Contrary to what many people believe, it is possible to set up and run a limited company in the United Kingdom even if you are a non-resident. The rules on company registration in the UK allow both non-residents and residents to establish a new company as long as certain requirements are met. Setting up and running a limited company in the UK offers a number of important benefits to non-residents, as we will discuss in this article.
Understanding the Concept of a UK Limited Company
Before discussing the advantages of a limited company for non-residents of the UK, it is important to understand what is meant by a UK limited company. A limited company is a type of business that is legally separate from its owners, which means that it can enter into contracts, own assets and incur debts in its own right.
There are several types of limited company, including:
- Private company limited by shares (LTD) – the most common type of limited company in the UK, whereby profit is distributed to shareholders.
- Private company limited by guarantee (LTD) – typically used by charitable or non-profit enterprises.
- Limited liability partnership (LLP) – limited liability partnerships are like normal business partnerships but with the benefit of limited liability.
- Public limited company (PLC) – used by companies listed on the stock market (e.g. the FTSE).
Directors of limited companies are required, by law, to adhere to strict duties and obligations, including the following:
- Adhere to the company’s constitution as set out in the articles of association.
- Keep company records.
- Maintain financial transparency.
- Report changes to Companies House.
- Prepare and file financial accounts and a Company Tax Return each year.
- Pay Corporation Tax.
Key Advantages for Non-Residents of Setting Up a UK Limited Company
UK limited companies offer significant advantages to residents and non-residents compared to other business structures such as sole traders and traditional partnerships. The most important benefit is that of “limited liability”. Limited liability means that the shareholders are personally protected from the financial losses of the company.
Further key advantages of setting up a UK limited company as a non-resident include:
- Global market access – The UK’s reputation as a global business hub means that non-residents will have access to international markets, partners and customers.
- UK market access – For non-residents, having a limited company registered and operating from the UK provides access to the vast UK market.
- Tax Efficiency – Non-residents may be eligible for tax benefits and incentives, such as exemptions from certain UK taxes.
- Asset Protection – Non-residents can benefit from the UK’s legal protection of certain assets, such as intellectual property (IP).
- International Banking – Non-residents have access to reputable UK banks and financial institutions which, in turn, simplifies the process of making international transactions.
- Access to Funding – Being established in the UK makes it easier to secure investment and financing from investors, venture capitalists or lenders.
- Legal Framework – The UK’s well-established legal system and corporate regulations afford businesses the clarity and stability that allows them to thrive.
- Ease of operation – Setting up and running a UK limited company is made far easier because of the excellent transport and communications infrastructure, the access to professional and business services and the availability of highly skilled staff.
Taxation for Non-Residents who own a UK Limited Company
Taxation for non-residents owning a UK limited company can be complex and depends on several factors, including the company’s business activities and the individual’s tax residency status. UK limited companies are subject to corporation tax on profits (currently 25%) for both resident-owned and non-resident-owned companies. There are, however, a number of tax treaties between the UK and other countries which may apply, potentially reducing or eliminating double taxation.
In addition to corporation tax, directors and shareholders who receive salaries and/or dividends from the limited company may need to pay income tax. Again, the exact amount to be paid in personal income tax will depend on whether there is a double tax arrangement between the UK and the non-resident’s country of residence.
Other UK taxes of which non-residents should be aware include:
- Value-Added Tax (VAT) – VAT is a form of sales tax and must be charged and paid if a limited company exceeds the VAT threshold. Non-residents are legally required to comply with the UK’s VAT regulations in the same way as residents.
- Capital Gains Tax – Non-residents may need to pay CGT (Capital Gains Tax) if they sell assets such as land and real estate within the UK.
- Non-Resident Landlord Scheme – If a non-resident-owned limited company rents out property in the UK then it must adhere to the Non-Resident Landlord Scheme (NRLS). The NRLS imposes a tax on UK rental income on those whose “usual place of abode” is outside the UK.
Given the complexities of limited company taxation for non-residents, it is essential to seek professional tax advice from experts who are familiar with both UK tax laws and the tax regulations of your home country.
Legal Protection and Limited Liability: A Major Advantage
The benefits of legal protection and limited liability offer significant advantages for non-resident owners of UK limited companies. Crucially, non-resident directors and shareholders enjoy the same legal protection and limited liability as UK residents.
Limited liability means that, if the business encounters difficulties, then the personal assets of the directors and shareholders are not at risk beyond the amount which they have invested. Their liability is limited to only what they have invested within the company, which is actually why it is called a “limited company”.
Limited liability provides a vital financial safety net, reducing individual risk and encouraging entrepreneurship and investment, so that shareholders can focus on business growth without fearing catastrophic personal financial consequences if the company runs into problems.
The Credibility and Reputation of a UK Limited Company
The UK’s stable economic environment, strong legal system and transparent business regulations mean that UK limited companies tend to be seen as more robust and worthy of investment.
Having a UK-based limited company can confer a high level of credibility and trust. This can be highly advantageous when building business relationships and partnerships with customers and other businesses. Furthermore, having a UK-based company can facilitate international trade and partnerships, attract investors and enhance the company’s ability to access global markets.
Having a UK limited company may also demonstrate a commitment to ethical business practices, legal compliance and financial transparency, all of which contribute to the internationally recognised appeal of UK limited companies in the business world.
Ease of Setting Up a UK Limited Company as a Non-Resident
If you are considering setting up a UK limited company as a non-resident then the good news is that the process is very straightforward. This is because the UK has designed its company registration processes to be efficient, allowing individuals from other countries to establish new businesses with ease.
UK company registration can be completed online either through Companies House or through a company formation specialist who can handle the process for you while also providing yo with expert guidance and assistance throughout the process.
Before setting up a limited company in the UK as a non-resident you will need to:
- Choose a name for your company.
- Register a physical address in the UK.
- Have any documents required for registration translated into English, if necessary.
- Open a UK bank account.
- Prepare a “memorandum of association” and “articles of association”.
Access to UK and European Markets for Non-Residents
One of the biggest reasons to set up a limited company in the UK as a non-resident is the ease of access to UK and European markets that it provides. The UK has a population of nearly 70 million people and is a major international trading power and financial hub which offers an open, thriving and diverse marketplace.
The UK’s proximity to Europe also provides access to highly lucrative markets within the European Union. The “Trade and Cooperation Agreement”, which was entered-into between the UK and the EU following Brexit, still gives UK firms across a variety of service sectors continued access to EU markets.
The Role of a UK Company Formation Agency for Non-Residents
UK company formation agencies play a key role in streamlining the process of establishing limited companies for non-residents. Not only can company formation agencies such as Uniwide Formations handle the process of registering a UK-limited company on behalf of non-residents, but they can also provide:
- Advice on the different business structures available in the UK.
- A prestigious physical registered UK address (a physical address is mandatory for registering a limited company).
- Help with opening a UK bank account.
- An introduction to a UK accountant.
- Help with registering for PAYE.
- Help with registering for VAT.
- Access to an online portal with all of the details of your new limited company.
- A range of business services to ensure compliance with the rules and obligations of limited company directors.
Conclusion: Why Non-Residents Should Consider a UK Limited Company
The UK has removed many barriers that used to hinder overseas business people and entrepreneurs from establishing and running a business within the UK from abroad. By establishing a business here you can benefit from the UK’s world-class infrastructure and business expertise, stable political and legal system, large and sound economy and its thriving markets. It is still important, however, for non-residents to seek specialist advice when setting up a UK limited company to ensure compliance with the UK’s laws and tax rules.