Benefits of a UK tax resident company formation for overseas clients - the UK tax residence for companies is determined by two main factors: the limited company should have either been incorporated in the UK and must be centrally managed and controlled within the United Kingdom. This last part refers to where the board of directors do the majority of their management work, rather than being based around the place where they meet.
Once UK residence for tax purposes has been established, the private company in question will be charged corporation tax on all chargeable profits made worldwide.
The benefits of establishing tax residence: a non-partisan review that was begun by the prior government in the Great Britain, and has been completed by the incumbent government, advised that a territorial taxation system would be more beneficial to both the United Kingdom itself, and to the limited companies who are resident for tax purposes. This, in fact, is the standard for most developed countries, and in recent years, the UK has changed its resident rules to reflect the outcome of the review.
Where a worldwide taxation system is applied, relief is usually given for taxes that have been paid overseas already. However, this is exceedingly cumbersome, since the company limited by shares is expected to re-compute absolutely everything in order to comply. Under the new territorial system of taxation, this is no longer an issue as profits will be taxed in the other country, without being included in the private company's taxable UK profits.
Additionally, the worldwide system of taxation places limited companies at a competitive disadvantage, while foreign companies have a tax incentive to take over UK parented multinational companies. As a result, the Great Britain found that in the past decade, many private companies removed their residence to other countries to avoid these problems, hence the non-partisan review. With the new territorial system, there is now a tax incentive for foreign companies to utilise tax residency.
A further issue with the worldwide taxation system is that any taxes applied to profits made in any given territory would be at the higher rate of tax in both the local jurisdiction, and in the United Kingdom. Clearly this is not profitable for the companies limited by shares. Again, with the new system, this is no longer an issue. Territorial taxation imposes tax on the profits that have been earned in any given territory. Where a UK registered private company has established other companies in those states, those chargeable profits of those companies earned elsewhere will not be subject to the UK taxation.