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UNITED KINGDOM

FEATURES OF UNITED KINGDOM PRIVATE COMPANY

GENERAL INFORMATION

The United Kingdom ("U.K.") comprises England, Scotland, Northern Ireland and Wales and is one of the fifteen member states of the European Union. It has an area of some 244,100 square kilometers (94,250 sq. miles) with an estimated population in excess of 57 million. London is one of the world's leading centres for banking, insurance and other financial services; lying between New York and Tokyo it is the third leg of the world's capital markets. Not the least of its attractions is that it is a politically stable English speaking country.

The U.K. is strategically located off the Northwest coast of Continental Europe and has excellent communications; it has three major international airports in Heathrow, Gatwick and Manchester with extensive worldwide connections. Recently the U.K. was physically joined to the mainland Continent by the opening of the Channel rail tunnel link which boasts frequent train services for passengers and cars to Paris and Brussels. The U.K. has signed double taxation treaties with 100 countries and thus enjoys the most extensive double taxation treaty network in the world.

FEATURES of U.K. PRIVATE COMPANY

Taxation
The corporation tax rates are the lowest in the European Union. Tax is levied at 20% on a U.K. company which has net profits under 300,000. For profits between 300,000 and 1.5million there will be an effective marginal rate of 32.5% and a tax rate of 30% is levied where the profits are over this figure.

Generally speaking, a U.K. company is taxable on its world wide income at the rates indicated above. However, a U.K. incorporated company may still be classified as non-resident for tax purposes, and therefore non taxable in the U.K. on non U.K. source income, if it is managed and controlled from a country with which the U.K. has signed a double taxation treaty which contains a recognised "tie-breaker clause". By careful selection of the country from which the U.K. company is managed it may therefore be possible to create a non-taxable U.K. entity. For example, Portugal has a suitable tax treaty with the U.K. so a U.K. company managed from Madeira (Madeira being part of Portugal) would neither be taxable in Madeira nor the U.K. It is important to note that such a U.K. company would not qualify to receive benefits under the tax treaty signed by the U.K. but might qualify for Portuguese tax treaty benefits so the major benefit of this structure is to create a non-taxable entity which has the added respectability of a U.K. persona.

Another recent innovation Section 246S of The Taxes Act 1988 (as inserted by Schedule 16 of The Finance Act 1994) creates the U.K. International Headquarters Company ("IHC"). This status may be accorded to ordinary U.K. companies which are at least 80% beneficially owned by non-residents. An IHC is an extremely useful vehicle for the collection of foreign dividend income as, in general terms, a full credit is given against U.K. tax for any tax paid on the remitted profits before arrival in the U.K. Thus as long as the dividend income has already suffered tax at a rate higher than or equal to the applicable UK rate (32.5%/30%/20%) no U.K. tax will be payable on that income either on arrival or on distribution. For example, a Danish subsidiary of a U.K. IHC would pay tax on its profits at 34%. If the Danish subsidiary distributed profit by way of dividend to the IHC parent no further tax would be levied on arrival in the U.K. because a credit would be given for tax paid in Denmark. This makes the U.K. IHC an extremely attractive holding company vehicle for investment into Europe or otherwise and in most cases will be more attractive than competitive structures available through the Netherlands, Austria, Switzerland etc.

Shareholders
A U.K. company must have a minimum of one shareholder who may be a corporate body or an individual. Details of the shareholders appear on public record but anonymity may be retained by the use of nominee shareholders or holding companies.

Directors
A U.K. company must have at least one director and a company secretary. A sole director cannot also be the secretary. The Director can be an individual or a company. If there is more than one director, one of them can also be the secretary but, as U.K. company law is complex, it is bly recommended that a professional secretary with relevant experience is appointed. Details of the directors appear on the public file but anonymity can be retained by the use of third party professionals.

Annual Reporting
Generally a U.K. company must appoint an auditor and audited accounts must be filed with the Companies Registry within 9 months of the financial year end. In a large number of cases companies with sales of under 90,000 are exempt from this requirement and those with turnover of less than 350,000 need only produce abbreviated accounts with a special accountant's report. An annual return giving details of directors and shareholders is required for all companies.

Timescale
Incorporation of a new company can take up to three weeks but ready-made companies are available for immediate use. However, a premium can be paid of USD500 for a 48 hour incorporation service.

Capital
A minimum issued capital of USD2,000 is required.

Local Requirements
As a matter of local company law the company MUST maintain a registered office address within the U.K. and must also appoint a company secretary who, for practical reasons, must be resident in the U.K. We would normally provide these services as part of our domiciliary service fee.

Secrecy
There are no specific laws relating to the unauthorised disclosure of information on a U.K. company, its directors or owners but U.K. law recognises the common law duty that professionals have towards their clients to keep their affairs confidential.

REGISTRATION FEES

Our registration fee for a limited company with a standard share capital is USD1200. The fee covers first year licence fee, first year registered agent fee and first year registered office fee.

Annual maintenance cost for second year onward is US$800.

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