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English Limited Liability Company (LTD) is a modern tool of tax planning of expenses

In the light of current trends of de-offshorization and the fight against aggressive tax planning, new instruments for optimizing the tax burden are gaining popularity, one of which is an English limited liability company (LTD). This form of property is an analog of a closed joint-stock company, well established in the international arena and provides its owner with all the advantages of doing business in the UK.

The English company LTD is an optimal solution for entrepreneurs who value reputation and status in combination with low cost and easy maintenance of the company. English LTD open accounts in European banks without any problems, they are widely used to optimize business structures, are irreplaceable for working with countries where strict anti-offshore legislation has been introduced.

So, the English limited liability company (LTD) has the following features:

  • Fast and easy registration
  • Low cost of registration/purchase and annual maintenance
  • Possibility of receiving VAT and EORI numbers.
  • Possibility to obtain a Certificate of Tax Residence (for LTD companies, which director is a citizen of the United Kingdom)
  • Possibility to take advantage of a large number of double taxation treaties with other countries, which allows the British companies not to pay a corporate tax on dividends, interest and royalties abroad.
  • Opportunity to open an account with most banks
  • Open online register of shareholders, directors and beneficiaries (controllers)
  • Corporate tax rate of the company is 19%
  • The need for accounting and filing of annual financial statements
  • Automatic assignment of TRN (Tax Reference Number) at company registration

Requirements for the establishment

  • There must be at least one director and one shareholder. Director is a natural person, there are no requirements for residency. Shareholder is a legal entity or natural person, there are no requirements for residency.
  • Shareholder and director can be nominees.
  • Shareholder, director and beneficiary must provide ID cards with photo and proof of permanent residence.
  • Legal entities provide documents confirming their registration and structure. Authorized capital is not paid at the registration.
  • Authorized capital is not paid at the registration.
  • Legal address must be in the territory of England.
Terms of opening of the company
  • Available ready-made companies LTD.
  • Registration of a new company is offered under the same conditions, it will take 5-10 working days.

EXTRA: Documents required for opening a company

If a legal entity acts as the founder, an extract from the register of the country of registration, registration documents of the legal entity, documents confirming the structure will be required.

A copy of the passport and confirmation of the permanent place of residence are required from all natural persons, including the beneficiary, as well as a questionnaire in which the customer indicates his wishes for the structure of the company.

As a confirmation of the place of permanent residence, the citizens of Russia, Ukraine and Belarus can provide a copy of the internal national passport: a copy of the first spread + a copy of the second spread + a copy of the page with the stamp on the residence permit. Or a recent utility bill where the name and address are visible.

Name

When registering a company of any type in the UK, the name restrictions are relatively numerous - the company can not be registered in the UK without special permission which name has the words “Bank”, “Insurance”, “Trust”, “Assurance”, “Building Society”, “England”, “European”, “British”, “Irish”, “Royal”, “King”, “Queen”, “Duke”, and others. The use of the words “National’, “International”, “Holding”, “Group”, etc. is limited.

Structure

The presence of at least one director and one shareholder is necessary to register a LTD company in England. Directors - at least one natural person, there are no requirements for residency. Shareholders - at least one legal or natural person, there are no requirements for residency. The number of shareholders of Ltd is not limited until it begins to offer its shares to the public (an open type company). A company can have only one shareholder, who can own only one share. Shareholder and director may be the same person. Meetings of shareholders and directors can be held anywhere in the world.

Local address

It is necessary to have a local registration (legal) address. This should be the actual address (business address) in England, and not PO box, etc. All official messages, for example, letters from the state register, Companies House, will be sent on the legal address. This must be a physical address in England. You can use the PO Box, but you still need to include a physical address and zip code.

Nominee services

Nominee shareholder and director will formally appear in all the main registration documents of the company, a general power of attorney for the right to manage the company will be issued to the owner (or to the person indicated by him). In addition, a trust declaration will be drawn up between the nominee shareholder and the owner (representative), which confirms that the nominee shareholder owns the company’s shares in favor of the owner and has no right to take any actions with them without the consent of the last one.

Authorized capital and shares

The minimum authorized capital is usually 100 shares, each one for £1. Shares are registered, with a nominal value. The issue of at least one share is required. The authorized capital is not paid at registration.

The register of beneficiaries (controllers - person with significant control (PSC))

All English LTD companies are required to create and maintain a register of persons with significant control (more than 25%) ie beneficiaries. This information is submitted annually to the Companies House and is available in the section “Persons with significant control section”.

There is an open register of shareholders, directors and beneficiaries (supervisors) in England. The information about them is publicly available and is contained in the online Register of Enterprises of England, Scotland and Wales (Companies House). Such data as name, address, date of birth, citizenship, country of residence, the nature of control, as well as the dates from which information is to be entered in the PSC are in the public domain. Beneficiary (controller) is any person who controls more than 25% of the shares, voting rights of the company.

An open register of beneficiaries (controllers) was introduced on July 1, 2016, but officially the companies were required to maintain an internal register of persons, exercising control, since April 2016. Therefore, as an alternative to the English companies LTD, we offer registration of Welsh (Wales) and Irish partnerships LP. At the moment, the main advantage of this type of partnership is that they do not fall within the scope of legislation on disclosure of information on controlling persons (beneficiaries).

Taxation

Resident companies are subject to the Corporation Tax in the United Kingdom on profits received worldwide (subject to the refusal of permanent representative offices outside the UK). In practice, the application of a wide range of tax agreements, together with the exemption from dividends, makes the UK corporate tax system more like a territorial system.

General corporate tax rates

The corporate tax rate is 19%. Now this is a standardized rate for all businesses. In 2016-2017, the rate of this tax was 20%, and until April 2016 it depended on the company’s profits. The current government undertook to keep the corporate tax rate low. It is supposed that this figure will decrease to 17% till April 1, 2020.

year profit less then £300 000 profit more then £300 000
2017-2018 19% 19%
2016-2017 20% 20%
2015-2016 20% 20%
2014-2015 20% 21%
2013-2014 20% 23%

If taxable profits can be attributed to the use of patents, a reduced effective tax rate applies. The rate is 10% from April 1, 2017. Profits can include a significant portion of the trading profit from the sale of a product that includes a patent, not only income from patent royalties. This scheme has been revised since June 2016.

In general, all companies in all sectors pay taxes according to the same tax rates and rules. Nevertheless, a special approach and some types of benefits can be applied depending on the characteristics of the business. There are also four special regimes for the companies working in oil and gas production, life insurance, owning commercial vessels, as well as companies in the banking sector.

In order to obtain a VAT number, it is necessary to document that the company’s taxable turnover has exceeded or will soon exceed £85,000 (this is the registration threshold in 2017). If the VAT is registered voluntarily, the registration body requests additional information: the type of activity, contact details of the company and business partners in Europe.

Each company registered in the VAT system must submit quarterly reports to the UK tax authorities - HMRC. If the English company submits zero reports several accounting periods in a row, then it is possible it will be excluded from the VAT payer register and its number will be canceled.

Value added tax (VAT) is levied in Britain at the rate of 20% (2017). When trading with partners from EU countries, which also have a VAT number, the tax rate is 0%.

There is an opportunity to receive EORI (Economic Operator Registration and Identification) - a unique identification number assigned to foreign trade entrepreneurs when registering with the Business Registration and Identification System. It is used to identify entrepreneurs and other persons when communicating with customs authorities.

Diverted Profits Tax

Beginning in April 2015, the new law regulating the levy on diverted profits tax entered into force in United Kingdom of Great Britain and Northern Ireland. Its adoption was the result of government policies aimed at supporting the OECD initiative to combat the use of schemes minimizing the taxation in international financial and commercial transactions.

The diverted profits tax does not depend on other corporate taxes. It is charged at a rate of 25% (or 55% in the case of “ring fence operations”) on the diverted profits and can be applied in two cases:

  • if groups create tax benefits using transactions or organizations that do not have an economic nature and / or
  • if foreign companies structured their activities in the UK to avoid the opening of a British permanent representation.

Companies are required to notify the tax authorities if they are potentially in a situation determined for paying the diverted profits tax within three months after the end of the reporting period to which the tax relates (the period is extended by six months within the first year).

Necessity of an audit opinion

“Small” partnerships may be exempted from compulsory auditing if their turnover is less than 6.5 million pounds and their assets are less than 3.9 million pounds (before taxation) or 3.26 million pounds sterling (net), and the number of employees - not more than 50.

Certificate of tax residency

The certificate of tax residency is issued by the UK tax service (HMRC) and it confirms that the company is a tax resident in the UK in the understanding of a double taxation treaty with a particular country in a particular fiscal year.

This certificate is updated annually in order to confirm the tax residence of the foreign recipient of income in the understanding of the double taxation treaty in the indicated fiscal year. Such a certificate can be obtained for the previous years.

That is, the UK company can even declare its tax residency after a few years and demand the return of an excessively withheld tax at the source.

The certificate of tax residency should be legalized. Such a certificate is required to transfer dividends and other types of income to the English company (interest, royalties, etc.), for which lower tax rates are provided at the source or exemption from tax collection at the source of income payment to a non-resident in accordance with the double taxation treaty.

After registration, the client receives such a package of documents:
  • Certificate of Collation
  • Certificate of Incorporation
  • Memorandum of Association
  • Articles of Association
  • Minutes of the First Meeting
  • Resolution of Shareholders
  • Certificate of Incorporation
  • Memorandum of Association
  • Articles of Association
  • Minutes of the First Meeting
  • Resolution of Shareholders
  • Share Certificate
  • Declaration of Trust
  • General Power of Attorney
  • Stock Transfer Form Form J30 with a signature / seal
  • Letter of Resignation from the director with a signature
  • Confirmation of the absence of commercial activity (if a ready-made company is purchased) (Certificate of Non-Trading)
  • Agreement for the Provision of Nominee Services
  • Seal
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