Company Formation for non-UK residents overview

Company Formation for non-UK residents overview

What is the limited liability company (“LTD”)?

A limited company is an organisation that you can  set up to run your business in the UK or worldwide. Companies limited by share are by far most common business vehicle in the UK. This  company structure is particularly popular  as the company exists as a separate legal entity from the individual owners  (shareholders and directors).

Limited companies are usually run by the directors, also known as officers of the company and owned by the shareholders. Directors can be also be the shareholders but they are not obliged to.

What are the requirements?

You can form a UK limited company with us in few simple steps regardless of you nationality or residency. You presence is not required and the entire process can be complete online without leaving your office or house. To set up a Limited liability company you would need:

  • A company name – it should not be the name already used by another company registered in the UK. You can use our search or Search companies house register to see if a name been taken.
  • At least one director – who is natural person and at least 16 year old. There is no nationality or residency requirement. Corporate directors are no longer permitted under the Small Business, Enterprise and Employment Act 2015.
  • A UK registered address- all UK business entities are legally required to have a registered office address in the UK. All the statutory mail will be send there and address details will be displayed on public. It may be same or different address to your operational address.

You may opt to use our registration address for your company, please note we will require standard due diligence documents to be provided by the directors (ID and recent utility bill) via email.

  • At least one shareholder- he/she can be same person as director or any other person who live anywhere in the world. Shareholders can be of any age. However, please seek professional advice if candidate is under 18 years.

VAT registration

Value added Tax or VAT is a tax that charged on the sale of goods and services and is levied on the final consumer, the standard rate is 20%. VAT registration is an requirement  for the businesses in the UK with taxable turnover more than £83,000 (2016-2017 threshold) or is expected to exceed that figure within the next  30 days. However, if you are below threshold (< £83,000)  you still may apply for voluntary VAT registration. We can help you register for VAT or you may choose to register directly with HMRC.

If choose to use our help, then we will email you the application form (with guidance notes)  that you will need to fill in and return to us. We will check the application, create Government Gateway account and submit your application online. It will take 14 working days for HMRC to process your application. Once your application is successful, you will receive a VAT registration certificate with VAT registration number.

The pros for VAT registration

  • The company can charge VAT on the goods and services it sells.
  • Your company will be eligible to recover VAT on your purchases of goods and services.
  • The VAT company can recover will also include any VAT you have been charged on goods or assets purchased 3 years prior to registering for VAT, providing purchases are still on hand at the time of registration and that you can provide evidence.
  • Recover VAT on services incurred prior to starting a limited company, these can be recovered up to 6 months prior to the VAT registration (services  have to be for business purposes and you must should have invoice).
  • Your business can give the appearance of being larger and well established corporation, which are appealing to clients, in particular to other VAT registered businesses and professional clients.

Cons for VAT registration

  • Your company will have to keep careful VAT records and send VAT returns on quarterly basis..
  • You may need additional accounting assistance on VAT filings and EC Sales List.
  • Charging VAT on certain products and services may decrease the desirability to potential customers, especially if they are not VAT registered themselves. As it may substantially increase final price.
  • If output tax exceeds input tax, a business will be required to pay the difference back to HMRC, and it can create problems such as low cash flow when you need to make a lump sum VAT repayment to the HMRC as required by law.

Business bank account

Whilst it is easy for non-UK residents to register a UK limited company anywhere in the world, it may be more difficult to set up a business bank account unless you are UK resident or to have proper guidance. As some banks are reluctant to offer their facilities for a number of reasons, such as fraud prevention or that their business facilities are small and mainly for UK residents such as Santander Bank. Nonetheless,  there are few options are available once your company is incorporated.  The easiest and most straight forward option is to  buy our International Package and we will arrange an appointment for you with HSBC bank which welcome international clientele (please note you will be required to attend the meeting) and to provide you with the guidance you need before attending your appointment with the bank.

Alternatively you may contact one of the following Banks on your initiative:

HSBC – may provide banking services for UK companies with all shareholders and directors being non-residents of the UK. All the directors as well as shareholders  with shareholding above 25% would be required to attend the meeting with bank manager in the UK.

Barclays International – All applications must start form Barclays  international in the Isle of Man, and the account will be classified as offshore. Once opened, the account will be based in London and its provides the same benefits available to onshore account holders. Please note that Barclays require business banking clients to place £25,000 on deposit in the first month of opening an account.

Lloyds – The bank account can be opened for the companies with non-UK resident shareholders/directors, provided at least one of the company directors is a UK resident.

Please also note that a UK bank account is not a pre-requisite requirement for a UK LTD company, in another word, there is no legal requirement for a UK company to have a business bank account in the UK. You may choose to open a business bank account in your country of residents or elsewhere. This would require your company documents to be apostilled (documents being signed by  a notary/solicitor and legalised by the Foreign and Commonwealth office). Archers can provide assistance with the legalisation of your company documents. You may opt to get your company documents legalised at the end of international package or order your company documents apostille at later stage.

Limited company annual requirement

Once your company is set up running,  it would be advisable to make a note of  upcoming filling deadlines in order to avoid  penalty fines or the dissolution of your company. If you are unsure about any of the requirements discussed below, we recommend you to seek professional advice.

Confirmation Statement (previously known as Annual Returns)

The confirmation statement has replaced the annual return as of 30 June 2016. Your company must deliver a confirmation statement at least once a year, even if the company is dormant (non-trading).

  • When are they due? Every 12 month
  • Who are they filed to? Companies House.

In case you are late, please keep in mind you can file confirmation statement up to 14 days after the due date. It’s a criminal offence for failure to file the confirmation statement within 14 days of the end of the review period. If you don’t do this, company and its directors may be prosecuted.

Annual Accounts

Limited company must provide a breakdown of the financial statement about your company over the past accounting year. If your company is dormant company, you must file Dormant company Accounts.

Statutory accounts must include:

  • a ‘balance sheet’, which shows the value of everything the company owns, owes and is owed on the last day of the financial year
  • a ‘profit and loss account’, which shows the company’s sales, running costs and the profit or loss it has made over the financial year
  • notes about the accounts (if applicable)
  • a director’s report

You might have to include an auditor’s report , this depends on the size of your company. The balance sheet must have the name of a director printed on it and must be signed by a director.

  • Who are they filed to? Companies House and HMRC
  • When are they due? First accounts are due 21 month after a company incorporation date and then all subsequent accounts have up to 9 months plus 1 day from your Accounting Reference Date.

If you file it late Companies House can Impose a penalty, and if they are not filed at all, CH  will strike off your company from the Register thus all asset of the company will be frozen and declare to the Crown.

Corporation Tax Returns

Every trading UK company must pay corporation tax on the company profits. Your company must file a Company Tax Return if you receive a ‘notice to deliver a Company Tax Return’ from HMRC.

When are they due?

  • Corporation Tax – 9 month plus 1days after the end of your accounting period.
  • Company tax Return – 12 months after end of your accounting period.

If you are late, HMRC can take enforcement action.

Quarterly VAT returns

This only applies if your company is VAT registered. The amount of VAT your company charged and the amount of VAT  your company paid must be reported to HMRC. You must submit a VAT Return even if your company has no VAT to pay or reclaim.

  • Who are they filed to? HMRC.
  • When are they do? Normally every 3 months, however please check your VAT Return Deadline via your VAT online account. in case other filing schemes have been opted for instead.

If you are late, HMRC can record default against your company and impose a penalty fine.