FAQs on Setting up a UK Company

Andrew Mosby - Menzies Accountant

Andrew Mosby – Inbound International Partner

Whether you are operating an Established UK business, or looking at Setting up in the UK for the first time, Menzies International Team can support you.

We recognise the importance of partnering with a firm who understand global business and that provides proactive and timely support, combined with cross border know-how. Below is a summary of some of the common FAQs (separated in to three sections) about setting up a UK company.

The process of setting up a UK company

Q. How do I set up a company in the UK?

The UK has an attractive regime for company formation, and is one of the easiest countries to set up in. To form a UK company, you are required to submit only basic information on directors, shareholders and trade.

Although, you do not need to appoint a UK based director (this can help with some of the other registrations and if you chose to set up a UK bank account), as part of forming a UK company, you will need to have a UK registered office address.

Menzies can act as your registered UK business address taking care of this administrative function for an annual fee.

At this set up stage no UK bank account is required or a registration with any other UK affiliates or organisations – Chambers/Embassies etc.

Q. How long does it take to set up a company in the UK?

Same day UK company formations are available, but a typical application (if submitted online) can be processed and turned within 48 hours.

Q. What is the cost of setting up a business in the UK?

Most companies chose to adopt a model/standard rulebook (Articles), while others prefer to tailor their Articles to include additional provisions and perhaps more than one class of share.

The formation cost will vary depending on your preferences and we would recommend discussing your requirements with us to determine the right course of action.

Q. What do I need in order to set up a company in the UK?

In order to accurately set up a company in the UK, Menzies will supply you with a data sheet for completion. This document covers any specific requirements you may have and will allow our team to map your requirements against the submission process as well as ensuring we have completed the necessary client take on checks e.g. anti money laundering. This is a requirement of all UK professionals that must be carried out BEFORE we form the new UK company.

Q. What else do I need to consider at the start?

There is a whole range of potential considerations in setting up a UK company including tax registrations (VAT), Employment/Social security. If you already employ or choose to employ people in the UK, there are certain obligations that need to be fulfilled including insurance, employment contracts and pension contributions.

A good advisor will work with you understand your plans and ensure you are compliant on all aspects of UK tax, employment and business law.

Ongoing considerations for the business

Q. Where is the best place to set up in the UK?

With a diverse population of over 8 million, world class transport links and easy access to mainland Europe, London tends to be the destination of choice.

Central London is however a premium location, rent and other overhead costs are higher, and many chose to locate outside of London, in the many Tech and Business parks.

The development of infrastructure projects such as Crossrail and High Speed 2 (HS2), travel between the UK’s major hubs is likely to improve and thus open up opportunities to set up in other locations including the ‘Northern Powerhouse’ such as Birmingham, Manchester and Leeds.

Q. What submissions do UK companies have to make?

As well as the UK tax authorities (HMRC) requirements to submit a corporation tax computation and return; there is a requirement to submit accounts at Companies House.

The UK system requires statutory financial statements to be prepared and submitted to the registrar (Companies House), for larger groups these accounts will need to be audited.

The UK is also a very transparent jurisdiction and all companies need to annually confirm their shareholders, directors and control. This is done by the means of a Confirmation Statement. Submission of your company’s confirmation statement/annual return as well as your annual accounts and company’s director/secretary changes can be done via Companies House WebFiling system.

Q. What is the UK corporate tax rate?

The current UK corporate tax rate is 19%.

Q. When should I set up a business bank account in the UK?

Unlike many European countries, setting up with a UK bank during the company formation process is not a requirement. The timing of setting up a UK bank account, it largely determined by when it becomes convenient for the business.

It is worth noting however, that the process of setting up a bank account can be a challenge – particularly if you have limited presence in the UK and activities are not established. It is worth noting that if you have a number of employees, there may be benefits to setting up a UK bank account to finance UK Pension contributions.

If and when you need to set up a UK bank account, Menzies are able to introduce, advise and streamline the process thanks to our extensive connections with local and specialist bank mangers.

Q. Do I need to VAT register in the UK?

In a lot of cases UK sales will exceed the low UK threshold, so VAT registration would be mandatory. However, often the UK company is set up as a support office, to its international parent operating in the UK – with a cost-plus model in operation.

In this scenario, it may be that sales made by the UK company are ‘Outside the Scope of VAT’. This would mean that VAT registration would be on a voluntary basis.

We would always recommend seeking professional advice to understand your current VAT obligations and any strategic developments that could impact your future VAT obligations. From these discussions we are able to outline the best options to ensure compliance.

Staffing considerations

Q. What are the UK employment rules?

If you choose to employ staff in the UK, all employees are required to have an employment contract in place. This is a legal requirement and typically cover matters such as pay, holiday, benefits, working hours, notice periods and any special requirements or instructions.

Employment contracts are often supplemented by an Employment Handbook (or Mini-handbook) to ensure all staff behaviours are aligned to the businesses expectations and agreed behaviours. Typically, these handbooks cover areas including Disciplinary, Grievance, Data Protection, Health and Safety, but can be expanded depending on the business need and type.

As UK employment rules are varying and complex, Menzies specialist HR People Solutions team are available to advise and help you manage your responsibilities as a UK employer.

Q. Do I need someone working in the UK, to set up a UK company?

No. Only a UK registered office is required.

Q. Can I operate a “Sales office” in the UK?

No. The UK removed this type of entity several years ago, where businesses set up a Sales office and operated as an extension of the overseas entity.

Such entities would be treated as a ‘Branch’ of the Overseas entity and be subject to the same tax and legislative requirements.

Q. Who can help with UK tax returns?

Employees may have their own tax return obligations. These would need to be declared on their personal tax return. This covers the period to 5th April each year, with filing due by 31st January.

Personal tax returns can be completed and submitted digitally via HMRC’s secure online portal. Requirements will vary depending on the individual’s personal circumstances and unless you’re familiar with the process, items of income to declare and the tax calculations, it is strongly advised that you seek professional advice in good time in order to avoid financial penalties.

Q. What staff expenses are likely to be taxed in the UK?

There is a whole range of items which HMRC consider to be taxable benefits, from Healthcare to the provision of a Company car, travel and entertainment. It is worth noting that round sum amounts (that may be allowable in other countries to cover sundries/lunch etc), are something that would be considered taxable in the UK.

As a UK employer it is your responsibility to be aware of the latest rulings on expenses and benefits in order that you accurately account for them with HMRC. Failure to do so can lead to penalties.

If you are at all unsure about the status of a current expense or benefit, expert advice is always recommended; better to be safe than sorry when it comes to tax.