Setting up a business in the UK by an overseas company
Why it is important to register with Companies House and HMRC.
Companies House has recently highlighted the rules relating to overseas companies. There are deadlines involved in the registration and it is important that directors and their agents understand the compliance requirements.
What is required?
If an overseas company wants to set up a place of business in the UK it must register with Companies House. This includes a permanent place of business or if the company usually carries out business from somewhere in the UK.
some types of company can’t register as an overseas company in the UK, including partnerships and unincorporated bodies
overseas companies that are developing property or land in the UK may need to register for corporation tax (see below) but may not need to register with Companies House
How to register and deadlines
The company must fill in form OS IN01 and send it to Companies House within one month of opening for business. The company will need to provide various details on the form and include documents such as accounts etc. There is also a £20 fee payable.
On-going requirements after registration
The company must tell Companies House within 14 days if the company details change. This includes:
what the business does
details of directors, secretaries or people authorised to represent the company
company information, for example accounting requirements or the powers of directors or secretaries
company constitution (one of the documents made when you formed the company)
What about HMRC?
The general rule currently in operation is that a company which is not resident in the UK has to pay UK Corporation Tax only if:
it has a permanent establishment in the UK
the economic activity that generates its profits is carried out in the UK
The criteria above can be subjective:
A permanent establishment is deemed to be where a company has a presence in a country through which trade is carried out. There are two types of permanent establishment:
a fixed place of business
a dependent agent.
A fixed place of business is generally a building or a site which the non-resident’s personnel have at their disposal and use to carry out the non-resident’s business. An office, a factory or a shop, for example, can all be a fixed place of business.
A dependent agent is a person who is not independent of the non-resident company and regularly does business for the company, usually by concluding contracts on its behalf.
The location of economic activity is even harder to define. Many different elements contribute to a multinational’s economic activity, including sales, employees, technology, physical assets and intellectual property. However, simply having customers in the UK does not mean that a company is carrying out its economic activity here. This is because having UK customers is not the same as having a permanent establishment in the UK. There is a difference between a non-resident company that is trading from abroad with customers in the UK, and one that is actually trading in the UK.
Registering with HMRC
Where a foreign company’s UK activities are deemed to be taxable, it must register with HMRC. Remember that it will need to do this within three months of starting to do business.
It will then be subject to the normal rules of keeping appropriate accounting records and completing corporation tax returns.