Yes, a non-resident UK freelancer can set up a company in the UK and do business through it with clients in the UK, but the UK-incorporated company will pay corporation tax on profits made in the UK and the freelancer will pay income tax on income and gains from UK activities if s/he spends more than six months in the UK. So the answer to your question is yes, a non-resident freelancer can certainly start a company in the UK and trade with UK clients, but you will need to be on top of the procedure and then take charge of your tax affairs in the UK and where you are resident.
Autumn Statement 2016
The Autumn Statement is relevant because the UK Chancellor announced a proposal to review how non-UK resident companies are taxed on income earned in the UK. Non-resident companies with a trading business in the UK pay corporation tax on their profits at present; but companies which do not trade in the UK may also become subject to UK income tax on their UK-source income. The most common scenario for a non-UK company to pay UK income tax would be on rental income (under the non-resident landlord scheme). So you should just bear this in mind for the future.
Starting a company in the UK
To incorporate a company in the UK you will need to:
- Choose a company name, which must be unique and not likely to cause offence.
- Appoint at least one director and a shareholder; you can appoint the same person to both positions.
- Get a registered office address (ROA) in the UK (the address must be in the same jurisdiction as the place you intend to register your company, i.e. England, Scotland, Wales, or Northern Ireland). This can be managed for you by an accountant or company formation agent in the UK.
- Register your company with Companies House in England, Wales, Scotland, or Northern Ireland. You don’t need to be in the UK in order to do this, and can do so personally, online, or via an accountant or other company-formation agent which will carry out the process for you.
- Then keep all the documents of incorporation safely.
When you have started your company in the UK it must adhere to the filing and reporting requirements of the Companies Act 2006. As mentioned, the UK corporation tax and personal tax you will pay depends on your UK-related income and your residency status, but considering you are non-resident, you will not pay any UK income tax.
If you are running a UK business you will need to open a business bank account here. To do so, you must provide proof of ID and evidence of incorporation in the UK. As there can be delays and difficulties due to know your customer (KYC) legislation, you should allow time for the process and also consider appointing a director who already has a good relationship with a UK bank.
To open a UK business bank account you will need to produce:
- Proof of residential address: the requirements vary, e.g. Lloyds requires proof of at least one director’s UK address; for Barclays there’s no need for any director to have a UK address, but you must place on deposit £25,000 after the first month of opening the account.
- Passport and names and addresses of directors;
- UK driving license (if applicable);
- Proof of UK registered company: registered office address; certificate of incorporation; memorandum of association; share certificate.
I think it would make things very straightforward were you to delegate the task of setting up a UK limited company and opening a business bank account to a chartered accountant based here. Make sure it’s an accountant with expertise in limited company contractors and small businesses and with experience of dealing with non-UK resident business owners.
About the Author:
Sumit Agarwal – A specialist accountant and tax adviser for freelancers, contractors and small businesses since 2005, He is an expert in business growth and development strategies. A renowned tax expert for owner managed businesses and contractors, He won the British Business Forum’s Young Entrepreneur Award in September 2012, presented at the House of Commons by MP Vrinder Sharma. He recently Awarded as Best in Accounting 2017 by the British Indian Awards.
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