Setting up a company in the UK involves a number of important considerations, beginning with the choice of business entity. For overseas businesses, the most common options are establishing a subsidiary or a branch. A subsidiary is a separate legal entity, limiting the parent company’s liability to its invested capital. By contrast, a branch is not legally distinct from its parent company.
The most common structure for commercial enterprises is a private limited company limited by shares, although other types such as public limited companies and private unlimited companies are also available. Businesses must also decide on the jurisdiction of incorporation—England and Wales, Scotland, or Northern Ireland—though the legal differences are minimal.
A UK company must have at least one member and one director, and while there is no minimum capital requirement for private limited companies, public companies must meet stricter thresholds. To incorporate, documents must be submitted to Companies House, including the company’s name, address, details of directors, a memorandum of association, articles of association, and Form IN01. Much of this information is publicly accessible.
Companies must also maintain a People with Significant Control (PSC) register, which identifies individuals or entities holding more than 25% of shares or voting rights. Failure to comply can result in penalties for directors.
From a financial perspective, non-resident owners are not required to hold a UK bank account, though doing so simplifies transactions. Overseas companies may be liable for UK corporation tax if they operate through a permanent establishment, and non-resident directors may also be liable for UK income tax. Businesses should also assess their obligations for VAT registration.
Employment law is another key area. UK employers must comply with requirements around minimum pay, working time, holidays, health and safety, and data protection. Employers are also responsible for collecting income tax and National Insurance through the PAYE system and must automatically enrol eligible employees into a workplace pension scheme.
Overall, establishing a company in the UK requires careful consideration of structure, compliance, and ongoing responsibilities. With the right planning, businesses can successfully benefit from the UK’s supportive environment for entrepreneurs and growing companies.
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FUNDAMENTALS OF SETTING
UP A COMPANY IN THE UK
ENTREPRENEURIAL BUSINESS LAWYERS
FUNDAMENTALS OF SETTING
UP A COMPANY IN THE UK
CHOICE OF ENTITY
Once a business has decided to establish a formal presence in the UK, its main consideration will be the
choice of vehicle through which to operate. A usual method for a foreign company operating in the UK is a
subsidiary or a branch.
A subsidiary is a company with a distinct legal personality. The parent company’s liability is limited to initial
capital invested. A branch is not a separate legal personality from the parent company.
Companies have separate legal entities from their owners and may be:
• Private limited companies limited by shares or by guarantee.
• Private unlimited companies, which can be registered with or without share capital and whose
members have unlimited liability.
• Public companies limited by shares.
The typical structure for a commercial company is a private limited company limited by shares.
PLACE OF INCORPORATION
A consideration when forming a company in the UK is in which jurisdiction you wish the company to be incorporated - England
and Wales, Scotland or Northern Ireland. There are few differences between the jurisdictions relating to company formation.
COMPANY STRUCTURE
A company is required to have at least one member.
There are no minimum investment amounts or minimum share capital requirements on the formation of a
private limited company (but this is not the case for a public company).
A company is required to have at least one director. Any person can be a director subject to a few
common-sense restrictions. Directors are required to disclose a number of details to UK Companies House,
such as name, address and date of birth.
To form a company in the UK, the following documents must be filed with the registrar of companies at
Companies House:
The company’s name, address and functions.
Details of its directors and secretary (if any).
Who is authorised to represent the company in the UK, and the extent of their authority.
Memorandum of association, a prescribed form which sets out the names of the subscribers
Companies House Form IN01, the application to register a company in a prescribed form.
Articles of association to set out the rules of governance of a company. The Companies Act 2006 offers a
set of model articles which can be used ‘off the shelf’ or amended for purpose. It is also possible to create
your own bespoke set of articles.
Documents and information filed at Companies House are available to the public.
ENTREPRENEURIAL BUSINESS LAWYERS
PEOPLE WITH SIGNIFICANT CONTROL (PSC) REGISTER:
Companies must record information on individuals or UK companies who own or control more than
25% of a company’s shares or voting rights, or who otherwise exercise control over the company or its
management. These are referred to as People with Significant Control or PSCs.
UK companies are required to record their PSCs in an online register. Details must also be notified to
Companies House.
A company may have one or more PSCs. If a company does not have a PSC it must state this in its PSC
register.
Failure to comply with the duty to provide the above information can result in the company’s director’s
being liable to a fine or imprisonment.
DO NON-RESIDENT COMPANY OWNERS NEED TO HAVE A UK BANK ACCOUNT?
It is not necessary to have a UK bank account to trade in the UK. However, having a UK business account
will help transactions to be processed more efficiently and without exorbitant fees.
It is not necessary to live permanently in the UK to open a UK bank account. However, UK residency rights
and a UK home address are often required (a registered office address may not be sufficient). Alternatively,
various international bank account services are available with major banks.
It is possible for non-residents to set up and run a UK company entirely or partly via a UK business agent.
DOES AN OVERSEAS BUSINESS NEED TO PAY CORPORATION TAX IN THE UK?
A non-resident company is generally only subject to UK corporation tax if it does business in the UK via a
permanent establishment.
If you register your company in the UK, you will most likely need to register for and pay UK corporation tax.
DO OVERSEAS COMPANY DIRECTORS NEED TO PAY INCOME TAX IN THE UK?
UK non-residents who earn income in the UK must usually pay income tax in the UK. They may be able to
take advantage of the Personal Allowance (i.e. the yearly amount of income on which income tax doesn’t
need to be paid).
Where a non-UK business takes on employees in the UK, it should consider whether or not it is required to
operate employment tax withholding.
WHAT ABOUT VAT?
VAT is chargeable by a taxable person on most supplies of goods and services made in the UK in the
course of business. It is also chargeable on the importation of goods and some services.
ENTREPRENEURIAL BUSINESS LAWYERS
EMPLOYMENT CONSIDERATIONS
Key mandatory and minimum requirements:
• Minimum work periods, rest periods and holidays. Details are contained in the Working Time
Regulations 1998.
• Minimum rates of pay: National minimum/Living Wage is currently £10.42 for those aged 23 and over.
This will rise to £11.44 from April 2024 to those aged 21 and over.
• Data Protection. Employers must adhere to the General Data Protection Regulation when dealing with
employees and/or client/customer data.
• Protection against discrimination. The protected characteristics are set out in the Equality Act 2010.
Discriminating against any employee based on any of their protected characteristic is against the law.
Discrimination can be both direct and indirect.
• Health and Safety. The basis of the UK health and safety law is the Health and Safety at Work Act 1974.
This Act sets out the general duties which employers have towards employees and members of the
public.
Employee Tax
• As an employer, you normally have to operate PAYE as part of your payroll. PAYE is HM Revenue and
Customs’ system to collect tax and national insurance from employment.
• When paying employees through payroll you must make deductions for PAYE.
Workplace Pensions
• Employers must automatically enrol employees into pension scheme and make contributions to their
pension if the employee is eligible for automatic enrolment.
While employment law in Scotland is very similar to that which applies in England and Wales, some
differences may apply.
The above is a general summary only of relevant matters to be considered in setting up a company in the UK. It
is not intended to be and does not constitute legal or tax advice. Appropriate legal and tax advice should be
sought.
mailto:tracey.ginn%40mbmcommercial.co.uk?subject=
ENTREPRENEURIAL BUSINESS LAWYERS
Tracey Ginn
PARTNER, HEAD OF CORPORATE & US
E tracey.ginn@mbmcommercial.co.uk
T: 0131 226 8232
For further details, please
contact:
MBM Commercial LLP
Edinburgh | London | Glasgow
T 0131 226 8200
E info@mbmcommercial.co.uk
mbmcommercial.co.uk
M
mbmcommercial.co.uk
FUNDAMENTALS OF SETTING
UP A COMPANY IN THE UK
ENTREPRENEURIAL BUSINESS LAWYERS
FUNDAMENTALS OF SETTING
UP A COMPANY IN THE UK
CHOICE OF ENTITY
Once a business has decided to establish a formal presence in the UK, its main consideration will be the
choice of vehicle through which to operate. A usual method for a foreign company operating in the UK is a
subsidiary or a branch.
A subsidiary is a company with a distinct legal personality. The parent company’s liability is limited to initial
capital invested. A branch is not a separate legal personality from the parent company.
Companies have separate legal entities from their owners and may be:
• Private limited companies limited by shares or by guarantee.
• Private unlimited companies, which can be registered with or without share capital and whose
members have unlimited liability.
• Public companies limited by shares.
The typical structure for a commercial company is a private limited company limited by shares.
PLACE OF INCORPORATION
A consideration when forming a company in the UK is in which jurisdiction you wish the company to be incorporated - England
and Wales, Scotland or Northern Ireland. There are few differences between the jurisdictions relating to company formation.
COMPANY STRUCTURE
A company is required to have at least one member.
There are no minimum investment amounts or minimum share capital requirements on the formation of a
private limited company (but this is not the case for a public company).
A company is required to have at least one director. Any person can be a director subject to a few
common-sense restrictions. Directors are required to disclose a number of details to UK Companies House,
such as name, address and date of birth.
To form a company in the UK, the following documents must be filed with the registrar of companies at
Companies House:
The company’s name, address and functions.
Details of its directors and secretary (if any).
Who is authorised to represent the company in the UK, and the extent of their authority.
Memorandum of association, a prescribed form which sets out the names of the subscribers
Companies House Form IN01, the application to register a company in a prescribed form.
Articles of association to set out the rules of governance of a company. The Companies Act 2006 offers a
set of model articles which can be used ‘off the shelf’ or amended for purpose. It is also possible to create
your own bespoke set of articles.
Documents and information filed at Companies House are available to the public.
ENTREPRENEURIAL BUSINESS LAWYERS
PEOPLE WITH SIGNIFICANT CONTROL (PSC) REGISTER:
Companies must record information on individuals or UK companies who own or control more than
25% of a company’s shares or voting rights, or who otherwise exercise control over the company or its
management. These are referred to as People with Significant Control or PSCs.
UK companies are required to record their PSCs in an online register. Details must also be notified to
Companies House.
A company may have one or more PSCs. If a company does not have a PSC it must state this in its PSC
register.
Failure to comply with the duty to provide the above information can result in the company’s director’s
being liable to a fine or imprisonment.
DO NON-RESIDENT COMPANY OWNERS NEED TO HAVE A UK BANK ACCOUNT?
It is not necessary to have a UK bank account to trade in the UK. However, having a UK business account
will help transactions to be processed more efficiently and without exorbitant fees.
It is not necessary to live permanently in the UK to open a UK bank account. However, UK residency rights
and a UK home address are often required (a registered office address may not be sufficient). Alternatively,
various international bank account services are available with major banks.
It is possible for non-residents to set up and run a UK company entirely or partly via a UK business agent.
DOES AN OVERSEAS BUSINESS NEED TO PAY CORPORATION TAX IN THE UK?
A non-resident company is generally only subject to UK corporation tax if it does business in the UK via a
permanent establishment.
If you register your company in the UK, you will most likely need to register for and pay UK corporation tax.
DO OVERSEAS COMPANY DIRECTORS NEED TO PAY INCOME TAX IN THE UK?
UK non-residents who earn income in the UK must usually pay income tax in the UK. They may be able to
take advantage of the Personal Allowance (i.e. the yearly amount of income on which income tax doesn’t
need to be paid).
Where a non-UK business takes on employees in the UK, it should consider whether or not it is required to
operate employment tax withholding.
WHAT ABOUT VAT?
VAT is chargeable by a taxable person on most supplies of goods and services made in the UK in the
course of business. It is also chargeable on the importation of goods and some services.
ENTREPRENEURIAL BUSINESS LAWYERS
EMPLOYMENT CONSIDERATIONS
Key mandatory and minimum requirements:
• Minimum work periods, rest periods and holidays. Details are contained in the Working Time
Regulations 1998.
• Minimum rates of pay: National minimum/Living Wage is currently £10.42 for those aged 23 and over.
This will rise to £11.44 from April 2024 to those aged 21 and over.
• Data Protection. Employers must adhere to the General Data Protection Regulation when dealing with
employees and/or client/customer data.
• Protection against discrimination. The protected characteristics are set out in the Equality Act 2010.
Discriminating against any employee based on any of their protected characteristic is against the law.
Discrimination can be both direct and indirect.
• Health and Safety. The basis of the UK health and safety law is the Health and Safety at Work Act 1974.
This Act sets out the general duties which employers have towards employees and members of the
public.
Employee Tax
• As an employer, you normally have to operate PAYE as part of your payroll. PAYE is HM Revenue and
Customs’ system to collect tax and national insurance from employment.
• When paying employees through payroll you must make deductions for PAYE.
Workplace Pensions
• Employers must automatically enrol employees into pension scheme and make contributions to their
pension if the employee is eligible for automatic enrolment.
While employment law in Scotland is very similar to that which applies in England and Wales, some
differences may apply.
The above is a general summary only of relevant matters to be considered in setting up a company in the UK. It
is not intended to be and does not constitute legal or tax advice. Appropriate legal and tax advice should be
sought.
mailto:tracey.ginn%40mbmcommercial.co.uk?subject=
ENTREPRENEURIAL BUSINESS LAWYERS
Tracey Ginn
PARTNER, HEAD OF CORPORATE & US
E tracey.ginn@mbmcommercial.co.uk
T: 0131 226 8232
For further details, please
contact:
MBM Commercial LLP
Edinburgh | London | Glasgow
T 0131 226 8200
E info@mbmcommercial.co.uk
mbmcommercial.co.uk