The United Kingdom, with its rich culture, strong economic ties and well-established diplomatic influence stands as one of the most respected and trusted jurisdictions in the world. Throughout history the British legal system and highly efficient law courts have been a leading example of justice, integrity and democracy, more so the British Common Law is one of the fundamentals on which legislations all over the world are formed, even today. Entrepreneurs from all over the world choose the United Kingdom for their corporate establishment due to its reputable banking sector, highly efficient, quick and investor-friendly regulatory authorities and for the financial stability that it offers with deep-seated roots dating back to centuries. The jurisdiction is an invaluable place for business with a strong infrastructure, a world-renowned judiciary system, a prosperous investment market and a flexible tax regime.

Brexit and its implications on the UK corporate sector:

Following the withdrawal of the United Kingdom from the European Union on January 31, 2020, new regulations are implemented in the region. The UK’s exit from the EU implies the withdrawal of certain EU directives such as the Parent-Subsidiary Directive and Interest and Royalties Directive, the loss of which will have an impact on the withholding taxes on interest, royalties, and dividends paid by EU resident companies. Brexit is expected to transform the UK’s economic regime, making it more flexible and desirable for foreign investment. The UK government aims to cut down taxation rates and introduce tax incentives to strengthen its foothold in the economic world and attract more foreign business to the country. Brexit’s impact includes:

• Withholding tax rates on interest, royalties, and dividends from the EU member state to the UK will depend on the domestic tax laws of the source company and the tax treaty signed between the UK and the relevant country
• No cross-border mergers involving UK resident companies will be applicable
• New rules were introduced on exports, imports, tariffs, data and hiring
• No more VAT-free/duty free trade between the UK and the EU
• EU nationals wishing to reside, study or work in the UK and vice versa will now need to apply for immigration permits
• After the end of the transition period, UK companies can no longer seek the mutual resolution procedure (MAP) for double taxation under the European Arbitration Convention
• Post-Brexit, MAP assistance can only be pursued via negotiated bilateral treaties. While European Arbitration Convention mandates the binding arbitration, bilateral treaties only ‘endeavor’ to form an agreement and do not guarantee assistance
• The UK government reserves the right to decide whether to retain certain EU directives on domestic laws or not
• EEA companies established within the UK registered under the Overseas Companies Regulations will have to provide additional information to the Companies House
• European public limited liability companies, known as ‘Societas Europaea’ (SE); and European Economic Interest Groupings (EEIGs) will no longer be able to be registered in the UK. However, SEs and EEIGs with a registration period of at least two years and two sets of annual accounts approved can convert to a UK Public Limited Company (PLC). Any existing SEs and EEIGs that have failed to make alternative arrangements prior to the end of the transition period, will automatically be converted into new UK corporate structures
• UK investment companies listed on an EEA regulated market will no longer be able to benefit from relaxations on controls on profit distribution
• Financial Reporting of UK companies will now need be done in accordance with UK-adopted International Accounting Standards (IAS) instead of EU-adopted IAS
• UK incorporated subsidiaries with an EEA parent and vice versa will no longer be eligible for certain exemptions from preparing and filing individual or group accounts

The exit of the UK from the EU, however poses a new opportunity for companies who wish to take advantage of the advanced UK legal system and the prestige of a UK company by incorporating a UK parent company and registering a branch for it in another EU or non-EU jurisdiction for business operations in order to legally minimize their tax and business expenditure costs. Section 249 of the Finance Act 1994 portrays the concept of “Dual Residency” for UK formed companies, which allows British companies to be residents in two countries at the same time and thus by utilizing the international agreements "On the avoidance of double taxation" signed by the UK with other countries worldwide a UK company with physical operations in another jurisdiction will be subject to UK tax only on profits derived from British sourced income. This is of particular interest for the combination of a UK Company with a branch in Cyprus due to the low corporate tax rate of 12.5% and additional tax incentives offered by the government of Cyprus. By setting up a branch with effective management and physical substance in Cyprus followed by the provision of relevant tax residence certificates to the HMRC, the UK company will be classified as non-tax resident in the UK and thus will only be liable to paying taxes in Cyprus. It will, however, maintain all the advantages of a British company, including slight ease of account opening procedures, esteemed reputation and most importantly the legal protection and access to competent British courts in the case of a potential dispute, the lack of which is unfortunately one of the major disadvantages of Cyprus legal entities. For more information on the particularities of Cyprus as a corporate jurisdiction, please visit our Registration of a Cyprus Company section, or contact our office for a detailed consultation tailored to your particular business needs.

Company Formation in the UK:

Although any type of entity in the UK can be a powerful and secure financial instrument for the right business model, a limited liability company (LTD) and limited liability partnership (LLP) are the most widely-used types of business structure in the UK. Companies operating as limited liability companies can own properties, initiate legal proceedings and pay taxes independent of its shareholders whose liability is limited to the share capital they have invested. An LLP is a hybrid of a partnership and a limited company which operates under a combination of the Companies Act 2006 and the Limited Liability Partnership Act 2000 and as such enjoys the benefits of limited liability whilst giving the flexibility to its members of setting up their internal structure as a traditional partnership with discretionary profit allocation and distribution.

Regardless of the entity type, registration of a company in the UK is an exceptionally cost-effective, simple and fast procedure. The UK Companies House is a highly efficient regulatory body that provides outstanding service and online support for corporate clients. Our corporate team can provide you with a fully registered UK entity within hours of the application. Furthermore, our team can help you with the opening of a bank account in UK or another jurisdiction worldwide as well as help you build your compliance portfolio and take on the full administration of your company including accounting, VAT registration and preparation of financial statements.

Corporate Features of a UK LTD and LLP

Contact our corporate team for more information on the registration and management of a business in the UK. Our professional staff can guide you through the whole process and can help you set up your enterprise in the UK or another jurisdiction of your choice.