This article is in response to question we received “can a non-resident register a company in the UK?”
The UK consistently ranks as one of the best countries in the world for doing business. A key aspect of this is the lack of red tape and bureaucracy, trusted institutions with checks and balances and the Government’s digital by default strategy. Meaning pretty much every aspect of UK life, or business can be carried out online. Including setting up a business.
Can a foreign national (non-resident) set up a limited company in the UK?
Anyone of any nationality can start, setup, and run a business in the UK as a private limited company (Ltd). You don’t need to be resident, or even live in the UK.
The only requirement is that the company itself must be registered to a UK address. This is mainly for official correspondence.
The good news is that a UK business address is easily acquired. Accountants, bookkeepers, and formation companies often have services renting UK addresses. Though if you’ve ever read the book ‘Moneyland‘ you may want to avoid 29 Harley Street, London.
Earning money via your UK company
Setting up a UK limited company as a foreigner allows you to actively trade goods or services though that business.
For example, a web developer living and working out of Bulgaria could open a UK company and use that company to invoice clients in the UK, or anywhere else in the world.
What it doesn’t allow you to do is physically work in the UK yourself without a VISA or other right to work in the UK. That means you can’t earn untaxed income. British residents enjoy a tax-free allowance of £12,500 on their income. As you won’t be tax resident in the UK and paying yourself a salary through the company this tax-free allowance won’t apply.
The business itself will pay UK corporation tax at a rate of 21% on profits, after which you can then exact your remuneration most likely in the form of dividends. For non-residents the UK treats these as having been subject to a 10% tax at source, so in effect you can take dividends out of the UK tax free. Dividends may be subject to tax in your home country though.
In our example of the Bulgarian web developer their UK limited company would pay 21% on its profit minus allowable expenses. Any remaining profit could then be taken as dividends without further UK tax. They would attract a 10% tax from the Bulgarian authorities though.
If, however the business owner was tax resident of Panama, they could enjoy the dividends tax free as Panama doesn’t tax foreign income.
How to open a limited company in the UK as a non-resident
Opening or registering a private limited company in the UK is extremely straightforward. The process for a foreigner is no different than that a British national and there are no immigration question or additional fees.
You can register the company yourself, or use a formation company such as 1st Formations which offers a complete registration package for non-residents for £124.99.
For UK residents these agents/formation companies, charge as little as £6.50, but for non-residents the cost can vary from £100-250. That’s because whilst it is easy to register a company yourself as a resident. Non-residents face a technical problem.
To register a business, you need what is called a Government Gateway ID. This is just a login to access Government websites. Unfortunately for someone not living in the UK it is impossible to get one as the ID process checks for a residential UK address and requires a UK tax number (National Insurance number).
The only way around the issue without using a formation company, is to register via post. This takes 10-14 days and costs £40, but gives you the added option to register a company name without the word ‘limited’ after it. Very few people would go this route, but if you do decide to go the postal route you can apply directly to Companies House.
Whilst a formation company (agent) may charge more, they also ‘add value’ to justify the additional cost. These add-ons may include, a UK business address (which you will need anyway), a mail scanning service, VAT registration if necessary, help opening a UK bank account, and a UK telephone number. Be sure to check the on-ongoing costs, as many of the services are discounted or only included for the first 12 months.
Whichever route you choose, to register the company you will need the following:
Company name – You will need a unique business name. You can use a different name for trading but the company itself needs a name. You can use the Companies House name checker tool to check your name and make sure it is not already in use.
Business address – as stated earlier the company must have a UK
Director information – there must be at least one company director. Most likely this will be yourself, so you’ll need to provide your name, address, and date of birth, nationality etc…
Shareholders – Just like the company director there must be at least one shareholder. Again, this is likely to be yourself as the owner of the company
Company documents
Memorandum of association and Articles of association – these two documents outline how the company will be governed, the company ownership, and any rules and restrictions. Most people will use generic documents provided by their formation agent, but you can draft your own, or have a lawyer daft them for you.
Registering the business for Corporation tax
You’ll also need to register for Corporation Tax within 3 months of starting to do business. If using a formation company they may do this for you.
Does a UK company need a UK bank account?
As odd as it might seem a UK company does not need a British bank account. In fact, there is no legal requirement for it to have a bank account at all, though it would be difficult to conduct transactions in the UK without one.
This where the problems start. Many of the best business bank accounts are off limits to companies with directors solely residing abroad. Those that do are generally aimed towards larger international businesses, and have high deposit requirements and on-going fees.
It is possible to use a business account in your home country, but the cost of converting currency to pounds sterling and vice-a-versa is likely to be expensive.
Our recommendation here is to open a business account with Card One Money. It is one of the few business accounts accepts both overseas directors and non-residents. We have a full review of Card One Money here.
Then to get around foreign exchange fees we also suggest a Wise account. Some formation companies will open one for you you, but it’s always better to go direct if you can.
The Wise International Business Account has a one-time fee of £16 and is allows sending, receiving and holding funds in multiple different currencies including EUR, GBP, USD, HUF others. There is a £3 on-off fee for the debit card, and ATM withdrawals are free for up to £200 a month. The free for converting money from GBP to something else varies depending on how exotic the currency is, but for EUR and USB it is around 0.35%.
Is there any else I need to know?
Once your company has been registered, a tax (and VAT) account setup, and you have a business bank account, you are ready to start trading. There are however just a few more things you should know.
Firstly you need to bear in mind that the UK tax year runs from 1 April to 31 March. This is quite different from many other countries. The first year’s company accounts actually cover a period of more than year, as they start from the end of the month the company was first incorporated.
These first year accounts are usually the most difficult, so it might be worth hiring an accountant. After that the annual filing of accounts for small business is relatively straightforward and can be done yourself, especially if using software such as FreeAgent.
On the subject of accounting, and tax, the business must register for VAT once its sales reach over £90,000. You can register even if sales are below this figure but it is voluntary. It’s important to note that if you do register for VAT you can claim back the VAT on purchases you make for the business, but must pay VAT on sales if selling to the general public. Most companies below the threshold don’t register due to the additional administration burden.
In addition to VAT and account filing, you must also submit what is called an ‘annual return’ this is not a financial document, merely a record of publicly available information about your company i.e. the company address, directors etc…