Can someone share some experiences with owning a UK company as a non-resident of the UK?

[scooterguy]

I'm an EU citizen living outside the EU and I'm looking into setting up a UK company for some side income. The company would own subscription based apps and a couple of websites getting AdSense revenue. Estimated revenue of the company would be around 20K/year during the first years of operation.

Note that one of the upcoming apps will have content uploaded by users, which will be allowed to be NSFW. This excludes UAE and other jurisdictions where the app would most likely be illegal.

From what I've researched so far, the UK has a 25% corporate tax, and apparently one can start a company there for less than 100 EUR and use a virtual office, which would be great to keep initial costs to a minimum. It also seems that one can also take a small tax-free salary of up to ~10K a year, which would work great for this small business, although having a salary is not really necessary.

Is anyone around here running a UK business from abroad that could provide some insights? Is it really that cheap? Is it easy to file taxes online? Is bureaucracy as simple as the HMRC website makes it seem? It is easy to open bank accounts, EMIs, etc. for the company?

Thanks!

 

[mok]

Simple answer: Yes, it's very easy.

 

[Clank]

Why UK and not US LLC?

 

[bibing]

Jbb1 said:
Why UK and not US LLC?
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Not OP, but I guess UK is easier for EU business?

 

[scooterguy]

Jbb1 said:
Why UK and not US LLC?
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I'm under the impression that a UK LTD is easier to form and manage than a US LLC, but I could be wrong.

 

[mok]

A UK LTD is easier to form. You can incorporate in a day and get the business account same day. With a US LLC, you need to wait 4-6 weeks for an EIN to access banking.

 

[JustAnotherNomad]

scooterguy said:
It also seems that one can also take a small tax-free salary of up to ~10K a year, which would work great for this small business, although having a salary is not really necessary.
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As far as I know, salaries paid from UK resident companies to non-resident employees are generally not taxed in the UK. However, they are subject to NHS contributions, for both the employer and the employee.

 

[fshore]

No tax or social security on salary paid to UK non tax residents.

 

[JustAnotherNomad]

fshore said:
No tax or social security on salary paid to UK non tax residents.
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Interesting. My source is a guy who was working for a UK company and then turned digital nomad. He became non-resident for tax purposes in the UK (as he no longer fulfilled the criteria for tax residency, got that confirmed by HMRC), but he still had to pay NHS contributions (about 8%, I think). Guess that was simply because he didn't know he could have avoided that, too?

 

[fshore]

JustAnotherNomad said:
Interesting. My source is a guy who was working for a UK company and then turned digital nomad. He became non-resident for tax purposes in the UK (as he no longer fulfilled the criteria for tax residency, got that confirmed by HMRC), but he still had to pay NHS contributions (about 8%, I think). Guess that was simply because he didn't know he could have avoided that, too?
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There are other rules if you have just been tax resident in the UK and a member of the national social security. I don't know how long you have to keep paying that. If you've never been a UK tax resident then you don't have to pay it.

 

[Barney2201]

I believe the UK NI obligation falls away after you have left the UK for over 3 years. I'm sure someone here will have more knowledge”¦.

The corp tax starts at 19% and increases up to 25% but the top rate only kicks in with profits over £250k

 

[rdec237]

Apart from the issue that some banks want a resident director in order to do business, this setup works well (except the tax of course”¦..)

 

[scooterguy]

Barney2201 said:
The corp tax starts at 19% and increases up to 25% but the top rate only kicks in with profits over £250k
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That's great to know, I thought it was 25% for all companies. The top rate, however, kicks in at 50k, according to pwc: United Kingdom - Corporate - Taxes on corporate income.

 

[khinkali]

scooterguy said:
It also seems that one can also take a small tax-free salary of up to ~10K a year, which would work great for this small business, although having a salary is not really necessary.
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That will often be the case but you need a UK chartered accountant to check your situation. HMRC can try to make the salary payment non-deductible, in which case the business still pays the 25% corp tax on that income.

Also depending on where you are, your country of residence might want to tax it (and even the whole company's profits depending on both PE and CFC rules).

 

[Barney2201]

Not come across the salary payment not being allowed against UK corp tax deductions.... Is this something you can shed more light on??

 

[khinkali]

@Barney2201 I don't have a link to hand, but if you shift profits into salary then it can be challenged.

e.g if the company makes £5 profit after paying the single-employee who is owner £5,000,000 salary, then it can look like profits have been taken as salary.

A company with a decent turnover that declares taxable profit and pays its owner-employee £10k as OP mentioned is likely to look reasonable, especially if the employee actually has work to do that relates to the trade of the business.

But these things are very specific to circumstances, hence the need to consult a UK chartered accountant and not someone on the Internet. 🙂

 

[John Cook]

mok said:
A UK LTD is easier to form. You can incorporate in a day and get the business account same day. With a US LLC, you need to wait 4-6 weeks for an EIN to access banking.
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You can get an EIN on the IRS website in 5 minutes. It is very simple.

 

[scooterguy]

khinkali said:
e.g if the company makes £5 profit after paying the single-employee who is owner £5,000,000 salary, then it can look like profits have been taken as salary. 🙂
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How would this scenario benefit a single-employee company though? A £5,000,000 salary would result in 45% in taxes for the person, even if the company only ends up owing £1.

It would also put the person in the additional rate category, which would result in a 39% dividend tax.

 

[khinkali]

scooterguy said:
How would this scenario benefit a single-employee company though? A £5,000,000 salary would result in 45% in taxes for the person, even if the company only ends up owing £1.

It would also put the person in the additional rate category, which would result in a 39% dividend tax.
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The original post mentioned "running a UK business from abroad" and titled the thread "...owning a UK company as a non-resident of the UK".

So we're talking about a non-resident employee of a UK company who doesn't do their work in the UK, so they might not be subject to UK income tax. (they could be taxed in some other country where they live and/or work)

If they are diverting profits by excessive pay, HMRC can make the salary non-deductible for UK corporation tax.

 

[mok]

John Cook said:
You can get an EIN on the IRS website in 5 minutes. It is very simple.
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Only if you have an SSN or ITIN. At least as far as I'm aware.