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Limited Company Formation United Kingdom

UK Limited Company Formation or PLC: Company Formation United Kingdom

• Tax planning via a network of international tax advisers and attorneys
• Why form a company in a foreign country with a tax accountant specialized in international tax law?
• Basic Considerations regarding the Formation of Companies in „Zero-Tax Havens“ i.e. in countries that have not entered into Double Taxation Agreements with other countries
• Offshore Company Formation: Tax haven rankings
• Examples for the legal reduction of corporate taxes
• DTA permanent establishment concept – Our services and fees
• Parent companies and their subsidiaries in the European Union
• Beware of cheap founders!

UK Limited Company Formation- Company Formation United Kingdom- UK Limited (Ltd) or PLC

Setting Up an English Limited Company (Ltd) or PLC (Public Limited Company) in United Kingdom

1. Company formation UK Limited (Ltd) or PLC: Basic Information on Taxation in United Kingdom

English limited companies (a limited company = a company with limited liability or a PLC = English public limited company) are taxed at 21%, the rate for medium-sized enterprises (on profits of up to 300,000 pounds sterling), thereafter progressively increasing to 30%. VAT is 17.5% and is due to be increased to 20% in 2011. As England is a member of the European Union, the EU directive on parent-subsidiary companies is in effect (tax-free collection of dividends in the case of associated companies within the EU, provided that the minimum participation threshold of 10% is reached and the companies involved are operating as active businesses), and the EU directive on mergers and/or the EU freedom of establishment. England has a double-taxation agreement with many countries and, therefore, in many cases, the shielding effect of a double-taxation agreement is available. As a rule, an English limited company or PLC is not suitable as a holding company (one which holds shares in domestic or foreign companies).

1.1. Company formation UK Limited (Ltd) or PLC: Basics Information on United Kingdom as a Location

From a purely fiscal point of view England, as a location, stands in the middle ground of the major industrialised countries. Within the European context countries such as Cyprus and Bulgaria (with tax rates of 10% on earnings), Madeira or the special zone of the Canaries (with tax rates of approx. 5%) have tax rates that are considerably lower. However, England has something to offer from the point of view of company law. Thus, in the case of an English limited company the minimum share capital is one pound sterling and, in the case of a PLC, 50,000 pounds sterling, whereby just 25% requires to be deposited. Companies (limited companies or PLCs) are liable with their capital contribution and fixed assets and business assets, insofar as there are any. There are also, admittedly, situations in England in which the corporate veil is pierced and liability is enforced on the director as a natural person. However, these are not comparable with the regulations in other countries.

2. Our “Setting Up a Company (Limited/Ltd or PLC) in United Kingdom” Services

Our legal firm sets up English companies (limited companies or PLCs) on behalf of clients, including all the necessary or desired services:

• Advice on all issues concerning the setting up of a limited company or PLC in England, and tax advice within the context of associated companies
• Setting up of the company, registration at Companies House in England, memorandum of association and the articles of association
• Translation of the registration documents into the language of the country of the client, apostille, certification of documents by a solicitor
• Provision of the registered office in England
• Provision of a head office (proper place of business) in England: company sign, its own telephone number, taking personal phone calls using the name of the company, fax service, acceptance and forwarding of mail. In addition, on request: the renting out of fully-equipped offices and/or the use of conference rooms
• Appointment of a company secretary and the services of the company secretary (no longer required in the case of a limited company)
• Appointment of a trust director or full-time director in England (cf. “location of the senior management of the business” as the location of the business premises, provided there are no production facilities, no site for the exploitation of mineral resources or building work being carried out in England lasting longer than 6-9 months, in which case the business premises are always in England, irrespective of the location of the senior management of the business). According to a new law, one director must be a natural person and be resident within the EU. Therefore, we will, on request, appoint one who is resident in England as a director of the company, if the business premises are supposed to be located in England.
• Appointment of a trust shareholder: we will, on request, appoint a legal person as trust shareholder, who will hold X-100% of the shares as trustee
• Bookkeeping, advance VAT return and annual accounts
• Opening of an account in the name of the English company, including online banking, cheques and credit card. On the appointment of a trust director the beneficiary/client will obtain sole authority over the account.
• Registration of a branch office of the English limited company in another EU country or in Switzerland.

Special services for companies that wish to set up fairly large business premises in England:

• Assistance with the search for suitable offices, storage depots or production sites, process for obtaining permits
• The director will be appointed by the foreign company itself and dispatched to England: registration for tax purposes, nationanal insurance number (social security number), English national health insurance, assistance with finding somewhere to live. The same applies to members of staff at the English company in England.
• Members of staff in England: payroll accounting, transfer of income tax on earnings and social security

The fees depend on the services. We will gladly send you a summary of our fees.

3. Setting Up a Limited Company (Ltd) or PLC  in United Kingdom and Company Law

3.1. English Limited Company (UK Ltd)

1. Establishment

A limited company may be established without the involvement of a solicitor. All that is required is to submit an application to Companies House, the central register of companies in England. Various documents must be enclosed with this application, such as inter alia the bylaws of the company, consisting of two parts: the memorandum of association and the articles of association. The memorandum will contain the provisions with reference to the legal relationship with third parties, whilst the articles govern the internal relationships of the company.

Companies House (English Register of Companies) only carries out a formal check and in so doing checks whether the name of the company is permissible or whether another company with the same name already exists or whether the intended articles of association contravene statutory provisions. If there are no grounds for rejection,  Companies House will issue the certificate establishing the company, the so-called certificate of incorporation. The date of issue of the certificate of incorporation is, at the same time, the date of establishment of the company. From this date onwards it is legally in existence, can conclude agreements and be the bearer of rights and obligations. From this moment on liability is also limited to the assets of the company, provided the articles of association of the company contain a corresponding clause limiting liability.

Companies House does not check that the obligations with regard to making deposits have been fulfilled and the ability to freely dispose of the goods and services of the company.

2. The Share Capital of the English Limited Company (Ltd)

The limited company needs practically no share capital. It is true that a nominal share capital must be quoted in the articles of association and each founding member must assume responsibility for a proportion of this. However, a share of one penny is all that is required, in theory. But in practice a nominal share capital of “at least one pound sterling” is demanded. The provisions concerning the meeting of the obligation to make an investment are also really quite liberal which, in view of the fact that only one pound has to be raised, is no more surprising. Therefore, both cash and contributions in kind can be invested, whereby services provided by the partners are also recognised as an investment. The investment can also be achieved by offsetting the claims of the partner against the company.  

The nature of the investment merely has to be communicated by the company secretary to Companies House, without an agreement in the articles of association being required. There is also greater freedom when placing a value on the contribution in kind. A full check such as in the case of a German limited company does not take place.

English law is stricter when it comes to the distribution of the profits. Only the profit made after offsetting it against losses carried forward may be distributed. The profit must have been made after the company was set up. Accounting profits resulting from re-evaluations are not available for distribution. On the other hand, undisclosed profit distributions are readily permissible under English law. Under German law, by contrast, this is not allowed, if the share capital is affected by the undisclosed profit distribution. Undisclosed profit distributions only lead to a liability, under English law, if there is a glaring imbalance between the performance of the company and the partner.

Considerably more difficult is a write-down of the share capital of an English limited company which, in view of the fact that is does not need to have practically any share capital is, however, of secondary importance. Should, nevertheless, a write-down of the share capital take place, the consent of the competent court is required for this. In so doing, the court will check whether the company has observed the formalities and whether the interests of the creditors, the shareholders and the public have been sufficiently safeguarded. A comparable check does not take place in the case of a German limited company.

3. The Organs and Arrangements of the English Limited Company (Ltd)

The English Limited company possesses three organs: the director, the company meeting and the company secretary.

Insertion: following an amendment to the law a company secretary is no longer required in the case of an English Limited company. The manager can take on these duties.

Every English limited company must have a so-called registered office in England. This does not involve, in this case, an actual place of business. But this registered office serves, in particular, as an official location for the delivery of mail to and the storage of documentation on behalf of the company. Official communications, complaints (including legal actions) etc. are delivered to this address. In addition, the obligatory partners – and miscellaneous register – must also be stored there. Therefore, the registered office is not just a letter-box office but actual administrative activities also take place there.

In England there are professional company secretaries who take on these duties for many different companies. These company secretaries also provide the services of a registered office.

4. The Obligations of the English Limited Company to Publish Information

Even limited companies are obliged to disclose their annual accounts. At the same time it must be borne in mind that the English limited company will, of course, have to present annual accounts that comply with the English balance-sheet standards.

In addition, the director of the limited company, or the company secretary must submit the so-called annual return to Companies House once every calendar year. What is involved in this case is a summary with information on the company, the management, the partners and the capital structure. In addition, there are further compulsory communications, all of which can, however, be dealt with by the company secretary or the director. However, Companies House monitors very meticulously that these duties of disclosure are being observed. In the event of these being breached, fines are imposed on those responsible and, in the worst case scenario, the company can be officially struck off due to the breaching of duties of disclosure.

5. Piercing the Corporate Veil in the Case of the English Limited Company

English law is also familiar with the possibility of making claims against the partners in respect of liabilities of the company (so-called piercing the corporate veil). However, the requirements are strict. Presenting them would break the local mould. All that has to be borne in mind is that the issue of piercing the corporate veil in the case of the English limited company can also depend on English law, even if the company has its registered office in Germany, for example.

3.2. Setting Up a Company in England: the PLC (Public Limited Company)

Key Features of the PLC (public limited company) in England:

• Minimum share capital: 50,000.00 pounds sterling, at least 25% must be deposited
• at least 2 directors must be appointed

Note: the place of business for tax purposes is legally defined in the double-taxation agreement. Thus a natural person who normally resides in England must occupy the position of senior manager of the PLC (5 DTA: “Location of the senior management” as the location of the place of business). Either the client – or a representative – shifts his usual residence to England and acts himself as a director of the company or our legal firm in England can appoint a trust director or full-time director. Since October 2008 only natural persons are still allowed as managers. Since, when setting up a PLC, two directors are required, our legal firm can appoint both directors or just one director, whereby the client – or his representative – steps in as the second director. It is not absolutely necessary for the second director to be normally resident in England.

This rule can be departed from if a production facility is set up in England, a facility for the exploitation of mineral resources or construction work is being carried out that will last longer than 9-12 months. In that case, as far as the facts of the DTA are concerned, the place of business is always in England, irrespective of the location of the senior management of the business.

• a certified company secretary must be appointed
• at least 2 shareholders must be appointed (these may be natural or legal persons from home or abroad)
• a PLC is subject to a “compulsory audit” once a year. We can arrange for an English firm of auditors to do this.

Sale of Shares in the PLC (quoted off-the-floor and on the stock exchange)

As far as the sale of shares in the PLC is concerned, the PLC, as a Public Limited Company, has the choice as to whether and how this should be achieved (through the stock exhange or “off-the-floor”).

Actually publication, that is listing them on the stock exchange, is very expensive.  However, it is not absolutely necessary for the PLC to “quote them publicly”, they can also be held privately or it can sell shares directly.

Registration of the PLC with the FSA (Financial Service Authority) in the UK must be determined following an examination of the business activities.

We can, on request, assume responsibility for all the services involved in quoting the PLC on the stock exchange or off-the-floor. Fees will depend on the services.

Company formation UK Limited: The following services are included in our complete packages:

Forming of the company, entry in the commercial register of the country, apostille, notarially certified translations of certificates into English, unless official language.

• Nominee director: An attorney in the formation country will act as nominee director of the company (to the outside) and transfers all rights and obligations internally to the actual beneficiary (notarial deed of trust). The director does not have any account authority.
• Nominee shareholder: a tax office in the formation country will act as nominee shareholder (to the outside) of the company and transfers all rights and obligations internally to the actual beneficiary (notarial deed of trust).
• Domicile of the company in the formation country: deliverable postal address, availability by telephone, telephone and fax, mail forwarding service
• Account opening: bank account for the company at a renowned major bank in the formation country, internet banking, VisaCard and cheques. Only the founder of the company is authorized to have access to the account.
• General power of attorney to the founder: Only the founder receives a notarially certified general power of attorney for the company.
• Recommendation of a renowned tax office in the formation country, for book-keeping and accounting
• Internet-homepage of the company hosted on a server in the formation country: 5 pages for presentation of services/products, feedback form, imprint, e-mail address. May be extended at any time.

The fees for the complete packages include the services mentioned above; any special services (nominee director and shareholder, domicile) are paid for one year.

FEES FOR UK LIMITED COMPANY – PERMANENT ESTABLISHMENT IN the uk

–Formation of a UK Ltd: Company name availability check, registration with the Companies House, all documentation, preparation of memorandum, preparation of articles of incorporation, statutory register, help file (including templates for: letterhead for UK permanent establishment and representative office or branch subsidiary outside the UK, invoicing, employment contract or independent contractor agreement, specifications for UK website, and much more): EUR 598.00

–Registered Office (NOT sufficient for an “ordinary place of business,” see Head Office below; a Head Office is generally a co-requirement): EUR 190.00 for the first year, GBP 84 per year thereafter.

–Apostille set, notarized certifications: Company statutes in English, notarized by the Companies House; company statutes in the language of the client’s home country, translated and notarized by a sworn translator approved by the UK courts; commercial register entry, notarized by the Companies House and apostilled by the UK Foreign Office: EUR 590.00 (required only if a subsidiary location or non-independent branch location registered with the trade authorities is to be established outside the UK, not for representation. Is also required for opening bank accounts outside the UK).

–Maintenance of your company statutory books (all communication with the British tax authorities and HMRC/Companies House via fax, telephone, e-mail, creation of Annual Return, deadline check with HMRC and Companies House, NO bookkeeping/year-end accounts): EUR 400.00 for the first year, GBP 120 per year thereafter.

–Appointment of a Company Secretary: EUR 290.00 per year

–Nominee director, legal entity: No “formation director” or director in “Belize” (beware of cheap offers!), British tax advisory and law office appointed as director of the company, accessible and reachable throughout the term of the agreement (unfortunately this is not always the case), nomineeship agreement between the nominator and nominee. EUR 700.00 for the first year, plus EUR 400 administration fee.

Note: In accordance with UK law, legal violations may lead to restriction of access for the director. For this reason, agreements to be signed by the nominee director must undergo prior legal review. Our UK tax advisors/attorneys charge between EUR 70 and EUR 150 per agreement that they are asked to sign in their capacity as nominee director. Independently thereof, the nominator (client) holds general power of attorney and thus has the ability to sign contracts independently (“on behalf of”), in which case no costs are incurred.

Warning: As of October 2008, legal entities are NO LONGER allowed to act as directors of UK Limited companies, only natural persons.

–Nominee director, natural person: No “formation director” or director in “Belize” (beware of cheap offers!), an employee of the British tax advisory and law office is appointed as director of the company, accessible and reachable throughout the term of the agreement (unfortunately this is not always the case), nomineeship agreement between the nominator and nominee. EUR 1,500.00 per year for the first year plus EUR 500.00 administration fee (due to the high liability risk, this service is subject to certain requirements, please inquire!)

Note: In accordance with UK law, legal violations may lead to restriction of access for the director. For this reason, agreements to be signed by the nominee director must undergo prior legal review. Our UK tax advisors/attorneys charge between EUR 70 and EUR 150 per agreement that they are asked to sign in their capacity as nominee director. Independently thereof, the nominator (client) holds general power of attorney and thus has the ability to sign contracts independently (“on behalf of”), in which case no costs are incurred.

–Permanent director:  An employee of the British-based office acts as director of the UK limited company, with a General Manager’s contract plus wage and social security benefits. Fees depend on expenses and income of the Ltd, between EUR 600 and EUR 1500 per month.

–Client becomes second director: Founder / client / beneficiary becomes a second director of the limited company with joint signing authority (both signatures required): One-time fee of EUR 490.00

–Nominee shareholder: English tax advisory and law office acts as nominee shareholder of the limited company (X – 100% shareholder): No formation shareholder or shareholder in Belize (beware of cheap formation offers!): EUR 980.00 for the first year, plus EUR 400 administration fee.

–London Head Office, Version 1: A Registered Office does NOT sufficiently constitute an ordinary place of business in the UK (could be viewed as a dummy corporation and/or the UK financial authorities may deny VAT registration). In Version 1, the UK Ltd receives its own phone and fax number with voicemail; incoming phone calls are forwarded to you via e-mail as sound file attachments; otherwise, a deliverable postal address is provided and mail is forwarded on to you. This prevents suspicion of a dummy corporation in connection with your nominee director’s “real office” (this is crucial): EUR 690.00 for the first year, thereafter EUR 260.00 per year plus mail forwarding fees (EUR 50.00 deposit required)

–London Head Office, Version 2: A Registered Office does NOT sufficiently constitute an ordinary place of business in the UK (could be viewed as a dummy corporation and/or the UK financial authorities may deny VAT registration). Version 2: Deliverable postal address in the US, mail forwarding, your own telephone number with personal answer service in the name of the company, fax, call forwarding to your phone available, company nameplate. Lease agreement between the landlord and the Ltd. Offered by our British-based tax advisory office at the office site, i.e. at the nominee director’s place of management. Temporary use of office and conference spaces for an additional fee optional. You will be notified of incoming phone calls via e-mail, fax or SMS. Fees: EUR 250.00 per month (payable 6 months in advance), one time setup fee of EUR 600.00. Call forwarding: plus any incurred call charges from British Telecom.

–London Head Office, Version 3: A Registered Office does NOT sufficiently constitute an ordinary place of business in the UK (could be viewed as a dummy corporation and/or the UK financial authorities may deny VAT registration). Telephone answering with company name, company address in London, company nameplate, mail forwarding, temporary rental of fully equipped office and conference rooms: http://www.eoffice.co.uk/services/virtualofficepremium.htm or www.regus.com. We will put you in touch with the provider, agreement signed between your Ltd and the Business Center.

–VAT registration/Sales tax ID number: GBP 249.00 Payable directly to the tax advisory firm in London, not included in the package. Within the scope of intra-Community deliveries and services, the VAT-registered UK Ltd issues invoices excluding VAT, as long as the service recipient is located outside the UK and also holds a VAT ID (6th EU Directive, reversal of turnover tax liability, service recipient pays VAT). VAT registration required for sales higher than GBP 60,000 per year.

–New bank account setup in the UK: New bank account including Visa card and online banking, Beneficiary has sole transaction authority: One-time fee of EUR 790.00

–New bank account setup in Austria (including online banking, Visa and debit card): One-time fee of EUR 900.00 The apostille set is required for this service. No travel to Austria is required. Austria offers a very high level of banking secrecy as guaranteed by its constitution; no information is disclosed except in serious criminal cases.

–Registration of a non-independent branch location (available in Germany, Denmark, France, Italy and Spain): The UK Ltd and permanent UK establishment must apply for registration and NOT the client. (beware of cheap providers!). Considerable administrative expenses are therefore incurred. The apostille set is required for this service: One-time fee of EUR 700.00

One-time fee amounts are calculated in advance and are understood to be net plus VAT if applicable. Partial payments (50% in advance, 50% after receipt of formation documentation by fax) incur a 5% fee. If taking over an existing Ltd, the fee must always be paid in full and in advance.

Annual fees (as of the first year) are considered deductible expenses and therefore reduce your taxable income. The same applies to costs for tax advisory services and year-end accounts. Foundation fees can be billed as “Tax and legal advisory services” to your German-based company, for example, and are equally deductible.

Fees for bookkeeping, advance sales tax reporting, year-end accounts (UK tax adviser)

Bookkeeping Price Plans

Include:

Inclusive transactions according to price plan Up to date bookkeeping at all times Creation of own dedicated accounts website to view your accounts online Monthly management account reports to view and print FREE VAT Registration if required VAT Return (automatically updated during period) to view and print Preparation of the annual Corporation Tax return Year End Accounts for submission to Companies House and HMRC Electronic document storage (PDF) for all your accounts Qualified, UK based Customer Account Manager (for all queries etc)