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Setting Up An Offshore Company in the UK

8 min read

An offshore company is a company incorporated or registered away from the country of its investors and the region of its main operation and offices. Usually, it operates outside the country where it is formed.

If you’re thinking of setting up one, this article will answer your questions. Otherwise, feel free to drop us a message on registering an offshore company in the UK.

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Why the UK for an offshore company?
Characteristics of a UK Offshore Company
What are the top uses for UK Offshore Company?
Offshore companies in the UK -liability to income tax, capital gains tax, and VAT
Best offshore company structure
How To Set Up An Offshore Company: Incorporation Procedure and Documents required
Offshore Company Banking

Why the UK for an offshore company?

These are some of the benefits of setting up a UK offshore company:

  1. Tax Treaty Network

The UK has the largest network of double tax treaties (over 100) in the world making UK companies a very efficient vehicle for minimizing withholding taxes on dividends received.

  1. Low Cost of Maintenance of a UK Company

They are amongst the lowest in developed jurisdictions such as Norway and New Zealand, with comparable reputation, international respectability and protection.

  1. Share Capital

There is no minimum paid-up share capital requirement and no capital tax on authorized or issued shares.

  1. Audit of Accounts

There is no audit requirement for companies with turnover below GBP1,000,000 AND net assets of less than GBP1,400,000 unless the company is part of a larger qualifying group.

  1. Ease of Establishment

Shelf companies are available. If required, tailor-made companies can be set up within 24 hours.

  1. International Respectability and Protection

UK companies are often used to acquire assets in certain foreign locations to minimize risks of property dispossession by foreign governments.

Characteristics of UK Offshore Company

The United Kingdom has a fast and efficient registration for offshore companies. Business incorporation can be processed online within a day.

Take note that upon the incorporation of the offshore company, the names of the company officers, information on directors and shareholders will appear on public record.

Features of UK Offshore Company (Private Limited Company – Ltd):

Minimum Number of Individual Directors 1
Local Registered Office Required Yes
Local Registered Office Required No
Local Company Director Required No
Public Register of Beneficial Owners Yes
Public Register of Directors Yes
Taxation on Profits Derived Outside UK* 19%
Annual Tax Return Required Yes
Annual Submission of Accounts Required Yes
Corporate Director Permitted (in addition to 1 individual director) Yes
Annual General Meeting Required Yes
Annual General Meeting Location Anywhere
Minimum Paid Share Capital Nil

*This does not remove tax liability for profits in the country in which they have been obtained.

What are the top uses for UK Offshore Company?

These are the main sectors where offshore companies prefer to set up in the UK:

  • Holding company
  • Commercial activities
  • Trading house
  • Asset protection
  • International investment company

Offshore companies in the UK: Liability to Income tax, Capital Gains Tax, and VAT

UK Tax for Offshore Companies

UK incorporation regulations require Private Limited Companies to pay UK Corporation Tax at a rate of 20 – 28%, which is determined after a company has filed their annual returns.

Company Directors are also responsible to pay UK income tax for any profits from the company. No taxes are paid on the dividends of a holding company and there is no double taxation on dividends distributed through to EU member countries.

After the offshore company formation in the UK and going through the incorporation process, a Unique Taxpayer Reference (UTR) number will be issued by the HM Revenue and Customs (HMRC), which will be sent to the Company’s registered address. The HMRC will instruct you how to register your company, file the company accounts, and pay corporate taxes.

A property is owned by an offshore company, Arc Pte. Ltd (fictional company name). Only the basic rate of UK income tax (20%), will apply regardless of the level of income. This can result in a substantial saving when compared with personal ownership under which the banded UK income tax rates (up to 50%) will apply. The basic rate tax would be deducted at source by an agent or the tenant. It is possible though for the owner to apply to HMRC for a clearance which allows them to receive the income gross.

Capital Gains Tax for Offshore Companies

Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value.

It’s the gain you make that’s taxed, not the amount of money you receive.

You bought a studio apartment for £150,000 and sold it later for £200,000. This means you made a gain of £50,000 (£200,000 minus £150,000).

Non-resident UK offshore companies do not normally pay capital gains tax (CGT). The territorial scope of this CGT depends on the residency of the taxpayer and not on where the asset is situated. This means that normally, there is no capital gains tax for offshore companies arising from disposals of UK assets unless the gain is caught by the corporation tax charge.

However, there are exceptions to the general rule in connection with UK real property. An example of the exceptions: offshore companies may be liable to corporation tax or income tax on income from UK real estate depending on whether the company is trading or investing in UK property. Where corporation tax applies, capital gains are also brought within the charge.

UK VAT – What Is The VAT Rate In The UK?

VAT, or Value Added Tax, is levied on the sale of goods and services in the UK. The Standard VAT rate in the UK is 20%. The VAT Reduced rate at 5%, applies to some goods and services, such as children’s car seats and home energy.

If a company does not have an annual turnover of more than £85,000, then Registration of VAT is not required. A Company that does register can collect a number of benefits through registration, such as the ability to reclaim input tax and collect VAT from customers. Companies register through the (HMRC) website.

Some things are exempt from UK VAT, such as postage stamps, financial and property transactions. The VAT rate which businesses charge depends on their goods and services.

What is the best offshore company structure?

There are 3 offshore company structures widely chosen by entrepreneurs for offshore company formation:

  1. Limited Liability Partnership (LLP)
  2. Private Limited Company (LTD)
  3. Public Limited Company (PLC)

The table below lists some features of these different offshore company structures:

Company Structure Key Features
LLP
  • Separate legal entity from its members
  • Taxed as a partnership
  • Must have at least two designated members
  • Must be registered at Companies House
  • Accounting and filing requirements are similar to those of a company
  • Ability to issue debentures, give fixed charges and floating charges over its assets
LTD
  • A privately held business entity with not more than 50 shareholders
  • Limited liability to shareholders
  • Can enter into contracts, acquire assets, sue or be sued under its own name
  • Enjoys low tax rates/tax exemption from income earned from outside its jurisdiction
  • Restricts shareholders from publicly trading shares
PLC
  • Also known as a publicly held company
  • Can issue shares for anyone to buy or trade on the London Stock Exchange or the Alternative Investments Market
  • Need to have at least two shareholders and issue at least £50,000 worth of shares
  • Must appoint a minimum of two directors and a qualified company secretary
  • Able to sell shares to raise capital without going into debt
  • Exists as a separate legal entity from its owners

The best offshore company structure is the Private Limited Company (Ltd.) because it allows profits to be shared by the shareholders while restricting financial liabilities; a private limited company has a separate legal existence from its members.

The liability for a private limited company’s debts is limited to each shareholder’s value of their shares. This protects shareholders’ personal assets if the Pte. Ltd. company encounters any financial problems, thanks to the UK’s strong and structured shareholder conflict resolution procedure in place for private limited companies.

How To Set Up An Offshore Company: Incorporation Procedure and Documents required

  1. Firstly, to set up a UK offshore company, the trade name must be finalised. As a part of the name, a suffix at the end of the business name must be included to denote limited liability. You can pick from either  “Limited” or “LTD”.
  2. Next, overseas companies must register with Companies House (or Companies House in Edinburgh for companies registered in Scotland) within one month of opening a UK establishment. They can do so by filing Form OS IN01 'Registration of an overseas company opening a UK establishment' with Companies House - along with a £20 registration fee.

Companies must supply due diligence information including:

  • A certified copy of passport and license;
  • An original or certified copy of a document proving applicant’s residing address;
  • Details of the company’s proposed business activities;
  • Names and details of directors;
  • Details of shareholders and share capital;
  • Registration fee;
  • The Company’s name and registered address (if pre-existing);
  • Articles of Association and Company Memorandum.

If it is registering its first UK establishment, it must additionally provide:

  • Certified copy of company's constitution documents (including a certified English translation if required);
  • Latest set of company accounts (including a certified English translation if required) if it is required to file these in its own country.
  1. Submit an order form including information as regards to what kind of shares are issued, the company secretary and the director, several shareholders, banking and virtual services required for the business and so on.

The best option, in order to avoid overlooking any step, is to engage an agent that acts as a representative for your offshore company. We can help you register your company in the UK and assist you with all the paperwork you need to do, while you focus on growing your business.

Offshore Company Banking

There are several offshore company banking options for non-residents of the UK. Business owners may refer to our article on “How to Open a UK Bank Account for Businesses”.

You can choose between international banks or online banks:

International Banking

After an offshore company is set up, it can open a business account in a large and reputable British bank such as Barclays, Lloyds, or HSBC in the UK.

Every bank is unique, but there are two documents each of them will ask for:

  • a valid passport/a national ID card
  • proof of address in your country of residence

Barclays

Barclays has an International Banking division where you can open your offshore company bank account for your business. You can open an account at Barclays online without being present or resident in the UK; furthermore, you can open it in three jurisdictions – the UK, Jersey, or the Isle of Man.

Lloyds

In order to open a business account in Lloyds bank you would need to fulfill these requirements:

1. Have the gross annual income of no less than £50,000 or equivalent.

2. Invest or deposit a sum of £25,000 or equivalent within 30 days after opening your account.

If you do, you can open an account online or by phone and choose from 3 currencies: sterling, US dollar, and euro. Moreover, Lloyds does not charge you for sending or receiving funds from other banks, offers 24/7 internet banking and Visa debit cards in these three currencies.

HSBC

HSBC offers holders of Business Current Accounts a free banking period of 12 months after account opening.

Online Banking

The benefit of online banking is that you can access your offshore company bank account from virtually anywhere; besides, opening an account in a banking app does not always require proof of residency. Some online banking applications include:

Monese

Monese is a mobile app that provides all the services of a standard bank. Its business account is only available to European Economic Area (EEA) residents who have registered a company in the UK. They offer a premium business debit card, invoices and expense reports, transaction categorisation and competitive currency transfer rates.

Revolut

Revolut positions itself as a digital banking alternative built around a mobile app and a multi-currency debit card issued on request. While they offer business accounts operating via mobile app, currently this app is available for businesses registered and physically operating within the EEA and Switzerland.

The UK for an offshore company setup is not the usual choice, but it could be the best choice for you. Besides, helping you with company registration, we can also assist you with bookkeeping for companies in the UK.

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