Setting up a legally UK tax-exempt company in 2023
Properly structured, a UK company can be legally exempt from paying UK tax. Click on the subheading links below to find out more about how this can be achieved.
How can a UK company be legally exempt from paying UK tax?
A UK company can be legally exempt from paying UK tax if it fulfils all of the following conditions:
- The UK company has i) no staff nor ii) office space nor iii) directors nor iv) shareholders nor v) corporate bank account inside the UK.
- Instead, the company has i) staff ii) office premises iii) a multi-currency corporate bank account in a country that has signed a double taxation avoidance agreement with the UK. For example, i) Ireland ii) Hungary or iii) Croatia. For a full list, see this webpage.
- In the above country, the UK company must i) secure a tax identification number (TIN) and ii) submit an annual corporation tax return. While not legally required, it is wise to also register a subsidiary or a branch office of the UK company.
- At least once a year, the global directors of the UK company travel to London to attend a Board meeting there. If required, Healy Consultants Group supplies our Clients with a city centre boardroom for the afternoon. See also this page regarding our concierge services.
- Each year, Healy Consultants Group will supply evidence of this meeting to the UK tax office and secure the UK tax residency certificate of the UK business of our Client.
- Each year, and after securing the UK tax residency certificate, Healy Consultants Group will submit a quality application to also secure legal exemption from UK corporation tax. The application includes the following documents:
- Corporate documents of the UK entity (COI, M&AA, corporate profile, certificate of UK tax residence and so on);
- Due diligence documentation on all directors and shareholders (passport copy and proof of residential address outside of the UK);
- Bank statements showing that the entity receives all its income outside of the UK, on an international corporate bank account.
- Proof of business in the country with the DTAA signed with the UK (e g salary slips, office lease agreement, customer and supplier correspondence, certificate of incorporation of the subsidiary if available)
- Proof that tax is paid in the country with the DTAA signed with the UK (TIN, notice of assessment, corporation tax return and government receipt for the payment of taxes)
- Within 6 weeks, and all going well, the UK company secures an exemption of Permanent Establishment from HMRC, confirming that it is legally exempt from UK corporation tax for that financial year. Healy Consultants Group forwards scan of the same to our Client.
Benefits of a UK company
- The UK is a reputable, trusted, strategically located jurisdiction good for i) international trading ii) holding companies iii) owning real estate iv) owning copyright and patents and v) international consulting services.
- Registering a business in the UK is straightforward. The company can be incorporated within a week. Only one shareholder and director is required, and neither need to travel to the UK to complete the engagement.
- A UK company is protected by a strong legal system where global trademarks and intellectual property can be registered and held securely.
- A UK company looks good to international Clients, investors, suppliers, banks and governments.
- This UK structure will have access to Double Taxation Treaties the UK has signed with other countries.
- Our firm legally registers companies in the UK supported by i) an international bank account in Ireland or another reputable EU or global jurisdiction and ii) legally registered address in the UK. The corporate bank account will be opened with a reputed top-tier international bank. See this page for possible no travel banking solutions.
For further information on the benefits of registering a company in the UK, visit this page.
Disadvantages of a UK company
- Shareholder names, share capital, beneficial owners and directors’ details of all UK companies are publicly accessible through the Companies House website. Although this affects the privacy of individuals, it increases the transparency and reputation of UK companies.
- Since the UK exited the European Union, UK entities cannot benefit from the EU centralized VAT system.
- To be legally tax-exempt, a UK LLC must comply with local laws in i) the UK and ii) the country where the Permanent Establishment is based. This makes the structure more complex to administer.
- There are anti-avoidance provisions in place to prevent companies attempting to inflate their foreign branch profits to avoid paying UK tax. Certain branch expenses will be taken into account when calculating the profits of the branch.
For further information on the disadvantages of registering a company in the UK, visit this page.
Table of comparison between UK tax exempt, taxable and LLP entities
No Task Tax exempt
1. UK corporation tax 0% 0% 19% 2. Corporate bank account location? Ireland Ireland Inside UK 3. Management and control of entity? Outside UK Outside UK Inside UK 4. Can do business with UK customers? No No Yes 5. Can have employees and a physical office in the UK? No No Yes 6. Legal registered address where? London London London 7. And virtual office address where? Ireland Ireland UK 8. Financial statements and UK tax return to be filed? Yes Yes Yes 9. Must register a branch in the country where our Client has an office? No No No 10. Must secure a TIN in the country where our Client has an office? No Yes No 11. Must register for VAT/GST/Sales tax in the UK? No No Yes 12. Must visit the UK once a year for a Board meeting? No Yes No 13. Public register of shareholders and directors & UBOs? Yes (click link) Yes Yes 14. Access to international double taxation treaties? No Yes Yes
Company fees and timelines
Annual administrative obligations
- The UK company is required to file corporate income tax returns and financial statements to HMRC.
- The UK company must lodge an annual return confirming relevant details of the company for the public register, including names and addresses of all directors, address of principal place of business and details of all shareholdings.
Clients should be aware of their personal and corporate tax obligations in their country of residence and domicile. They must fulfil these obligations annually. Let us know if you need Healy Consultants Group’s help to clarify your annual reporting obligations.