UK LTD and LLP Offshore Company Formation Guide
UK LTD and UK LLP Structures
UK Limited (LTD) companies are classic corporate entities in England and are particularly well-suited as holding structures. They can receive dividends from established jurisdictions virtually tax-free, provided these dividends originate from bona fide corporate entities. These can then be distributed offshore to shareholders without withholding tax.
UK LTDs also enjoy the typical holding privilege: shares in subsidiaries may be sold tax-free if a minimum stake of 10% is held for at least one year. However, due to the 20% corporate tax rate, UK LTDs are less attractive for operational business purposes.
UK Limited Liability Partnerships (LLP) are partnerships with limited liability that offer significant tax advantages, especially when used by non-UK residents. Much like a US LLC, the LLP is treated as a transparent partnership for tax purposes. However, it requires at least two partners, with at least a minor share (e.g. 1%) transferred to a trusted person.
If no trusted individual is available and an external nominee service is not desired, an alternative is to establish a separate UK Limited company to act as the second partner—ideally holding a 10% stake in the LLP. This structure also helps when opening bank accounts, as it provides substance in the UK, improving the chances of account approval.
However, this solution does come with added complexity: the Limited must maintain its own accounting and will be liable for 20% corporate tax on its 10% share of the LLP’s profits—equivalent to an effective tax burden of approximately 2% on total LLP profits.
Compliance and Filing Requirements
UK companies are subject to certain accounting and reporting obligations. Each year, they must file the following:
- Confirmation Statement (ownership structure)
- Annual Accounts
- a Tax Return or “nil” return if no taxable activity occurred
If a UK LTD is officially registered as “dormant for tax purposes” and has not engaged in any taxable activity, the tax return can be omitted.
Each partner in a UK LLP must also file a personal Self Assessment tax return if they derive income from UK sources. However, if the LLP generates only non-UK income and has no UK permanent establishment, its partners can apply to be exempted from filing.
Should it become foreseeable that a UK business will exceed £90,000 in taxable UK turnover within 12 months, VAT registration is required. After registration, quarterly VAT filings must be submitted.
An audit is generally not necessary unless certain revenue or staffing thresholds are exceeded. Most of our clients fall below these thresholds, so no audit is typically required.