Commercial LawSETTING UP A COMPANY IN THE UK

The necessary steps need to be taken in order to set up a company in the UK are as follows;

  • Determining the Type of Company:

There are different types of companies in the UK. You need to choose the company type in view of your business area, your business needs and targets.

Company Types

Although you have various options while setting up a company such as Limited Partnership (LP), Limited Liability Partnership (LLP), Public Limited Company(PLC), the most preferred ones are Sole Trader, General Partnership and Limited Liability Company (LLC).

Sole Trader

Its incorporation and operation are easy to proceed. The owner of that company is responsible for all the loss-profit and has personal liability for all the debts. To register as self-employed with HMRC is sufficient in order to become a Sole Trader. He is an income tax payer.

General Partnership

This is a business entity made up of two or more partners, in which each partner is fully responsible to all the creditors for all the business’ debts.  A general partnership is formed via a verbal or written general partnership agreement. Partners should register with HMRC and every one of them have to give a personal income tax statement.

Limited Liability Company (LLC)

Partners of an LLC are liable only for the unpaid amount of their share in the company’s underwritten capital. This means that the company’s owners are not personally responsible for the debts of the business.  This entity might own assets or properties and is independent from its shareholders. It is compulsory to have a director for LLCs, either a person or a legal entity, and to register the company with Companies House. Even though people might choose to register the company by themselves, they might also use company formation agents, accountants or lawyers working in commercial area.

Options for Foreign Investors

. Establishing a Branch Office:  The foreign company which opens up a branch Office in order to start its commercial activities in the UK, is obliged to register its branch with Companies House within one month by providing the main company’s documents. The branch’s shareholder structure should be same as the main company’s. It would be good to keep on mind that the Turkish exporters can benefit from the different supports provided by Turkish Government, one of them being branch-warehouse rent support.

. A Place of Business : A foreign company, which conducts its operations from the same place, but which is not established as LLC and its activities are not sufficient to identify itself as a branch, needs to register with the Companies House as a ‘Place of Business’. This registration time should not exceed one month after this place of business gets into full swing. Some examples for this situation might be running a warehouse or appointment of a sole representative.

 

  • Choosing the Company Name

You need to choose a unique name for your company. In order to use it in the UK, you need to check on Companies House website whether it is already registered. Moreover, you need to beware that your company name should not cause any conflict with trademarks and there are no restricting regulations for your company name under UK’s legislation.

  • Company’s Head Office and Address

It is necessary to obtain a Head Office and address for opening up a company in the UK. This address will be your official correspondence address.

 

  • Appointment of Directors and Partners

It is crucial to opt the people for the management of your company; at least a director or a partner should be appointed. There is no obligation of being a UK citizen or resident to be a director.

 

  • Preparing The Company Documents: You need to prepare the documents listed below for setting up your company:

 

FOR LLCs

  • Memorandum of Association : The name of the company, registered address and field of business activity should be stated.
  • Articles of Association: This document contains the regulations of the company.
  • For 10: Director of the company and the registered office address are stated in the document. The company has to have at least one director.
  • Form 12: It is a declaration that the company is established by complying all the regulations.

 

For ‘Branch’and a ‘Place of Business’

A foreign company who opens up a branch in the UK or a ‘Place of Business’, has to register the branch office/Place of Business within one month with the Companies House by providing the documents below:

Branch

  • BR1 Form
  • Main Company’s certificate of incorporation in original along with the certified English translation
  • Latest year’s annual financial statement and profit-loss statement, certified by a competent authority
  • Registration fee should be paid to Companies House (50 GBP)

‘A Place of Business’

Also, within a month after opening up ‘a place of business’, a foreign company has to register with the Companies House by providing the documents below:

  • 691 Form
  • Main Company’s certificate of incorporation in original along with the certified English translation
  • Registration fee should be paid to Companies House (50 GBP)

 

  • Registering with Companies House: The incorporation documents of your company should be sent and the registration fee should be paid to Companies House. You may send your application by post. If and when your application is approved, your company then would be officially registered.

 

  • Tax and Other Obligations: You need to register your company with HMRC for tax purposes.

If you are an employer, then you also need to take the necessary steps for your employees’ tax, insurance and other legal obligations.

 

Tax Types

 

. VAT: Self employers might be VAT registered depending on their request, however it is obligatory for them, in case their annual turnover exceeds 90.000 GBP. The standard VAT rate is %20.

.  Corporate Tax: If the profit of a company is under 50.000 GBP, the corporate tax rate is %19. This rate varies between %20-24 for the profit amount between 50.000-250.000 GBP and if the profit exceeds 250.000 GBP, then the rate is %25.

              . Income Tax: Income Tax rates are as follows; between 5.000-37.700 GBP it is %20, between   37.700-125.140 GBP it is %40 and more than 125.140 is %45.

               . Property Tax for Working Premises: Although this tax is generally paid by the tenant, this  can be changed through agreement by the parties. This property tax is assessed by the local authority, calculated by taking  %41.4 of the estimated rent value.

 

Double Taxation

There is a convention in force between UK and Turkey since 1988 called Prevention of Double Taxation. This is based on the principle of ‘where the gain is earned should be taxed at the same place.’ The employees assigned from Turkey, depending on their role and employment period, their taxes can be paid in Turkey. In this respect, it is recommended for Turkish companies to work with an accountant or a consultant to fully exploit the advantages.

 

The Key Points

  • Your company name should be unique and not cause any conflict with any trademarks.
  • You need to respect the UK’s law and legislation.
  • It is strongly recommended to work with a consultant experienced in tax and accounting.
  • You might need to apply for necessary permits and licences in order to continue your business.
  • Turkish owner of the company can not be a director at the UK’s company. It is not obligatory for a director of the company being a UK resident or citizen, however it is mandatory for that business to have an office address in the UK.
  • It is strongly suggested to talk with UK Trade and Investment team at UK’s Embassy in Ankara and at UK’s Consulate General in Istanbul with regards to establishing a business.