UK Companies and the Role and Importance of UK Professional Directors
Why use a UK Company?
Over recent years, the UK Government has introduced many changes to make the UK tax system more competitive, in particular in relation to; UK holding companies, the re-shoring of manufacturing and increased UK based research and development (R&D).
United Kingdom (UK) entities have a respectable international image and can be used tax efficiently for cross border trading and as international holding companies.
UK Resident Companies: Some of the Advantages/Opportunities
Since 1 April 2017 the corporation tax rate has been 19%. Given the unprecedented measures in response to the COVID 19- pandemic the Government has found it necessary to increase the rate to 25% which is still the lowest rate in the G7.
There are generous allowances for investment in R&D by small and medium sized entities. The tax relief on allowable R&D is 230%. That means that for every £100 spent on R&D you can claim a tax deduction of £230.
Where a company makes a profit from exploiting potential inventions those profits may be taxed at 10% rather than at the normal corporate tax rate.
UK Controlled Foreign Company Laws have been reformed with the aim of making the UK tax system competitive for multinationals.
There are no withholding taxes on dividends paid, from the UK, by companies.
Why Appoint Directors From Dixcart UK?
Clients typically appoint us because they initially do not always have the resources in the UK to provide the management and control of the proposed company in the UK. If management and control were to be exercised from a client’s home jurisdiction there would be a danger that the jurisdiction would seek to tax the profits of the UK company.
Professional Dixcart UK directors are also appointed due to their expertise and assistance in managing UK companies, many of which are subsidiaries of an international parent company.
Management and Control
The fundamental question is; where is a company managed and controlled, and what factors will tax authorities consider when assessing where management and control takes place?
The central management and control of a company would normally be the place where directors meet to manage the company’s business. Generally, this is the place where board meetings are conducted. This is only relevant if central management and control is in fact exercised by the directors in those meetings. It is essential to show that directors have authority and make independent and informed decisions concerning the central business policy of the company, rather than just ‘rubber stamping’ the decisions of others.
It is important therefore, that foreign shareholders appoint UK resident directors who are aware of these risks and ensure that they carry out their duties correctly, but also properly minute and evidence their actions, in order to be able to demonstrate management and control in the UK, if called upon to do so.
Where a UK entity is being used as an SPV for a number of different shareholders, we are often appointed because the shareholders want independent directors to run the company. Such directors will need to familiarise themselves with any shareholder agreement, and ensure that the controls and mechanisms put in place to govern the relationship between the shareholders and to protect minority interests, are observed.
Dixcart Directors and Additional Professional Support
Dixcart directors are supported by a team of professionals enabling us to provide a complete business management and administration service. This includes:
- Company formation and secretarial services;
- Book-keeping, accounting and tax compliance services;
- Serviced office space;
- Telephone answering and email services;
- Human resource services, including help with recruitment, employment contracts and payroll services;
- Immigration services to help clients who wish to recruit or transfer staff to the UK from abroad.
Clients wishing to establish a business in the UK are advised to contact Dixcart at an early stage so that we can gain a comprehensive understanding of the proposed business.
This will enable us to give relevant pre-arrival advice and demonstrate how our directors would add value, should you decide to form a company in the UK. Please contact: Laurence Binge or Peter Robertson at the Dixcart office in the UK: firstname.lastname@example.org