The advantages and disadvantages of doing business in the UK
By The Forex Review - 30 / May / 21 1122
Dominick Bell
Often foreigners wishing to open their own business in the UK do not quite understand why their willingness to work and the size of their investment in the country's economy are perceived rather dryly. The thing is that the Kingdom has a strong traditional component, and a prospective partner needs not only to prove financial solvency, but also to prove their trustworthiness.
Business in the UK
Framework
In the legislation of Britain there are many regulations that contradict each other. Laws are based not only on law but also on judicial precedent regarding their private application.
Because of the country's administrative divisions, each part of the United Kingdom - England, Wales, Scotland and Northern Ireland - may have different regulations.
There are some general laws that should be considered for those who wish to start a business here:
the Limited Partnerships Act 1907;
The Small Business, Enterprise and Employment Act 2021; and
Companies Act 2006;
The Limited Liability Partnerships Act 2000.
When registering a business entity in Scotland and Northern Ireland it is necessary to refer to local legislation and use separate forms.
It is possible to determine which laws a business must comply with by locating the registered office of the company. It is important to remember that under UK law an address must be real and located within the United Kingdom.
It is not possible to register a company with an address which is abroad.
Corporate forms for business
There are three ways of doing business in the UK
sole trader
limited company;
partnerships.
The first form is familiar and comprehensible to Russian citizens. Business is conducted in the name of the individual, responsibility for liabilities extends to all kinds of personal property, the taxation of income occurs through the charging of income tax for individuals.
Compulsory registration is intended for those who earn £1,000 or more as a self-employed person in one fiscal year - from April 6 to April 5 of the following year. It also entitles you to deductions and benefits under statutory national insurance: basic pension, unemployment benefits, maternity benefits and the death of a close relative.
A sole proprietorship has the right to register and use its own trademark and to employ staff.
Companies limited by shares fall under the concept of limited companies:
Private limited companies (Private limited companies) - where shares are issued exclusively to a limited number of members and determine the shareholding in the company and the amount of dividends. This is the form more often chosen by small businesses in the UK.
Public limited company (PLC - the wording must appear in the company's name) - joint stock companies which issue and sell their securities on the stock exchange. The value of shares issued for public sale must exceed the amount of 50,000 pounds.
Another type of commercial interaction - partnerships - are formed for the joint implementation of temporary and permanent business projects. Participants may include organisations, individuals and other partnerships.
Unlike a company, a partnership is not liable for the affairs of its participants and its profits from joint activities are not subject to corporation tax. All income received (after the payment of VAT, if such registration is required by the amount of receipts) is distributed in accordance with the agreement of the participants, and is taxed according to the circumstances of each of them.
Business niches in demand
Even those who moved to the islands as an employee sooner or later begin to think about starting their own business. Entrepreneurship in England is attractive for 70% of people aged 25-35.
People from the CIS prefer to provide services to their compatriots on a fee basis: they open translation agencies, travel agencies, beauty salons, cafés "for their own people", they offer support for Russian-speaking guides, and consultancy services. The volume and type of activity make it possible to register this as self-employment (the equivalent of a sole proprietorship) with the right to employ assistants.
If the new British resident has the start-up capital, he can try his hand at the hotel business (the low-cost temporary accommodation niche is particularly in demand) or open a restaurant.
The main thing is to put a national twist on it: Russian cuisine or traditional dishes from other countries, characteristic details in decoration or service.
Entrepreneurial visas
The mere desire to open a business in London is not enough to obtain a permit to enter and work in the country.
List of documents
Each applicant is required to provide:
A foreign passport with an English translation;
Results of medical examination for tuberculosis;
Criminal record certificate;
Bank statement showing a bank balance of at least £945 within 3 months. For investors - a document of financial position and origin of £2 million.
Rules of business registration
Business registrationWhen the form and method of how to start a business in England have been chosen, you need to study the registration procedure and required documents. Depending on the chosen form of doing business, the process may vary.
To become an entrepreneur, you must:
by 5 October of the year following the reporting year, submit a self-assessment declaration as a sole proprietorship and a social security class 2 contribution payer application (non-employed persons);
obtain a unique taxpayer number (UTR) from the Tax Office and save it;
create and set up an account on the Fiscal Service website to send reports and exchange information.
It is the responsibility of the Fiscal Service to send the account activation code within 10 days of filing the return (maximum 21 days if the person is abroad).
The creation and registration of partnerships begins with the negotiation and signing of a partnership agreement. It must clearly state the purpose of the partnership, the duties of each of the members, designate the responsible members, indicate the physical address for registration and keeping the records, and state a unique name.
The agreement is recorded at the Registrar's Office at the same time as the application to form the partnership is submitted. As soon as the name of the new company is successfully tested for similarity with other companies or existing trademarks, the state authority will issue a permit for the commencement of activities. The process takes an average of 24 hours if submitted electronically.
Establishing and registering a company in the UK will require much more effort. Partners in a company need to make and document a decision on
the company name - it must be unique and contain no offensive words or signs;
the management body (director) and the appointed secretary responsible for keeping the company records
the registered office and place of storage of documents, if these do not coincide
the value of the share capital or the value of the shares to be issued (if there is only one member this can be as low as £1, there is no minimum limit set by law);
register of shareholders and decision makers (from 2021 it is compulsory for all);
the contents of the articles of association or memorandum of association;
the list of economic activity codes (SIC).
The completed documents can be transmitted electronically, through an authorised person or by post. The standard cost of the procedure is from £12. A fee of £100 must be paid to register on the same day.
Algorithms of buying a ready-made business
Great Britain is proud of its business reputation and strictly protects it, so it is very difficult to register a company and open a bank account without being tax resident in the country. That is why foreigners are often ready to buy a ready-made company with address, account and name.
The deal can be done in two ways:
Use a commercial nominee service - agent company for a fee provides a nominee director (British citizen), registered office, files accounts and communicates with the bank.
The company is transferred to the actual owner and then acts in its own name. The option is good for those who are actually in the country and can confirm their business credibility, as otherwise the company may lose the already open bank account.
The cost of re-registration services (without a visit to the Kingdom) ranges from £15,000 to £20,000.
Rules for opening a bank account
The banking system in the UK boasts a centuries-old tradition. This has led to a high level of confidence in banks from the general public and the commercial sector.
Stringent KYC (Know Your Customer) rules have helped maintain stability and reliability and therefore opening accounts for foreigners and non-residents is often not as straightforward as for permanent residents.
HSBC and Lloyds. This will require that:
The client provides documentation to show that they are actually located at the stated address (invoices for rent and services);
show accounting records of the nature of their business activities;
disclose the names of his counterparties (it is important that they have no problems with taxes and the law) or provide positive references from reputable clients.
Letters of guarantee from other credit institutions in the UK are seen as an additional factor.
Taxation and reporting
Taxation in the UK is based on self-assessment.
Every business entity is obliged to declare its income every year, to report on benefits it has received and to calculate the amount to be paid to the state budget.
Fiscal returns must be filed by sole proprietors and companies as well as individuals claiming deductions and tax refunds. In addition to reporting tax obligations, companies and partnerships are required to file annual financial statements and submit a confirmation of data to the Registry Office.
When determining a business entity's fiscal obligations, the following distinctions must be borne in mind:
IE profits are subject to income tax (analogous to personal income tax in Russia) - the scale is progressive and, depending on annual turnover, can reach 45%.
Companies pay corporate income tax - 19 % on the positive difference between gross income and reasonable expenses (related to business activities).
Partnerships can only pay VAT and excise duties on their products, the profits generated are distributed according to the terms of the agreement between the participants and are subject to taxes, depending on the status of the entity: personal income tax for individuals and corporate income tax for companies.
Business immigration into the country
The recipient of an investor visa after the first five years of residence in the UK may apply for residence permit and is likely to receive a positive response. This visa is available even to those who initially had nothing to do with commerce: it is important to invest in the British economy of two million pounds or more.
It should be understood that the source of money must be checked for legality: it could be savings, inheritance, proceeds from the sale of valuable property, etc. Apart from the financial aspect, the applicant has to meet an age requirement (be 18 years or older) and agree to submit to biometric data (fingerprints).
Peculiarities of English business culture
In life and business British people are very conservative and reserved, punctual and thorough. This is not to say that all companies are manic about formalities and etiquette. However, if a new foreign partner who intends to co-found a firm in England, shows that it is important to plan meetings in advance, be on time for them and discuss specific business issues rather than shake the air with empty plans and promises, any firm will take it positively.
If the partnership works well, the English often invite foreign partners to business lunches in their homes. Here it is important to remember that even in an informal setting they do not discuss anything but common business interests; private life is forbidden.
Nor are there any debates about tradition or religious preference, which have been all too sensitive in the unification process.
Conclusion
In the business sector tend to trust not only numbers, but also reputation, so a firm with a British nationality will be perceived as much more reliable than an LLC from Russia.
Registration of a new business entity in the UK is fairly quick - sometimes within a few hours. However, the would-be entrepreneur should bear in mind that in future, his activities will be controlled not only by the tax authorities, but also by the banks, which only want to do business with reliable clients.
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