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How to Buy Business in the UK and What Benefits Does It Bring?

The UK is one of the top five most attractive investment destinations offering favourable conditions for registering a subsidiary. The UK is not offshore and its tax regime is not mild. However, according to some surveys, every second foreign entrepreneur would register a company or buy a business in the UK. But why is the United Kingdom so popular among businesspeople?

5 Key Benefits of Buying Business in the UK

  1. Prestige of the jurisdiction
    A UK-based company will not prevent but facilitate your success. Partners and suppliers trust companies registered in one of the global financial centres.
  2. Stability
    It means both political stability and economic resilience of the UK. A strong national currency and economic stability not only allow to run a company but also make long-term business plans.
  3. Tax optimisation
    The UK has signed double taxation treaties with over 140 countries. There are corporate and tax laws in the UK that allow companies to significantly optimise their tax burden.
  4. Favourable business environment 
    Small and medium-sized businesses contribute a lot to the national budget. Therefore, the UK government promotes private businesses:

    • The UK has a simplified incorporation procedure
    • Once a year you will have to submit a confirmation statement to the Companies House
    • There are no nationality requirements for directors and owners. Individuals and legal entities can be shareholders of a company
    • You can manage a company remotely through nominees
    • The UK government promotes small and medium-sized enterprises.
  5. The UK market advantages
    Buying a business in the UK will open a large and high-potential UK market for your products and services. This unique experience in a highly competitive environment will be useful for future projects. 

What Are the Advantages of Buying an Existing Business in the UK?

The main advantage of buying an existing business in the UK is significant savings of both time and money because a company has already been registered. Additional benefits are listed below:

  1. Registered companies have unique names. You do not have to create a name limited by certain restrictions because everything has already been done for you. The only thing to do is to choose one of the available options;
  2. Purchasing a UK company only takes a few hours. Transferring business ownership takes from 1 to 4 days;
  3. Existing companies usually have a nominee director who will represent your interests in the country; 
  4. It is possible to buy a new company that carries out no business activities and has a good reputation because there are no records and/or debts;
  5. You can also buy an existing business in the UK if you want a company with a good market position and an updated client base. Such businesses are already registered for VAT and have a UK corporate bank account.

As a result, if you think about purchasing a business in the UK, you have two options: registering a company with no records but some business activity (a business name, registered address, bank account, etc.) or buying an existing business that has been trading, has employees, assets, and various liabilities. In the latter case, it is more complicated and requires a more comprehensive approach. You should conduct a full audit, including financial, accounting, staff performance and other reviews, to be confident about your decision. Based on the results of the audit, you can make a final choice about buying a business in the UK. 

All cases are unique; therefore, our article gives a general overview of buying a registered company in the UK, although all of these nuances should be considered when buying a business in the UK. However, if you are interested in buying an existing company, it is better to consult our experts for a more detailed consultation.

Common Types of Company Registered in the UK

Foreign investors often choose companies and partnerships with limited liability to buy a business in the UK. Let us review each legal form.

  • A limited liability company (Ltd, Limited) is the most common type of company, equally suitable for small and medium-sized businesses. A limited liability company is completely independent of its owners, so it can sign contracts and is liable for its liabilities. Limited companies are managed by nominee directors chosen among shareholders. Owners’ liability is limited, i.e. they are only liable for debts of a company up to the amount of their share in the share capital or by a guarantee.
  • A limited liability partnership (LLP) is a specific business structure in the UK because it does not pay corporation tax. Partners in the partnership must file their personal tax returns with the HMRC to report the distributed profit. All partners of an LLP can participate in the management of the company. LLPs are required to prepare and submit financial accounts and tax reports annually. This type of company is completely independent of its owners, the same as Ltd, so it can enter into contractual relationships. Owners are only liable for debts of a company up to the amount of their contribution paid upon registration. Designated partners are liable for accounts submitted late.
  • A limited partnership (LP) or a Scottish limited partnership (SLP) (it depends on the place of incorporation – England or Scotland) is a limited partnership where a general partner participates in the management and has unlimited liability for the company’s debts and liabilities. Limited partners do not participate in the management of a company and therefore their liability is limited to their contribution to the partnership. In this case, owners are taxed on their share of income and gains and do not have to pay corporation tax, as all income belongs to partners according to their shareholding. Owners must report and pay tax to the tax authorities of their countries. Limited partnerships do not have to file annual accounts unless they carry out business activities in the UK and their partners are UK tax residents. Scottish limited partnerships do not have to file tax reports under the same conditions, but English limited partnerships are required to submit tax reports, even if they show nil profit. 
  • A public limited company (PLC) is a limited liability company that trades its shares on a stock exchange market, and the liability of partners is limited to the amount of their contributions. Foreign investors can purchase shares and even take part in the management of a company unless stated otherwise in the company’s Articles.

UK Offshore

As it has already been mentioned, the UK is not offshore and the UK corporation tax rates are not low. In fact, if you want all the offshore benefits (not to pay tax on foreign income and keep confidential information about a company’s owners and beneficiaries), it is better to register a company on one of the Caribbean islands.

However, the UK laws provide plenty of opportunities for some businesses to optimise their tax burden. LLP and SLP (LP) do not pay corporation tax; profits are distributed among partners who report to the tax authorities of their country individually. However, it is possible to minimise tax on foreign profit, like in an offshore, because no laws are preventing foreign taxpayers from becoming partners of LLPs in the UK.

An additional benefit of a Scottish limited partnership (SLP) and limited partnership (LP) is a simplified reporting procedure. For example, if an SLP or LP does not trade in the UK, it has no obligation to file annual accounts. Moreover, an LP, SLP, or LLP do not pay stamp duty either when purchasing or selling a UK property.

How to Buy Business in the UK?

There are two options for buying a business in the UK:

  1. Buying a business indirectly by purchasing stocks of a parent company that owns a business you are interested in. If you think about buying a company by becoming a shareholder, consult a competent advisor to draft a share purchase agreement and new incorporation documents confirming the share transfer.
  2. Buying a business in the UK directly as a going concern with all the assets: owned or leased property, production equipment, etc. A foreign entrepreneur needs legal advice, because, in addition to a correctly drafted share purchase agreement, a set of necessary documents and agreements may be required based on various factors.  

Risks of Buying Company in the UK

Acquiring an existing UK company is risk-free if the purchase is supported by qualified advisors. People who buy an existing business in the UK on their own have the following risks:

  1. Purchasing a company with a shady past: bad reputation, suspicious deals, scrutiny by regulatory and tax authorities
  2. Buying a company with outstanding debts
  3. Mistakes made in documents.

What is included in the package of documents transferred to a new owner after buying a UK company? The detailed list depends on the deal and business structure. This package usually includes:

  • Certificate of incorporation from Companies House
  • Incorporation documents: Articles of association, minutes of the first shareholders’ meeting with an appointment of a director
  • Shareholders’ register
  • Share certificate
  • Registered address
  • Stamp.

Please try to be as patient and careful as possible when buying a company in the UK, find out more information about the business entity you are interested in from official sources, review all documents or consult qualified advisors to avoid any potential problems in the future. 

Costs of UK Company

If you want to buy a business in the UK, remember that the total cost of an existing company depends on many variables: year of incorporation, share capital, annual turnover of a company, etc. 

Such costs as renting a registered address or accounting services should be considered fixed costs that are directly related to a business in the United Kingdom.

A unique advantage of our company is a comprehensive approach to the goals and requirements of clients, so our specialists can solve issues related to registering or buying a business in the UK, tax optimisation, accounting support, preparing financial accounts and tax reports, opening a bank account, etc.

There are three packages for prospective UK businesspeople: Standard, Standard Plus and Imperial:

  1. Standard package is suitable for those who decide not to buy an existing company and want to register their own business. We will not only check a company name for availability and prepare all documents and forms but also provide a registered address and company secretary services in case you will want to change incorporation documents.

The package price is £285 a year.

  1. Standard Plus package is perfect for those who have opened a company in the UK but do business mostly abroad. In addition to the Standard package services, this package offers an office manager taking calls, messages and emailing recaps to you.

We also provide a correspondence address and, if required, a business telephone number and a meeting room (for an additional fee). Moreover, there is a mail forwarding service.

The package price is £1, 950 for the first year.

  1. Imperial package includes comprehensive services for prospective UK businesspeople: in addition to all Standard Plus package services, our company will provide a business address and help with opening a bank account in the UK or Europe. We will provide visa support for two people, and VAT registration. Our consultants will be glad to answer any questions of an entrepreneur making their first steps in the UK market.

The price is £3,800 in the first year and £2,500 in subsequent years.

Imperial & Legal can help you buy a company in the UK quickly, affordably and without any risk. Our package services eliminate many organisational challenges from changes to the Articles of Association to facilitating staff trips to the UK.

FAQ about Buying Business in the UK

Can I change an existing company name and how long does it take?

Yes, if you are satisfied with everything except for a name of an existing company, you can change it with the help of an experienced advisor. It takes no more than 24 hours.

There are many preliminary checks and considerations that you should carry out before proceeding with a change of name. The name must not:

  • Be similar to the name of any existing company
  • Contain offensive or obscene words as determined by the Companies House
  • Constitute an offence
  • Give an impression that your company is connected to the UK government or the royal family.

What documents are required to buy a company in the UK?

The package of documents depends on whether an individual or a legal entity is going to buy a business in the UK. A list of documents will be shorter for individuals than for legal entities. You can always ask our specialists which documents will be required in your case for buying a company in the UK. Moreover, Imperial & Legal specialists translate your documents, if required. 

What is a dormant company?

If a company is registered with the Companies House but carries out no business activities within a year, it is considered dormant.  

Dormant companies are often new. They are registered when, for example, businesspeople try to secure a unique name. However, a dormant company does not always mean a new business. Sometimes a company is made dormant to restructure a formerly active business, or when an owner requires an extended period off due to illness. Pay attention to this when buying a dormant business in the UK.

When must a company register for VAT in the UK?

You must register if your total VAT taxable turnover for the last year was over £85,000. The standard rate of VAT in the UK is 20%. A limited number of goods and services are classed as reduced or zero-rated. Most competent businesspeople register for VAT in advance because they can correctly evaluate their business prospects in the conditions of UK economic stability.

Imperial & Legal’s list of services includes VAT registration. This option, among many others, is also included in our comprehensive Imperial package.

What taxes are paid when buying a business in the UK?

However you choose to buy a business in the UK – directly by buying a parent company or its shares – if it is an active company, you also become an owner of assets and property: land, buildings, equipment, tools, fleet, etc. And you must pay the following taxes:

  1. Stamp duty is a tax you pay when you transfer a property or land. The amount of tax depends on the cost of real estate
  2. Value Added Tax (VAT) is added to the cost of a property that is transferred to you along with a business. VAT is not charged if you buy a business directly as a going concern
  3. When you buy shares of over £1,000 you have to pay a stamp duty of 0.5% on the transaction.

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