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

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.

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.

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.

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).

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.