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If you do business in the UK, including in England and Wales, you may be wondering when you must formally register or incorporate your foreign business in the UK. This article will explain what these obligations are and the practical and commercial implications of both.
Registration vs Incorporation
Overseas company registration and incorporation refer to two different processes.
Registration
Registration is where you file certain documents with Companies House, which is the public body that governs companies and other business structures. However, you only have to register if you have a physical establishment in the UK.
If you have an office you work out of in the UK, this likely constitutes an establishment. However, if you visit the UK a couple of times a year and stay at the same hotel, even if you meet clients or work in the hotel, this is unlikely to constitute a business.
Only companies and certain other incorporated businesses are capable of being registered. If you run your business as an unincorporated partnership or sole trader, you do not have to bother registering your business with Companies House.
Incorporation
Incorporation is a more stringent process where you create a new company governed by the laws of England and Wales. Unlike registration, incorporation will create a new legal entity with its tax obligations to HM Revenue & Customs. Any profit this entity declares will be subject to the corporate tax rate, which is currently 19%.
As an alternative to incorporation, you could purchase a shelf company. A shelf company is a pre-made company that entitles its owner to trade through it. However, the ultimate effect is the same: your business will operate as its legal entity in the UK and be subject to UK laws.
Which Process is Best for My Business?
There are not many benefits to registering your company in the UK. Instead, registration is more of a procedural formality. However, registration is something that you are required to do in certain instances. Therefore, if you do not register your business when you are supposed to, you can face penalties such as fines.
On the other hand, while incorporating a business subjects you to UK tax obligations and will increase the administrative burden on your business, it has some advantages. Having your operations in the UK structured through one incorporated company will effectively ring-fence your liabilities in England and Wales to just the assets held by the English company.
Having your operations structured through an incorporated company can also allow your business to attain legitimacy. For example, say you want to open a bank account in the UK. In this instance, you may find it easier to have a UK-incorporated company. Likewise, your customers and suppliers may prefer to do business with a UK company.
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What is the Process of Registration?
You must register your business within a month of establishing your business in the UK. You will need to fill out Form OS IN01, commonly called a “Registration of Particulars”, and file it with the Registrar of Companies at Companies House. It currently costs £20 to file this form.
Furthermore, you will need to provide the following information:
- your company’s name;
- the law that your company is incorporated under;
- your company’s registration number;
- details about the company’s director(s), including names, addresses, and nationality;
- information on the company’s UK establishment, including its trading name in the UK and the kind of business it operates in the UK;
- details of the company’s “authorised permanent representative” and the sort of authority the representative has; and
- a certified copy of the company’s constitutional documents and most current accounts.
Key Takeaways
If you operate a business in the UK despite being incorporated in a foreign jurisdiction, you will likely have to register your business as an overseas company. However, you will not have to register your company if you do not operate an incorporated business and instead trade through a sole trader or unincorporated partnership (or its foreign legal equivalent). Nevertheless, incorporating a foreign business in the UK is different from registration. Through incorporation, you will have created a new legal entity subject to the laws and tax obligations of the UK.
If you need further guidance, our experienced corporate lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. So call us today at 0808 196 8584 or visit our membership page.
Frequently Asked Questions
If your business is ‘established’ in the UK, you must register with the body governing incorporated businesses in England and Wales. For example, if you have an office or premises where your business regularly operates, this will likely constitute an establishment.
If you incorporate a foreign business in the UK, you will create a new legal entity independent of the foreign business. It will have debts and own property. It will be a subsidiary of the foreign business (called parent company).
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