The UK’s departure from the European Union officially came into force from January 2021 onwards. Despite the major change to a business setting and economic scenarios in the UK post-Brexit, the country remains one of the ideal destinations for global entrepreneurs to conduct their business and also a popular jurisdiction for offshore companies registration.
If you are currently looking for a place to set up your own offshore company, take your time to read this article and find out why the UK is the right choice for you.
What is an offshore company?
At its most basic, an offshore company is simply a legal entity that has been incorporated outside of its home country or the region of its main operation and offices.
For instance, if your company operates in the US, you could establish an offshore company in countries such as Panama, St. Vincent, Belize and similar countries that are favourable to foreign entities.
The reason behind this far-off-the-land incorporation is that offshore companies are normally subject to tax advantages and offer a considerable trading opportunity for business owners.
In the UK, offshore companies are typically used for the following purposes:
- Holding company
- Commercial activities
- Trading house
- Asset protection
- International investment company
Why register offshore companies in the UK?
Below are some of the benefits of forming a UK offshore company:
Ease of incorporation and doing business: The requirements to set up a new business in the UK are not as strict compared to other prestigious countries, especially other European countries, around the world.
Open trading opportunities: After Brexit, companies in the UK are able to broker many competitive deals and take up more trading opportunities with other European countries and commonwealth partners.
Tax treaty network: It is evident that Brexit has almost no impact on the UK’s double tax treaties network with over 100 jurisdictions, as these are not based on EU Membership. An offshore company in the UK can be considered a very efficient vehicle for minimizing withholding taxes on dividends received.
Strategic location: The UK has long been a crucial link in the global supply chain with its large number of international ports such as Port of Felixstowe and Port of London, offering a good environment for doing business in terms of logistics.
Low maintenance fees: The cost of maintenance for companies in the UK is amongst the lowest in developed jurisdictions such as Norway and Switzerland.
Minimum capital requirements: There are no minimum capital requirements for offshore companies in the UK.
If you want to learn more about offshore companies in the UK, feel free to visit BBCIncorp!
What are the disadvantages of offshore companies in the UK?
The following are the disadvantages that business owners may have to face when incorporating offshore companies in the UK:
Extensive record-keeping procedures: Offshore companies in the UK are required to follow very strict bookkeeping practices. For example, business owners must take note and keep track of every company meeting and record all decisions taken by company directors and shareholders.
Tax returns: Offshore companies in the UK are required to file tax returns to HMRC (HM Revenue and Custom) annually.
The UK tax returns can be tricky and complicated, which requires an excessive amount of time to review and complete. Moreover, business owners will face penalties if he/she fails to submit tax returns on time without reasonable excuses.
Business bank account: Setting up a business bank account for offshore companies can be challenging because of the strict anti-money laundering regime and customer due diligence in the UK.
However, there are many innovative solutions for business banking that help you overcome the challenge. It is highly recommended to pick a banking method that meets the needs of your business.
Although the benefits generally outweigh the challenges, it is advisable for entrepreneurs to take into consideration all aspects before proceeding further.
What are the structures for offshore companies in the UK?
For business owners who want to start an offshore company in the UK, understanding all the options available is fairly important.
There are generally 3 types of offshore company structures that are widely used by entrepreneurs across the world. Each structures are composed of distinct features and functions differently, including:
- Limited Liability Partnership (LLP)
- Separate legal entity from its members
- Formed by at least two members
- Subject to partnership taxation
- Similar accounting and filing requirements to those of a company
- Private Limited Company (LTD)
- A privately held entity has no maximum number of shareholders
- Limited liability to shareholders
- Must have the word ‘Limited’ or the abbreviated ‘Ltd.’ at the end of their name
- Shareholders are restricted from publicly trading shares
- Public Limited Company (PLC)
- A public held entity formed by at least 2 shareholders
- Separate legal entity from its owner
- Can issue and sell shares to raise capital on public market
- Must issue a minimum of £50,000 worth of shares before registration.
How to set up offshore companies in the UK? (H2)
Offshore companies registration process in the UK is fairly simple and straightforward. Business owners need to follow the 3 main steps:
Step 1. Choose a Company Name
To set up a UK offshore company, the trade name must be finalized. The company name must comply with Government regulations and must not contain any sensitive word or expression.
For certain words or phrases that may indicate the connection with the government or public authorities, permission from authorities must be granted.
Step 2: Register the company
After picking the name, offshore companies must register with Companies House within one month of setting up a UK establishment, by filing Form OS IN01 ‘Registration of an overseas company opening a UK establishment’ with Companies House, along with registration fee.
Step 3: Receive certificate of registration
The Registrar of Companies will review all forms and company information before giving its approval and issuing a certificate of registration. This certificate is an indication that an offshore company may start its trading activities immediately.
Choosing the UK for offshore company registration comes with many attractive benefits that are set to stay in place after Brexit. So if you are looking to form an offshore company, or have plans to incorporate it in the future, the UK could be the right choice for your business.
For further guidance and support regarding doing business in the UK, click here!