Open a company in the United Kingdom
Incorporation of a company in the United Kingdom
What are the main types of companies in England?
The main types of companies in England are the following:
- Private Limited Company (Ltd);
- Public Limited Company (Plc).
- Limited Liability Partnership (LLP);
- Unlimited Company.
A Private Limited Company or Ltd (similar to an Italian S.r.l.) is the most common type of company in England for small and medium-sized enterprises. Holdings in an Ltd consist of shares. Members may be individuals or other companies. It is sufficient to appoint a director, who may also be non-resident in England.
A Public Limited Company or Plc (similar to an Italian S.p.A.) is the most popular company type for large companies or large shareholders. The minimum capital for the incorporation of a Plc is £50,000 (or the equivalent amount in Euro or other currency). Members may be individuals or other companies. It is sufficient to appoint a director, who may also be non-resident in England.
A Limited Liability Partnership or LLP is a limited liability partnership. Holdings are represented by shares. It is necessary to have at least two partners (general partners). The partnership agreement of an LLP is a private document and, as such, is not published with the English Companies House. The LLP does not have any corresponding company type in Italy. The Italian legal system, in fact, does not allow the creation of limited liability partnerships.
An LLP – unlike an Ltd and a Plc – is subjected to taxation for transparency. Therefore, the turnover of an LLP is taxed directly to partners and not to the company. For example, in the event of an LLP formed by two individuals who do not reside in England for tax purposes, the company’s turnover shall be taxed exclusively to partners in their own countries of residence, and no tax shall be due by the LLP the English tax authorities.
An Unlimited Company is a partnership (similar to an Italian società in nome collettivo) in which, unlike the LLP, each member is responsible without limitations and with their own personal assets for the company’s obligations. An Unlimited Company – like an LLP – is subjected to taxation for transparency.
How long does it take to incorporate a company in England?
The timing is approximately 24/48 hours and, therefore, much faster than what is required to incorporate a company in Italy and many other jurisdictions.
Is it necessary to pay (or undertake to pay) a minimum share capital to incorporate an English company?
The incorporation of an Ltd and an LLP does not require any engagement to pay or the actual payment of a minimum share capital. The initial share capital may even be equal to £1 or €1.
Instead, the incorporation of a Plc requires a minimum subscribed share capital of £50,000.00 (or the equivalent amount in Euros).
The capital of an English company may be denominated in British pounds sterling, Euros or other currency, depending on the choice of its members.
It is necessary to travel to England for the incorporation?
No, the entire process of incorporation of the company, requesting an English VAT number and the opening of a bank account does not require one’s own physical presence and may be managed directly through our offices in Italy (in Milan, Roma and Palermo). The incorporation of an English company does not require the intervention of a notary public, whether in England or in Italy.
Is it necessary to be resident in England to incorporate an English company?
Absolutely not. The members and directors may also be individuals who are non-resident in the United Kingdom.
Is it possible to protect the identity of the members of an English company?
The identity of the members may also be protected through the establishment of a trust or by appointing a nominee shareholder.
The establishment of a trust requires the transfer by the settlor, on a permanent basis, of the ownership of shares to a trustee, together with the irrevocable mandate to manage them in the interest of one or more beneficiaries, possibly under the supervision of a protector. The beneficiary of a trust may also be the settlor themselves (self-declared trust).
Broadly speaking, the beneficial owner of the shares transferred to a trust is the trustee and not the settlor.
Instead, in the case of nominee entrustment of the shares with a trust company, the client legally remains the actual owner of the shares on the basis of the contractual arrangement with the nominee company, which shall acquire the shares on behalf of the client.
The client may at any time revoke the nominee appointment, with the result that the shares shall return to being in the name of the client.
A recent legislative amendment has introduced an obligation to publish in a special section of the Companies House the names of all persons who ultimately hold holdings equal to or above 25% in an English company (‘People with Significant Control’ Companies House register). The obligation does not apply, in principle, to shares transferred to a discretionary trust.
Is it possible to have a nominee director?
The client may protect the identity of the director through the appointment of a nominee director. The client shall conclude a nominee director agreement with one of our professionals residing in England, who shall assume the directorship on behalf of the client (beneficial owner).
The client shall be able to terminate at any moment the nominee appointment. The client may retain exclusive access to and management of the company’s bank account, by providing the bank with specific instructions. Where requested, the trustee director shall be able to confer powers of attorney to the client, based on the needs of the latter.
Do the articles of association of an English company have to indicate the corporate object?
No, it is possible to include a general business clause. In such case, the company shall be able to engage in any lawful activity without any restrictions whatsoever.
It is necessary to appoint anyone in a role comparable to that of a sole auditor or a board of auditors?
English law does not envisage any role or body comparable to the auditors or the board of auditors. There is, however, an auditing obligation upon passing certain thresholds.
What documents and information are required to incorporate a company in England?
- a copy of the passport or other ID for each member and director of the new company or, in the event that the member is another company, the certificate of incorporation (or other equivalent document) of such company;
- proof of residence for each member and director of the new company (e.g., telephone or internet subscription, first page of a bank statement etc.), or, lacking that, a certificate of residence.
The client shall provide us with the following information, which shall be entered in our engagement letter:
- name of the company;
- initial capital (which may also be €1 or £1), number of shares to be issued and allocation thereof to members;
- forename and surname, date and place of birth and residential address of each of the directors;
- brief description of the activities to be carried out by the company.
Is it possible to open a bank account outside of the United Kingdom?
Of course. A bank account may also be opened outside of the United Kingdom, in accordance with the client’s needs.
What is the annual return of an English company?
The annual return is an updated list of members that the directors of any English company must file with the Companies House at least once a year. Therefore, any transfers of shares that took place during the year shall be available for viewing at the Companies House on the earlier date between that when the company, at the request of a member, files an updated annual return and that of passing of the deadline for filing the annual return each year. As such, the annual return must not be confused with the financial statements.
What happens if my English company has been removed from the Companies House as a result of missed filing of the financial statements or the annual return (strike off)?
The failure to file the financial statements or the annual return for an extended period of time shall lead to the cancellation, ex officio, of the company from the English Companies House register, with the result of a transfer, ex lege, after a certain period of time following the cancellation, of the assets of the company to the English Crown.
The cancellation may be withdrawn through a restoration process, which shall result in the reallocation of the shares to the shareholders. Prior to the application for restoration, it shall be necessary to fulfil all outstanding obligations (e.g., late filing of financial statements or annual return).
Can I confer to an English company a real estate asset located in Italy?
Of course. The operation requires a resolution to increase the share capital of the English company to be released with the conferral of the real estate asset. Unlike the Italian legal system, the determination of the value of the real estate asset for the purpose of the conferral does not require any sworn expert statement, and can also be done by the director without any particular formalities. The conferral shall be registered with an Italian notary public for the purpose of recording the transfer of ownership on the Italian land register. The conferral of real estate assets located in Italy to an English company presents significant tax advantages compared to the same conferral to an Italian company, because the registration tax is in principle in a set amount (€200.00), rather than in a proportional one (6% of the value of the real estate asset)
May I establish a branch of my English company in Italy?
Yes. To this end it shall be necessary to draft a resolution to establish a branch in Italy, which shall have to be fitted with apostille in England and filed with an Italian notary public, together with the articles of association and the by-laws of the Company (both translated into Italian by certified translation). It shall also be necessary to appoint a representative of the Italian branch, whose name shall be published on the Italian companies’ register. The annual financial statements shall be drawn up in accordance with English law and filed with the Italian companies’ register.
We are able to assist our clients in all phases of the process of establishing a branch in Italy, by drafting the documentation required in Italy and England.
May an English company only operate in Italy?
Yes, an English company could be even incorporated only to operate in Italy. The company shall remain in any case subject to English company law provisions. However, from a fiscal standpoint, it might be subjected to Italian taxation.
Must directors and members of an English company pay social security contributions in the United Kingdom?
Directors and members of an English company who are not resident in England are under no obligation to pay social security contributions in England.
How do I sell shares in an English company?
The sale of the shares in an English company is a very simple procedure and just requires the seller to sign a stock transfer form. No involvement of a notary public is required.
What are the main advantages of incorporating a company in England in lieu of an Italian company?
There might be several reasons that render it helpful or advantageous to incorporate an English company, which should be evaluated on a case-by-case basis:
- access to the English market;
- time and cost of incorporation;
- no obligation to specify the corporate object;
- reduced time and cost compared to an Italian company for amendments to the articles of association and for share transfers;
- the procedure for terminating an English company is much faster and less expensive than the one for an Italian company;
- possibility to appoint a nominee director;
- ability to protect the identity of the members by conferring the shares to a nominee shareholder;
- possibility to confer the shares to a trust;
- conferral of real estate assets, without the need for any appraisal by an expert in order to certify the value thereof;
- application of a set amount registration tax (€200.00) to the conferral of real estate assets; in the event of conferrals to an Italian company, the proportional registration tax would apply instead (6% of the value of the asset).
- no compulsory social security contributions for directors.
What taxes shall an English company pay?
English companies are subjected to a corporation tax, which is currently equal to 19% of profits, whether distributed or not. Dividends shall again be taxed in the country of residence of the shareholder. In the United Kingdom there is not a tax similar to Italian IRAP [Regional Tax on Productive Activities].
Unlike what happens for an Ltd and a Plc, an LLP is subjected to taxation for transparency (i.e. it is not taxed at the corporate level but only at the level of the partners). Therefore, if two subjects not fiscally residing in England incorporate an English LLP, the latter shall not pay any taxes in Great Britain and the partners shall be subjected to full taxation on individuals in their own country of residence.
Is there a bilateral convention against double taxation between Italy and the United Kingdom?
Yes, the Convention between the Government of the United Kingdom of Great Britain and the Government of the Italian Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income approved in Italy by Italian Law 5 November 1990, No 329 and entered into force on 30 December 1990.
Shall an English company always be subjected to taxation in England?
To determine in which country the company shall pay the income tax it is necessary to establish, in the first place, the country where the company itself has its own fiscal residence. Generally speaking, we can say that a company is resident in the country in which the place of effective management or the primary object of the activity are located. Therefore, an English company owned by Italian members, with registered office in England, but actually managed from Italy, shall be considered fully taxable in Italy, with the result of it being subjected to the Italian IRES tax for income produced anywhere (world income principle). However, in the event that the company is actually managed from England, it would be subjected to the English corporation tax. In the latter case, the company shall have to pay taxes in Italy only in relation to the income produced in our country (source principle).
Where shall an English company pay its VAT?
An English company that is fiscally resident in Italy shall pay its VAT in the same way as an ordinary Italian company does. Instead an English company, which is actually fiscally resident in the Great Britain, might request the English tax authorities to issue a VAT number in order to pay the VAT in the United Kingdom.
May Italian tax authorities object to the use of an English company?
The incorporation of a foreign English company is perfectly lawful per se and Italian tax authorities may not object to it, insofar as – obviously – the company operates in full compliance with the law.
It is compulsory to hire employees?
No. Hiring employees is absolutely discretionary.
Another way for an overseas company to establish a UK presence is via a representative office. A representative office is not allowed to engage in any business activity other than market research or feasibility studies and cannot generate any income. It has no legal status and is purely an administrative arrangement.
Procedure for establishing a UK representative office
The overseas company must file the following documents with Companies House within 1 month of being established:
- Application form OS IN01;
- Registration fee of £20;
- Certified copy of the company’s constitutional documents with a certified translation into English where required;
- A copy of the company’s latest set of accounts (along with a certified English translation where necessary) if the company is required to file such accounts under local law.
Once registered, the company will be issued with a certificate of registration and will have ongoing filing and disclosure requirements in the UK.
These are broadly the same as for a UK branch.
Overseas companies must file accounts with Companies House where they are required to do so under their local law. The accounts must be submitted within 3 months of the local filing deadline. Form OS AA01 must also be submitted along their accounting documents.
For EEA overseas companies, if there is no requirement to file accounts under local law, the accounts do not need to be filed at Companies House. Non-EEA overseas companies however which are not required to file accounts under their local law, must still file accounts at Companies House. Such accounts must be prepared following the provisions in the Overseas Companies Regulations (OCR) 2009.
A UK permanent establishment is where a company has a presence in the UK through which trade is carried out. As a representative office should not be engaging in any business activity, it should not be classed as a permanent establishment for tax purposes and therefore have no corporation tax presence in the UK.
The overseas company should not be required to register with HM Revenue and Customs and file annual corporation tax returns. The overseas company is also not liable to UK corporation tax and not required to register for VAT.