Tax Residency in the UK

Need for tax residency in business

The following are the requirements to register as tax residents in the UK.

Any citizen of the European Union or European Economic Area may enter the United Kingdom legally to live and work. Those wishing to work as sole traders on a self-employed basis, will be required to register for tax, national insurance and VAT in the same way as anybody else and cannot carry out business activities in the UK unless they have made arrangements to declare UK income to their home country’s tax authorities or to the UK authorities.

Individuals from countries other than in the EU or EEA may require a visa to enter the country and in many cases, a work permit may also be required.

Any incorporated company wishing to trade in the United Kingdom is required to have a UK registered office address. This must be a bona fide address where mail is received and responded to (ie from Companies House or HMRC) when required.

Foreigners and individuals based overseas

If a company is owned by a company or individual who lives or is based overseas, they must still have a UK registered office, whether trading as a company or having a branch office or representation in the UK. A foreign company must register with the UK authorities in order to trade in the UK.

The UK authorities will require documentary evidence of any company that is already established and based abroad and any directors, managers or employees of the company that is to operate in the UK must have the right to work in the UK.

When forming an incorporated entity (eg limited liability company, limited partnership) it is necessary to register the entity with Companies House.

To set up a limited company the following documents must be sent to Companies House:

  • Application to register a company (FORM 1N01);
  • Memorandum of Association;
  • Articles of Association

On receipt of these forms Companies House will incorporate the company – usually within eight to ten days from receipt of the documentation (which includes the Memorandum and Articles of Association). Same-day incorporation can be requested, for an increased fee. Companies House will process the application and issue the Incorporation Certificate.

There is an ongoing legal requirement to file accounts and to notify Companies House of any changes to the status of directors of the company. Proper records of meetings of directors and shareholders must be kept.

A Limited Liability Partnership must be incorporated and a form (LL IN01) completed and sent together with the relevant fee to Companies House. The partnership does not become legally effective until Companies House has issued the incorporation certificate. The form is available from the Companies House website –www.companieshouse.gov.uk . They can also be contacted at:

Main Office:
Companies House
Crown Way
Maindy
Cardiff
CF14 3UZ

Edinburgh:
Companies House
4th Floor Edinburgh Quay 2
139 Fountainbridge
Edinburgh
EH3 9FF

London:
Companies House Executive Agency
21 Bloomsbury Street
London WC1B 3XD

Northern Ireland:
Northern Ireland
Companies House
Second Floor
The Linenhall
32-38 Linenhall Street
Belfast
Northern Ireland
BT2 8BG

HMRC must also be informed of the existence of a new company – registration for corporation tax is mandatory, as corporation tax is payable on all incorporated companies’ taxable profits.

Sole proprietors and partnerships

Any sole proprietor or non-limited partnership must register with HMRC upon commencement of business activities. In the case of a partnership, each partner must register separately as they will be responsible for their own tax return, in addition to the partnership tax return that must be filed by the nominated partner. There is no requirement, however, for a sole proprietor or partnership to register with Companies House.

Sole traders, partnerships (limited liability or not) and certain other bodies are not subject to corporation tax. Arrangements must also be made to register for PAYE (Pay As You Earn) to deduct income tax and national insurance at source for all employees of the company.

This article is an extract from Personal Business Tax Guide , dated 4th January 2011, for the latest version please click here .

Further reading

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