Many international clients and non-UK residents are often interested in setting up companies in the UK. This is because of the ease of starting and doing business, access to international markets, modern regulatory framework, and the highly regarded judiciary in one of the world’s largest and most advanced economies.
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 assist in completing and submitting all necessary information and documentation, thus avoiding common mistakes made by those unfamiliar with the UK who try to establish a company on their own. Applications are typically approved within 3-6 working hours, given that all required information is accurately completed online and submitted 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
When a company is owned or operated by non-residents and is involved in international trade, it often needs to make frequent cross-border payments. For this purpose, the company requires a business bank account in its name. However, if a newly formed UK company is entirely owned or controlled by non-UK residents, opening a corporate bank account with a UK bank can be quite challenging. This is due to the limited range of banking services available to UK companies that are wholly owned or controlled by non-UK residents.
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 banks, i.e. non-UK banks, will require a set of company formation documents that have been duly authenticated with an apostille, along with personal identification and other documents regarding all of the company’s directors and shareholders. You may also need to have the documents translated into the language of that bank’s jurisdiction, with the translations certified as accurate by an appropriate person such as a solicitor or notary public. These translations should then be supplied to the bank with the original documents themselves or certified copies. Some banks may also require a personal visit by a company director in order to open an account.
Concluding Remarks
Creating a UK company is a relatively straightforward process. However, non-residents may encounter challenges in managing the company’s affairs due to unfamiliar tax and reporting systems. Therefore, it’s essential for non-UK residents to stay in regular contact not only with their company formation agent, but also with their accountants, solicitors (if needed), and other advisors in the UK to ensure compliance with all legal requirements.
We at Uniwide Formations have developed a special Non-Resident Package tailored for individuals residing outside the UK who wish to establish a company.
