Company Incorporation in UK

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Overview- Company Incorporation in UK

The United Kingdom (UK), also commonly known as the United Kingdom of Great Britain, is the 6th largest economy in the world and 2nd largest in Europe in terms of GDP. It is one of the top destinations for entrepreneurs from across the globe to establish their businesses.

The United Kingdom is one of the most important European consumer markets and one of the top countries in the world attracting FDI or Foreign Direct Investment. One of the primary reasons why the UK economy is attracting FDI is due to its nature of a liberal economy, while its business environment is highly favorable.

Company incorporation in UK is attractive due to its certain facilities, such as solid governance, well-equipped infrastructure, and various other structured rules and regulations. However, company incorporation in UK is easy and faster, and there is no mandatory requirement for citizenship. There are also no restrictions regarding the directors' or the shareholders' nationality.

Such company incorporation varies from country to country. Every country has its legal regulatory framework that must be followed before obtaining a company incorporation certificate or permission. Therefore, navigating the process of company incorporation requires a comprehensive understanding of the legal, regulatory, and procedural aspects involved.

Types of Companies in the UK

When forming a company or a business, one should know the types of companies available in the specific country. Each type of business entity has a separate legal requirement. The following are the options for company formation in UK:

1. Public Limited Company

A public company is one in which ownership is distributed among the general public through publicly traded shares. It must have a share capital of £ 50,000 or more and a minimum of 25% must be paid before the company begins trading.

2. Private Company Limited

It is a legal entity with its right or ownership, is privately held and is not eligible to be listed on the stock exchange. Private companies limited are Private Company Limited by Guarantee, Private Company Limited by Shares, and Private Unlimited Company.

3. Limited Company

A limited company incorporated in the UK has a limited liability feature. Here, the liability of the company's members is limited to their shares in the company.

4. Community Interest Company

A business that seeks to establish a benefit for the community rather than the shareholders or members of the company. They can choose to be either public or private and can be limited by share capital or guarantee.

5. Sole Trader

A sole trader is one in which a single individual can obtain a company incorporation in UK. The liabilities are unlimited; hence, individuals shall consider such personal liability before applying as a sole trader.

6. Partnership

A partnership firm is one where two or more persons come into an agreement, sharing the profits and liabilities of the business.

7. Unlimited Company

In an unlimited company, the liability of the shareholders and members is not limited. Here, the members are jointly liable for the company’s debt.

8. Limited liability Partnership

A limited liability partnership is established between two or more persons, where the liability of the partners is limited depending on the amount of contribution to the partnerships.

What are the Benefits of the Company Incorporation in UK?

One should know the benefits before applying for company incorporation in UK. Below is the list of benefits of the company incorporation in UK is as follows:

  • The United Kingdom has access to a large consumer base from all across the globe.
  • In the UK, an efficient workforce is available, thus increasing work efficiency and reducing costs.
  • The British Government also offers a favorable tax system, where both company owners and employees are eligible.
  • Global recognition gives a company multiple opportunities to raise capital and finances from banks and financial institutions.
  • The British Government provides various government incentives and benefits.
  • There is no requirement for citizenship of company directors or shareholders.

Eligibility Criteria for Company Incorporation in UK

An applicant seeking company incorporation in UK must meet the United Kingdom company incorporation laws and regulations. Below is the list of eligibility criteria:

  • An applicant company should obtain a distinctive or unique name, no forbidden terms and the company name should not be identical to another registered company.
  • A registered office in the UK and the location must be listed on the public record.
  • The number of directors varies from company to company; however, the directors should be above 16 years.
  • A minimum of one shareholder is mandatory for company incorporation in UK; in the case of a partnership & limited liability partnership company, at least two shareholders also have no limitation on the nomination of shareholders.
  • At least one natural person or individual besides the corporation acting as a company director.
  • A mandatory service address has to be kept in the public record by the company director, company secretary, or person with significant company control.

Documents Requirement for Company Incorporation in UK

Documents are crucial for obtaining any certificate or registration. Below is the list of documents required for company incorporation in UK.

  • Memorandum of Association & Article of Association.
  • Visa & Passport
  • Details of the company’s stakeholders and persons with significant control (PSCs).
  • Details of company registered address.
  • Details of the service address of all PSCs and directors.
  • Address proof & ID proofs.
  • Bank account details in the UK.

Process for Company Formation in UK

The company formation in UK is regulated under the Companies Act, 2006, under the regulatory authority of the UK Company Registry, also known as Companies House. The steps involved in the company incorporation in UK are as follows:

1. Choose the Type of Business

The applicant business owners shall choose the type of business or company they are willing to set up in the UK. However, these types of companies are differentiated by the nature of the business, members or partners, and area of business operation.

2. Choosing a Company Name

The next step is to choose a name for the company. The name of the company shall be decided diligently after understanding the rules on the company's name, ensuring compliance with the UK Companies Act, 2006. Additionally, such company names shall also be available and meet the requirements of the Trademark Act.

3. Directors Appointment

A minimum of one shareholder is mandatory to look after the company's affairs before applying for company formation in UK. Such a shareholder can also be the company's director. A company may also appoint key management executives, such as a company secretary, compliance officer, etc.

4. Identify People with Significant Control (PSC)

An applicant business owner shall identify the PSC of the company, i.e., directors or shareholders who have significant control over the company. However, the PSC details of the company must be recorded in the PSC register and mentioned in the UK company incorporation form.

5. Preparation of the Necessary Documents

The applicant business owner shall prepare legal documents like the Company’s MoA (Memorandum of Association) and AOA (Articles of Association).

6. Apply for Company Registration

After completing the above-given steps, the applicant must choose an SIC code, i.e., the Standard Industrial Classification of economic activities for the company. This code describes the activities carried out by the company. The company registration shall be applied for before Companies House either online or offline.

Compliance Requirements for Company Incorporation in UK

After obtaining Company incorporation in UK, every registered company needs to comply with the laws and regulations as per the Companies Act, 2006. Below is the list of compliances for UK companies.

1. Company’s Annual Account

A Private Limited company must submit yearly accounts to HM Revenue and Customs (HMRC) and UK Companies House. The amount determined by these accounts determines the Corporation Tax to be paid.

For the newly registered UK private Limited company, two types of accounts are required:

  • First Account- A company must submit an annual account to Companies House 21 months after incorporation.
  • Annual Accounts- An annual account submission to the Companies House 9 months after the Company's fiscal year ends.

2. Confirmation Statement

Companies registered in the UK must draft and file a mandatory confirmation statement at least once a year.

3. Company Tax Return or Corporation Tax Payment

Private Companies must submit tax returns to the HMRC, even though no corporation tax is due. Such tax returns must be filed within twelve months after the end of the accounting period, and corporation tax payment is due nine months and one day after the end of the accounting period.

4. Employee Paye Taxes

Employers in the UK must use Pay as You Earn (PAYE) to deduct income tax and national insurance from employees’ paychecks. It applies even though only the company director’s employee himself.

5. National Insurance Contribution

A company in the UK must contribute to the National Insurance Contributions by paying them before the HMRC from the employees' paychecks.

6. Value-Added Taxes

Value-added taxes are also commonly known as VAT; in the UK, this means a tax on products and services that an employer is accountable for collecting and paying tax on sales and purchases.

7. Business Rates

A business rate is a tax paid on properties used for business activities. The local council sends these business rates to companies in February or March every year.

Some properties are exempt from business rates, such as farm buildings and places used for the welfare of disabled people.

Penalties for Non-Compliance with the Companies Act

Any business in the UK that fails to comply with the Companies Act 2006 shall be liable to pay a legal penalty. Below is the list of penalties:

  1. Failure to submit the annual accounts on time will result in a legal penalty, and if such annual accounts payable are late for two years in a row, the penalty shall be doubled.
  2. Failure to submit a confirmation statement before the deadline is an offence, which may result in prosecution and the removal of the company's registration.
  3. Failure to meet the Company Tax Return and Corporation tax payment deadline will result in a legal penalty.
  4. Failure to contribute to the National Insurance contribution may lead to a fine of up to 100% of the unpaid amount for paying late.

What are the Challenges of Doing Business in the UK?

Before establishing a company formation in UK, one should understand the challenges and various drawbacks one can face. The given below is the list of challenges:

1. Complex Tax Structure

The UK has a complicated tax structure, which is very time-consuming and costly. Therefore, one should only apply if one has enough resources and time to comply with the local tax law.

2. Cost of Living

Living in the UK is indeed costly due to its high inflation rate, which impacts business costs.

3. Shortage of Labor

Due to the unprecedented COVID-19, the UK has addressed a major shift in labor supply and demand. Many individuals have lost their jobs and refused to return to the workforce, thus creating a labor shortage in the UK.

Tax Structure for Company Incorporations in the UK

Tax is an important element that every individual and business must understand before company incorporation in UK. A tax system provides a structure for how much tax a company has to incur depending on various factors like business structure, profits, etc. Below are the types of tax in the UK.

1. Corporation Tax

Structured companies, such as limited companies or foreign companies incorporated in the UK or having a branch or office in the UK, must pay corporation tax. It is a tax paid annually on the profits that a business makes annually by conducting its business. Profits under £50,000 are charged a small profit rate of 19%, profits over £250,000 are assigned a primary rate of 25%, and profits falling between £50,000 and £250,000 are assigned an introductory rate of 25%.

2. VAT

VAT is charged only when the business is a VAT-registered business, and it is mainly charged at 20%; a company must register for VAT if its taxable turnover is more than £85,000, which is a compulsion.

3. Business Rates

Business rates are paid to local councils if a company is being operated out of a dedicated business location; this business rate is to be paid to the local council.

Fess Structure for Company Incorporation in UK

The fee structure for company incorporation in UK varies from company to company. However, the government fee is between $565 and $600, i.e. 47,053.71 INR to 50,000 INR. If a professional service is opted for, additional charges shall be added to such mandatory government fees.

Timeline for Company Incorporation in UK

The timeline or timeframe for Company incorporation in UK takes around 24 hours to a week to incorporate business in the UK. However, this timeframe varies depending on the type of business the applicant business owner is establishing and the readiness of the necessary documents.

Why Choose Enterslice for Company Formation in UK?

Enterslice has a team of expert professionals providing the best structure for company formation in UK. We help businesses navigate complex legal frameworks by reducing risks and optimizing operations to increase efficiency and profitability. Our end-to-end services ensure clients do not fall into the pitfalls of legal penalties and legal proceedings, thus saving the businesses' costs and budget. Therefore, you can choose us as your partner for company formation in the UK and various other countries across the globe.

Frequently Asked Questions

Company formation in UK can be obtained through electronic software filing, UK official websites, and a paper application form sent through the post.

Yes, the UK is considered good for doing business due to its high ease of doing business in set-up costs, compliance, and scaling.

Yes, anyone can establish a business in the UK without having a current residential status. There are also no barriers to non-citizen entry.

Yes, you can change the company's name after company incorporation by complying with the legal procedures.

Private equity, commercial real estate and open-ended investment companies are some of the UK's most popular and profitable businesses.

No, companies do not have to pay capital Gain Tax; CGT applies only when an individual disposes of assets.

Yes, foreign companies in the UK pay tax or are subject to corporation tax.

Yes, one can open a company in the UK from India by following the legal procedures as per the UK Companies Act, 2006, since UK citizenship is not mandatory.

Yes, one person can own a company in the UK and be a shareholder or director of the company, obtaining 100% ownership.

A business secretary is responsible for maintaining the company’s documentation, maintaining the company record overall, and managing the company's executive obligations.

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