today and contains every service that you will need to set up and run your company in the UK. It includes the following solutions:

UK Company Formation

We will set up your UK Limited company with Companies House. This usually takes just 48 hours. If you have a UK Ltd company already you may move it to us. We do not charge for the incorporation hence the fee would be the same.

   

Local Director

A UK resident consultant from our firm will become nominee director of your company as outlined above. This service is optional. You may of course have your own UK resident director should you prefer this.

   

Registered Office

Every UK company needs a registered office where official mail from the tax man can be delivered. We will domicile your company at our office address in Central London.

   

Phone & Fax Number

You get your own phone and fax number. Faxes will be forwarded to you by email, the phone will be answered in your company's name by our staff. We will send you an email with the message that the caller left for you.

   

Use of our Offices

You may use our offices and meeting rooms while you are in London (after prior arrangements, limited fair use policy applies)

   

Correspondence Address & Mail Forwarding by Email

You can use our office address as correspondence address for your business mail and on business stationery such as business cards or compliment slips. We will forward any mail that we receive by email. If we receive packages or original contracts etc we will forward them by post or by courier.

   

Corporate Bank Account

Your company will receive a corporate bank account with credit cards from a major UK bank.  Please note that you will need to travel to London for this. You account will be opened the same day. In exceptional cases we can open accounts by post but you will need to visit a branch of our bank in your country to introduce yourself. A minimum deposit of £1,000 is required.

   

Annual Return

Once a year every company needs to update their details with Companies House (363 Return). We will submit the 363 return on time for you.

   

Deadline Maintenance

In the course of the tax year there are a number of important deadlines and dates to keep in mind for your company. These have to be followed strictly as the UK authorities will raise penalties immediately. We will monitor these dates and ensure everything is filed on time.

   

Communication with the UK Authorities

We deal with the tax authorities and Companies House on your behalf. We will solve any issues directly with them as much as we can. If required we will contact you first to agree the best way forward before communicating with them.

   

Unlimited Support

Our multi-lingual team of accountants and business advisors are happy to assist you with any questions or issues you may have in relation to your company. Call us or email us and we will assist you as quickly and as efficiently as we can. You may also come to visit us in our offices in London to discuss certain things face to face if you prefer. Just arrange an appointment and we will be happy to see you!

Accounting & Bookkeeping Services

The following services will be charged separately on a time and material basis at a reasonable and affordable hourly rate agreed in advance (request a quote for details). We encourage all of our clients to prepare as much of their bookkeeping as possible on their own (for example by using spreadsheets). However, we are happy to take on this type of work and provide a full service should you wish for us to do so.

VAT Registration

We will register your company for VAT if required. We can also act as your VAT agent (for an additional fee). See the important disclaimer below.

   

Ongoing Bookkeeping

When you sign up for our service we will provide you with your dedicated accounts website and inbox email address. Just email all your relevant paperwork to this address (receipts, invoices etc) and our accounts team will do the bookkeeping. You can see all documents online using your accounts website.

   

Tax Returns & Year End Accounts

We will prepare the statutory accounts for your company plus the corporate tax return.

Fees & Payment Terms

The annual fee for this service starts at £2,300 plus VAT. Please note that the final fees will depend on your specific requirements so it would be best that you request a quote first so we can properly assess your needs. All fees are payable one year in advance.

Fees for accounting and bookkeeping services will be charged on a time and material basis as required. You will be invoiced monthly or quarterly for these services, depending on the work undertaken.

There is also VAT Registration

We recognise that most of our clients are likely to need a VAT registration (tax ID). This process can take up to 6 months depending on the speed with which HMRC and other UK government departments operate. If you need a VAT number urgently you may consider buying a 'readymade' company from us that is already VAT registered. Please check this page for details. 

Process

Please check this page for details on our process of setting up your company.

Is this service right for you?

We recommend this package for entrepreneurs who are looking to set up and operate an actively trading business in the UK. If you are looking for another type of company (holding company, dormant company, company to hold an asset) please contact us as we may be able to provide a better solution.

This package is ideal for entrepreneurs who are looking to generate at least £200,000 in annual sales with their UK Limited company. If your expected annual sales are less you may find this service too expensive or simply an overkill. We regret that we will unlikely be able to help you in this instance.

If you are planning to set up your own operations in the UK (take out a lease, employ staff) most of the issues raised here should be of no concern to you. Your own operations will always constitute a place of business in the UK. However, we can still provide you a quote for the services that you will still require when setting up your UK business, feel free to get in touch and we will see what we can do for you.

Next Step

If you are interested in setting up a UK Limited company please contact us to request a quote.