5 Key Things to Know About Starting Up in the UK

5 key things you need to know about starting up in the UK

By Paul Beare, CEO Paul Beare Ltd, which is part of the IR Global professional network

The UK remains a hugely attractive place for global businesses. Home to the world’s pre-eminent financial centre, the UK also has a highly skilled workforce, well developed infrastructure and a business services sector to rival any other country in the world.

Despite the flow of FDI taking a hit post-Brexit, there are clear signs that much of the disruption caused by the decision to leave the EU has been worked out. Britain is, as the government likes to tell its foreign counterparts, open for business.

But while the country is, broadly speaking, very pro-business, the UK does have its particular rules and regs; so it pays to understand some of the basics before embarking on the journey to set up in the UK. Here are five key elements those looking to set up in the UK should know.

Corporate governance

As with most global jurisdictions, the UK has a clear set of rules governing how companies are run, and by whom. One of the most important is the role of the director.

In short, whatever its size or corporate structure, the company must have at least one director. Directors are legally responsible for running a company and making sure company accounts and reports are properly prepared. This applies in cases where the company is a subsidiary of an overseas entity setting up in the UK for the first time.

Although directors can hold a whole range of different responsibilities and roles, there are some non-negotiable duties that they must carry out to be in compliance with UK corporate governance law.

This involves a range of activities that include following the company’s rules, shown in its articles of association; keeping company records and reporting changes, filing accounts and the Company Tax Return, informing other shareholders who benefits from a transaction the company makes and paying Corporation Tax

Some start-ups might find it easier to pay for a company secretarial service to help in this area. These services can include assisting in the preparation of the meeting agenda and support as required with the board meeting documentation, providing a staff member in attendance if required. Company Directors will make decisions about the day-to-day management of the company.

Under an arrangement like this, the CoSec company will provide board minutes to reflect board meetings. These minutes are a legal obligation in the UK and should include all relevant material, and especially all decisions.

Visas

There’s a good chance that if your business grows you may want to bring in employees from overseas. When attempting to hire individuals from overseas for a UK business on a long term, permanent basis, it is essential that the business obtains a Sponsorship Licence

That means that when an individual applies for a working visa, they must provide their Certificate of Sponsorship, a digital document which confirms to the Home Office that the applicant has a valid job in the UK.

The “Certificate is provided by employer to the applicant, and to allow a business to assign “Certificates of Sponsorship”, it must have a Sponsorship Licence. To obtain this licence, in most circumstances, the business needs to be registered at Companies House, have a UK bank account and be registered with PAYE and VAT.

Banking

Opening and operating a bank account in the UK can be a challenge. In order to open a UK bank account, an overseas company needs to have a registered office and a UK business address. Additionally, the company may need to provide documents such as a certificate of incorporation and a business plan. Be warned: this can be a time-consuming process, especially if the company is not familiar with UK company formation requirements. A UK based resident director may also be required, in some circumstances, depending on ownership structure together with expected turnover of the UK Company.

It’s also worth noting that banks in the UK are required to verify the identity of their customers as part of their anti-money laundering (AML) and counter-terrorism financing (CTF) obligations. This can be a challenge for overseas companies, especially if they do not have a physical presence in the UK. The bank may require the company’s directors and shareholders to provide proof of identity and address, such as a passport or utility bill.

UK banks will also expect to see your credit history – something that may prove complicated if you’re from outside the country. UK banks use credit scores to assess the risk of lending money to customers, so without a UK credit history, an overseas company may struggle to convince a bank that they are a low-risk customer. This can make it difficult to open a bank account or access other financial services, such as loans or credit cards.

The UK banking system may be very different from what overseas companies are used to. For example, many UK banks do not offer the same types of services that are available in other countries. Additionally, the bank may have different policies and procedures for opening an account or accessing financial services. This can make it difficult for overseas companies to navigate the UK banking system.

The different banking options

Fintechs: Digital-native banks like Starling, Monzo, and Revolut offer streamlined services and advanced digital features.
High St Banks: Well-established players like Barclays, HSBC, and Lloyds continue to provide comprehensive business banking services. More hoops to jump through to get an account, but they offer a wider range of services, including business lending.
Credit Unions: Local credit unions often offer a community-focused banking experience with competitive rates.
Specialised SME Banks: Some banks specialise in serving SMEs, offering tailored financial solutions to meet your business’s unique needs.

Government grants and support

In the UK, a number of government agencies offer a range of grants to help smaller firms to grow and prosper. The grants are typically designed to support innovation, encourage job creation, and underpin growth. In the last few years, a number of new initiatives have emerged, including grants aimed at boosting green technology and digital transformation.

The following list isn’t exhaustive, but gives an indication of some of the grants available:

Green Business Grants: The UK government encourages sustainability through grants for businesses involved in renewable energy, eco-friendly practices, and low-carbon technologies.
Innovate UK Grants: These are targeted at businesses investing in research and development, particularly in cutting-edge technologies and innovative solutions.
The full Government Grants search platform can be found on the UK government’s website.

The grants system can be confusing. But with basic research and some effective help you can find what you’re looking for. Eligibility often depends on factors such as the size and nature of your business, the specific grant’s requirements, and your ability to demonstrate how your project aligns with the grant’s goals.

Getting tax right

The UK tax system can be – like many countries’ – a complex beast at times. Perhaps the element that is most unique to the UK is Value Added Tax (VAT), which is tax added to most products and services sold by VAT-registered businesses.

Businesses have to register for VAT if their VAT taxable turnover is more than £85,000. They can also choose to register if their turnover is less than £85,000. You might also need to register in some other cases, depending on the kinds of goods or services you sell and where you sell them. You can also register voluntarily.

VAT is charged on a range of goods and services. They typically include hiring or loaning goods to someone, selling business assets, commission, items sold to staff – for example canteen meals, business goods used for personal reasons, and ‘non-sales’ like bartering, part-exchange and gifts

It’s important to note that, from the date of VAT registration, the company should charge VAT on all supplies within the UK. This must be collected and reported each quarter. Any purchases made or expenses for which the company is charged VAT a VAT receipt should be obtained which will detail the amount of VAT payable and this can be offset against the sales tax. The current standard rate of tax is 20%.

Records should be maintained by way of accounting package/excel so that figures each quarter can be reported to HMRC. For those businesses selling overseas, details on VAT for Exports to EU can be found on the HMRC website.

Some products and services are exempt from a VAT charge. While VAT should be charged on all goods and services that are invoiced by the UK company, there is one important exception: If you supply services to a business customer in the EU, you don’t need to charge VAT – the customer is responsible for paying VAT in their country.

And there are advantages to voluntarily registering for VAT. By registering voluntarily for VAT, the business may experience a cash flow benefit, as well as giving perceived comfort to your customers (it adds a certain level of prestige and perception of size and professionalism).