Today we will discuss the formation of a limited liability company in the UK, also known as “LTD” or “Private company limited by shares” .
The British government offers many advantages when it comes to investing and has very high legal security, so this type of company has become a great opportunity for entrepreneurs who want to expand in the market or start their business career.
Interlegal UK is very good at helping entrepreneurs and businessmen to set up, manage and run their companies, as we offer a unique and affordable service according to market prices.
Interlegal is always looking to improve in order to provide better customer service and that is why we are offering you more information about the limited liability company in the UK or “Ltd”, so you can better understand its purpose and objective.
Interlegal wants to highlight the importance of choosing the right professional, since when it comes to establishing a limited company, one that is incorrectly established and managed can result in the individual having fiscal problems in his or her country of residence if there is an international challenge of the “Ltd”, forcing the company to pay taxes based on the fiscal legislation of that country (in this case, local regulations).
A bad choice can result in serious problems and Interlegal wants to help you avoid this. We always recommend that you become familiar with the characteristics of this type of company in advance.
The bureaucratic process of this type of company is simple and minimal, as the share capital required is 1 pound, the tax rate is 20%, and British tax deductions and standards apply.
Another advantage of this type of company is that the owner of the company doesn’t have to be a resident in the UK, provided that they meet a set of requirements, allowing greater mobility in the trade. Therefore:
- At the beginning of the establishment process: the costs of setting up the company are minimal, and the share capital required is symbolic: just1 pound.
- Establishing the company: the paperwork for forming the company is minimal or very simple, since it doesn’t require notary approval or certification, which greatly reduces the costs and formalities.
- Fiscal optimization: the UK offers tax advantages. It is a tax haven compared to many countries. For example, you can create a multiple structure formed by an off shore company in the Channel Islands, linked to a limited company in the UK (Ltd). This structure allows you to significantly optimize dividends without the authorities being able to object anything about it. Tax deductions are very flexible and any expenses that are associated with the business are deductible.
To obtain all fiscal and bureaucratic benefits, it is essential to prove that the company has actually established residency in the United Kingdom.
Interlegal provides security specifically at this point, and one of the several solutions we always recommend is that the director of the company is a UK resident (so there is no doubt that the company is British.)
3. Double taxation policy:
The most common error is believing that working in another country and having a company in England means that your business automatically pays taxes in the United Kingdom.
It is therefore very important to choose a bilingual and a qualified professional. Interlegal Group is composed of professionals who verify all information regarding taxation in both countries, which is important for avoiding problems with tax authorities.
In this respect, Interlegal wants to make it clear that a company must pay taxes in the place where its headquarters are.
That is why, if a Spanish citizen residing in Madrid establishes a limited company (Ltd) in the UK but with its headquarters in Spain, it will be subject to Spanish law and therefore taxation in Spain. These regulations apply in most European countries, except for Switzerland, where you can run a business without being automatically taxed by the tax authorities.
However, a registered office is not the only criterion for determining the liability of a company. We must also examine the mechanisms of advertising used by the company as well as the type of product for the target market.
4. Basic requirements:
- Registered office in the UK.
- Domiciliation in the UK (correspondence).
- A director who is a resident in the United Kingdom.
- Company advertising that is not aimed exclusively at consumers in the owner’s country of residence.
- The infrastructure must be located in the UK.
If your limited liability company already exists, but does not fulfill the above requirements, please consult our professionals.
Sometimes this type of company may not fit your needs: a Ltd isn’t the solution for everyone. Interlegal thoroughly examines the needs of every individual in order to optimize the benefits.
If the services provided are linked to the individual’s country of residence, the management of the business takes place exclusively in their country of residence, or the activities are focused on properties or holdings; it cannot be regulated by the British tax law.
However, even in such situations, you can opt for an international solution that will optimize your corporation tax, excluding the tax when making the distribution of dividends. In this case, you should create a structure composed of a limited company (Ltd) in the UK, which owns a subsidiary in another country other than the first one. The subsidiary will be governed by the local legislation, but taxation of dividends will be done in the UK under the British taxation law.
If the business is online, the situation changes completely, but it is necessary to analyze each case separately. As a general rule, you should be able to manage the activity of your company online or else do it from the UK.
6. Taxation in the UK and dividend distribution:
The only tax that a limited company in the UK (Ltd) is required to pay is the corporation tax, which taxes the total profit generated by the company. It is currently fixed at 20%.
The owner must decide whether the money will stay in the company or bedistributed to shareholders through dividends. These shareholders may be both individual persons and legal entities. When it comes to the distribution of dividends, they will not be taxed by the UK, but by the tax authority of the country where they reside: the tax treatment of dividends varies according to the country in question.
In addition, the individual is obliged to inform the tax authorities of the amount of dividends distributed dividends when declaring income.
There are several ways, both direct and indirect, to distribute dividends among the shareholder(s).
Interlegal lists the options:
- Issue invoices to other companies: If you have another company, for example in Spain, you can issue an invoice (for an amount equivalent to the dividends) in the name of the company, and then make the payment. British authorities are very flexible and being the owner of both companies will not be a problem, but everything must be done in a transparent way and without hiding the transactions.
- Expenses: The British tax authorities allow the inclusion and deduction of any expenses related to the activity of the company.
- Salaries: Another solution is to opt to pay a salary to yourself. The amount of money established as a salary will not be taxed in the UK. Taxes will be paid only in the country of residence of the shareholder(s).
In this regard, Interlegal wants to makes things easier, so, it has designed a service exclusively for residents in Spain when it comes to dividend distribution: Interlegal Spain makes the income declaration, emphasizing this particular point, and you will also receive a discount for being a client of Interlegal UK.
INTERLEGAL PACKAGE UK
Interlegal UK offers two packages according to your needs: firstly, the package exclusively for the UK, and secondly, the universal UK & SPAIN package.
These services include:
- Setting up the company for free: safely and directly.
- Domiciliation: As an essential requirement, a registered office is necessary, which may or may not be the same as a service address, the address from which authorities issue all necessary communications. Interlegal offers domiciliation in London, Doncaster and Madrid exclusively.
- Opening a bank account: We will personally help you to open an account according to your needs, since we are aware that the language change can be difficult when performing this procedure. At your request, the account opening can be performed remotely without having to travel to the UK.
- VAT registration: We will take care of the process of obtaining the VAT number for your limited company in the UK. How long it takes to obtain the VAT number doesn’t directly depend on us, but on the British authorities.
- Accounting and maintenance of the books: We take care of the company’s annual accounts and balance sheets.
- Timely presentation: We take care of all tax obligations, submitting the necessary documentation on the dates given by UK Revenue.
- Tax return to the owner of the company: All British companies must annually updatethe structure and status of the company in the “Companies House” register.
- Salary for the business owner.
- Advice and support: We’ll help you with any problems you have, and serve as a mediator between the British authorities and help you with any difficulties that may arise from the language.
- Business Technology (I + D + i): We currently believe that technology is a means by which you can market you business and get customers, thereby optimizing your profits. Interlegal has a reliable network, essential to maintaining your website and email, that is fully managed by our group of experts, who use high quality, reliable software (Cisco and Juniper providers). Technological and innovative development is essential for communication, which is why Interlegal offers:
- Additional services: Notarization of documents: this means the legalization of a foreign document so it has legal effect in the intended place; it is required for those countries that are not members of the the Hague Convention.
Translations: are required for some documents.
- Legal advice. Business Law: Our team of lawyers advise companies about various legal issues. We give comprehensive legal advice that will help you find the best and most correct way for your company when it comes to UK commercial law or UK labor law.
Trade Agreements: Publicity and marketing, betting and gambling, confidentiality, consumer rights, goods distribution, franchising, supply of goods and services, general commercial agreements.
Business Law: Administration and company meetings, directors, financial reporting, maintenance of the rights of capital and of shareholders, issue of shares, transfers and dividends, asset acquisitions, joint ventures, private equity and venture capital, associations and LLP.
Intellectual and industrial property: confidentiality, copyright, databases, designs, IP, patents, research and development, trademarks, data protection, information technology, etc.
Telecommunications: magazines, films, Internet, music, privacy, etc.
Universal Package: (UK & SPAIN)
In addition to providing services for the UK, Interlegal wants to facilitate procedures, which is why we have designed a package intended for those who have a company in Spain and want to establish it in the UK, so as to take advantage of opportunities in both countries.
1. Accounting & Tax Advice: Preparation of balance sheet, trial balance, profit and loss account, journal and general ledger, book of received and issued invoices, digitalized invoices, submitted fiscal models, VAT submission, corporate tax submission, and those models that the company is required to submit.
2. Labour Advisory: Preparation of work contracts, social security registration and deregistration, settlements.
For any questions contact INTERLEGAL.