International clients or non-UK residents are very often interested in establishing companies within the United Kingdom, one of the world’s largest and most advanced economies, due to the ease of starting and doing business, access to international markets, modern regulatory framework and its highly regarded judiciary.
The conditions for setting up and running companies are, for the most part, the same for both UK residents and non-residents.There are, however, some specific points about company formation by non-residents and these are discussed below.
Who is a non-resident?
A non-resident is an individual who resides mainly in one country but has interests in another country. Government authorities in that other country will therefore classify that person as being non-resident.
In most jurisdictions, residency does not depend strictly upon a person’s citizenship but, rather, upon how much time the person spends within the country. The Finance Act of 2013 provides a sequence of tests to determine whether an individual is a UK resident. The simplest rule is that an individual is automatically considered to be resident in the UK if he-or-she spends 183 or more days of the tax year within the UK. If he-or-she spends fewer than 183 days of the tax year within the UK then he-or-she is therefore considered a non-UK resident.
The distinction between residents and non-residents is used mainly for tax purposes. Persons who are resident in the United Kingdom are subject to UK income tax on their worldwide income. In contrast, a person who is not resident in the UK is subject to UK income tax only on income received from sources within the UK. In other words, non-residents pay tax only on their UK income and not on their foreign income.
Can a non-UK resident form a company in the UK?
Yes. Both UK residents and non-residents can establish, own and operate companies and partnerships within the UK. They can also acquire shares in existing UK companies on equal terms. The legal requirements and application procedure are almost the same for everyone wherever they live.
Formation of a UK company by a non-UK resident
Today’s online technology has made setting up a UK company relatively easy, even for clients who are not UK residents.
As a non-UK resident, you have three routes whereby to incorporate a limited company within the United Kingdom:
- Online through a company formation agent such as Uniwide Formations;
- Online via Companies House web incorporation service;
- By post using Companies House paper application forms.
The easiest way for non-UK residents to set up a UK company is to use a company formation agent. They will help to complete and submit all of the required information and documentation, avoiding many mistakes that are commonly made by those who are unfamiliar with the UK and who attempt to form a company by themselves. Applications are usually approved in 3-6 working hours provided that all of the required information is completed correctly online and delivered electronically.
One of the main benefits of using the services of a formation agent is that you do not need to travel to the UK, sign, send or submit any hardcopy documents in person.
Can a non-resident act as a company director?
Yes: A director of a UK company does not need to be resident in the UK. A company may have a non-resident director, even if he-or-she is the only director. The Board of directors of a company may also be composed of both resident and non-resident directors.
Directors who do not reside in the UK must, however, perform the same duties in respect of the company as directors who are based in the UK. These duties include, among other things, complying with accounting and reporting requirements and paying taxes. Failure to comply with such requirements may entail penalties being imposed upon company directors, whether they are resident within the UK or outside.
Do I need business premises within the UK to open a company?
Every UK registered company must have an address within the UK which is its legally registered office. This must be a real, physical address: It cannot be merely a PO Box. This address is necessary for a number of reasons, including to ensure the receipt of statutory mail and legal notices that are sent to your company, regardless of where you are.
For example, let us suppose that you live overseas –i.e. outside the UK – and you have no premises that you own, rent or otherwise have available within the UK that you may use as your company’s registered office. In that case, you may purchase a registered office address service from a corporate service provider within the UK. This address is often provided for a period of a year with subsequent annual renewal.
In addition to the registered office address, each company director, shareholder and person with significant control (PSC) must inform Companies House also of their service (or correspondence) address. This address (or these addresses – one for each director, shareholder and/or other PSC) may be located anywhere in the world and is used for receiving official government post addressed to these officers of the company.
Both the registered office and services address will be publicly available via the Companies House website. If you prefer not to disclose your home address then it is recommended that you specify somewhere else as the service address. You may do this by purchasing a service address (or service addresses) in the same way as a registered address.
The business premises in which the company carries out its day-to-day operations, however, may be anywhere, including outside the UK.
Opening a bank account
A company that is owned and/or operated by non-residents and is engaged in international trade typically makes frequent cross-border payments, for which purpose it needs a business bank account in the name of the company. If a newly formed UK company is wholly owned or controlled by non-UK residents, however, then opening a corporate bank account with a UK bank is a challenging task. This is because the range of banking services within the UK that are available to UK companies that are wholly owned or controlled by non-UK residents is very restricted.
Fortunately, however, companies that carry out international business can enjoy international payment services, which can be an excellent alternative to local bank accounts. Such payment services offer fast and secure international money transfers at affordable fees.
Yet another banking solution for non-residents is to open for the company a bank account that is based outside the UK, since a company that is registered within the UK is not legally required to open an account with a UK bank. The company may therefore trade using a bank account that is held within another jurisdiction.
Foreign – i.e. non-UK – banks will require a set of company documents that have been duly authenticated with an apostille, together with personal ID (identification) and other documents regarding all of the company’s directors and shareholders. You may need also to have the documents translated into the language of that bank’s jurisdiction, with the translation/s certified as being accurate by an appropriate person such as a solicitor or notary public; these translations then being supplied to the bank with the original documents themselves or copies of them which are also certified as true and accurate representations of the originals. Some banks will require also a personal visit by the – or at least a – company director in order to open an account.
Although setting up a UK company is a comparatively easy process, it could then become more complicated for non-residents to manage the company’s affairs due to unfamiliar taxation and reporting systems. It is, therefore, important for non-UK residents to maintain regular contact not only with their company formation agent but also and especially with their accountants, their solicitors (if needed) and their other advisors within the UK in order to ensure compliance with all statutory requirements.