Benefits and problems of registering a company in the UK in 2021
Benefits of UK company registration
- Company registration process in UK are simple since:
- It requires only i) one director and ii) one shareholder to form a private company;
- Foreign entrepreneurs wishing to register a UK company can easily handle the administration remotely, as Companies House allows to make online filings;
- UK entities have an excellent reputation worldwide, with English law forming the basis for company law in many countries of the world. Registering a business in the UK ensures legal flexibility with clear governance rules in one of the world’s largest and most reputable trading economies;
- UK company business registration enables our Client to benefit from an attractive tax regime because:
- The UK corporate tax rate is 19%, which is one of the lowest rates in Europe after Ireland and Bulgaria;
- Dividends paid to UK companies are generally tax exempt, and the UK levies no withholding tax on dividends paid to foreign residents;
- Tax credits are available for companies involved in R&D. These companies pay a lower rate of Corporation Tax. Companies may get a 100% deduction of Corporation Tax on work related to R&D. Large companies can get a further deduction from their taxable income which is 30% of their current spending on qualifying R&D;
- Capital gains for companies selling subsidiaries (with at least a 10% holding) are tax exempt if the subsidiary was owned for at least 1 year.
- A foreign company can open a London corporate bank account and not be subject to UK tax if i) it has no sales in the UK, ii) no office in the UK and iii) its beneficial owners reside outside the UK. However, using this structure will mean that the company will be tax resident elsewhere, where additional liabilities might arise. This structure also removes access to the UK’s network of tax treaties.
- The global rankings of UK in the various indexes are quite impressive for doing business:
- In the Heritage Foundation’s 2019 Index of Economic Freedom, the UK ranks highly as having the world’s 7th freest economy, and scores 90% for investment freedom and capital flows;
- The United Kingdom is perceived as the 11th least corrupt country in the world, according to the 2018 Corruption Perceptions Index by Transparency International;
- The United Kingdom is ranked 8th by the World Economic Forum in their Global Competitiveness Report 2018, one of the world’s most comprehensive and well-respected assessments of countries’ competitiveness. The report offers invaluable insights into the policies, institutions, and factors driving productivity that benefit entrepreneurs interested in UK company registration.
- The UK has a workforce of over 30 million people which is the 2nd largest in the EU. The UK workforce has a strong skill set, a flexible labour market and the regulations are designed to protect employees;
- The United Kingdom has a robust infrastructure which is an essential aid for new businesses to grow.
- There have been massive improvements in the transportation system of the UK through the government’s £120 billion investment program;
- The UK is highly reputable in terms of its world-class infrastructural facilities since it has the: i) 2nd largest port industry in the Europe; ii) largest air transport network in the Europe; and iii) most enhanced railway systems in the entire EU;
- UK’s pro-business friendly nature towards entrepreneurs and graduates through its programs like the Global entrepreneur program and the Sirius program, along with its robust infrastructural facilities makes it an ideal place for business incorporation.
Problems of UK company registration
- As part of the Government’s drive to encourage transparency, a ban on the use of corporate directors is due to come into force as part of The Small Business, Enterprise, and Employment Act 2015. The government has not yet defined the scope of such exceptions, but this action is expected soon;
- UK incorporated companies trading on the AIM market of London Stock Exchange and other prescribed markets are now required to make reasonable investigations about their beneficial ownership and need to produce, and make public, beneficial ownership registers. New deadlines for filing relevant information regarding PSCs are more onerous;
- Annual accounts must be prepared and submitted to the Inland Revenue and Companies House. The accounts submitted to Companies House are available for public inspection. However, dormant companies and “small companies” as defined in the Companies Act only need to submit abbreviated accounts. This means that only the company’s balance sheet and notes are made public, rather than the company’s income or cash flow statements;
- In a historic referendum on June 23rd, 2016, Britain voted to leave the European Union. After which, the pound fell to its lowest since 1985, immediately after the result was declared. The UK is considered one of the best countries to start a business, but that could change due to the unknown effects Brexit could bring:
- This could take a major hit on export businesses in the UK, as their costs will hike up with the increased tariffs. Even if the businesses choose to maintain a competitive edge by decreasing prices, it would mean lower profits for them;
- The European Free Trade Association (EFTA) was formed in 1960, which the UK was a founding member. If the EU decides to change policies after Brexit, it could mean that the UK will lose its access to the single market.
- Value added tax (VAT) is charged on the value of supplies of taxable goods and services made in the UK, including some exports to European Union (EU) countries. It is also chargeable on imports of goods from outside the EU. The main rates are 0% and 20%, but a few supplies are charged at 5%;
- The UK is still recovering from its financial crisis. The economy holds 13th rank for its competitiveness in terms of its macroeconomic environment on the 2018 Global Competitiveness Index. This can be one of the major hindrances for the economy of UK which can discourage new entrepreneurs to invest in the UK;
- No UK banks onboard cryptocurrency-related business due to increased compliance costs and direct competition with the traditional financial system.
- The UK banks would onboard a client’s business only if majority of directors and shareholders are UK residents.
Best uses for a UK company
- Companies based in the UK can reach more than 500 million consumers across Europe, offering great potential for foreign entrepreneurs and investors with business support, tax incentives, and visa flexibility;
- Companies and limited liability partnerships registered in the UK can also be used as asset management Firms for funds registered in British Overseas Territories including i) Jersey ii) Guernsey iii) Isle of Man and iv) the British Virgin Islands