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Setting up Limited - Doing business in England

A Limited (Ltd for short) is a well-known English legal form for entrepreneurs. More and more entrepreneurs are taking the plunge toward the other side, just as vice versa, for that matter. Since the Brexit, the rules regarding trading between the EU and the United Kingdom have largely changed or are still under negotiation. With an English Limited, the equivalent of the Dutch BV, you can effectively circumvent any trade restrictions now and in the future. Even when we compare the Limited to other legal forms, it offers a number of important advantages. Are you considering the move toward a Limited in the United Kingdom? Van Lier can support and advise you throughout the entire process so that you enter the UK market well prepared.

Terms and conditions of formation of Limited

A well-known advantage of the Limited is the limited private liability, which limits the financial risks to the capital you bring into the Limited. However, there are a number of conditions associated with establishing an Ltd, such as:

  • The Limited must have a registered address in England itself
  • Registration within the trade register
  • Annual remittance for registration of the Ltd within the trade register
  • A summary balance sheet should be submitted annually
  • Application Certificate of incorporation: an official license for companies

At Van Lier, we provide a customized package, taking care of all the obligations surrounding the formation of a Limited at once. No surprises afterwards, and everything always taken care of down to the last detail. That gives you the space to focus on the core business of your company.

Benefits Limited

In addition to limited private liability, a Limited brings more benefits. Did you know that incorporation can be completed within 24 hours? This involved completing all steps of the process, including registering the Limited within the English Commercial Register. Additionally, establishing a Limited requires only one shareholder and one director. Other benefits that come along around setting up a Limited:

  • Draft deed does not have to go through the notary, and that saves significantly on costs
  • The Ltd has tremendous international appeal
  • BV is (effectively) contributing within the Limited

Also enjoy the benefits of a Limited? It can be done! Contact us.

Setting up a Limited can be completed quickly, but you don’t want to forget anything. So choose the all-in package at Van Lier. We advise and support you from the planning stage to start-up of your own Ltd. Opt for international allure, too.

Cost of setting up Ltd

The costs of setting up a Ltd are considerably lower than, for example, the comparable Dutch BV. This is due in large part to the absence of a notary within the entire process, allowing the formation of a Limited to proceed much more quickly. However, it doesn’t stop there; even after incorporation, you benefit financially from a Limited. Those financial benefits can be traced to the profits you make. Whereas in the Netherlands you may only withdraw profits from a BV with a so-called distribution test, including an accountant’s statement, this does not apply to a Limited. However, you do face a director’s liability.

Van Lier consulting and support

Setting up a Limited: it is still incredibly attractive. The English economy has been highly regarded for years and is considered an important outlet for Dutch trade. Contributing the BV to a Limited is additionally an attractive option. Want to set up a Limited and enjoy the great benefits and international allure? Van Lier guarantees advice and support from application to registration. We are happy to involve you within the process, but can also take everything off your hands. Find out how we do it and contact us directly.

Setting up an English Limited at Van Lier: always at low cost and quickly arranged!

Frequently Asked Questions

VAT number application

After the English Limited is registered with the Chamber of Commerce in the Netherlands, a VAT number can be applied for.

To assess whether the English Limited is an entrepreneur for VAT purposes, the following are considered:

A taxable person for VAT is any person who, in the exercise of an economic activity, regularly and independently, with or without profit, makes supplies of goods or services , regardless of where the economic activity is carried out.

The definition includes 4 essential elements:

  1. Anyone:
    Natural person, legal person or associations as far as they carry out economic activities
  2. Economic activity:
    This includes all activities of the producer, trader or service provider (except exempt operations).
  3. Regularly exercised activity:
    To be a taxpayer, the actions listed in the Code must be regularly performed by him/her. Only through succession do actions become an activity. The regular occurrence of the acts under form of an activity is not clearly delineated. Deciding whether an act is part of a regular activity or accidental in nature is judged on the basis of the facts.
  4. Independent:
    The performance of the activity must be on an independent basis and not in employment. There should be no bond of subordination to another person

If the English Limited meets the above requirements, it is liable for VAT, and the Inland Revenue will issue a VAT number.In international transactions with other legal entities within the EU, this VAT number is crucial, since a valid number leads to an invoice without VAT ( a so-called intra-community transaction). Also, always check the validity of your counterparty’s VAT number, since if the number is invalid, the normal VAT rate applies.

Bank account Ltd

Opening a Dutch bank account for an English Limited is possible after it is registered with the Chamber of Commerce.

With the extract from the Chamber of Commerce, you need to visit a banking institution, after which the account can be opened. There are banks that are reluctant to open a bank account for a Limited. This is because with a Limited, a bank has less certainty regarding the directors/shareholders than with a Dutch BV. This is because the mutations in a limited liability company are controlled by the Chamber of Commerce (director change) and by a notary (share transaction). With an English Limited, it is possible to make a change in the board/shareholders online, effectively allowing banks to hold a bank account for a customer unknown to them.

In practice, there are 2 major banks that open accounts for English Limiteds. If required, we will assist you in applying for a bank account. However, you will have to visit the bank yourself at all times.

Establishment Ltd

The formation of an English Limited is done without the intervention of a notary. Only identifying information needs to be submitted to the founding authority in England, and upon agreement, the Limited is formed. The turnaround time is about 1-2 days.

Tax burden Ltd England

After the English Limited is incorporated, and also registered with the English Chamber of Commerce, the incorporation is shared with the English Tax Office ( HM Revenue & Customs (HMRC)).

Here, it makes no difference whether the English Limited is actually active or inactive. HMRC creates a computer file following the formation of the English Limited from which a UTR number emerges. UTR stands for Unique Taxpayer Reference. All documentation sent to the Limited includes this UTR number. First, all new Limiteds receive a Form CT41G, which details the corporate tax. The information will be sent to the Limited’s English address. Even in the event that the Limited actually trades outside England, and has a registration in another country, the Limited receives mail at the registered address in England. Thus, for any Limited, it is duty to maintain an English address.

If an English Limited does not actively participate in economic activity, i.e. does not carry out any activities, it is classified as a “Dormant Company.” The Limited is then granted a corporate tax exemption for a certain period of time.

For example, in the event that an English Limited operates in the Netherlands, and is also subject to taxation there (VPB), then a statement from the Dutch Tax Authorities is necessary. Such a statement is called a “Statement on the capacity of the taxpayer.” This statement should be sent in original to the HMRC in England, after which they will give the Limited in England “Dormant Company” status. In this way, the Limited does not have to file VPB returns in 2 countries.

Minimum capital

An English Limited has no minimum capital.

So you can have the English Limited incorporated with any capital you want, so for example a share capital of 1 euro, 1,000.- euro or 100,000.- euro. Please note that in case of bankruptcy of the English Limited, the trustee may decide to claim unpaid share capital. So if you issued 10 shares of 1,000.00 euros through the Limited to yourself, and you only paid 1 share of 1,000.00 euros to the Limited, the trustee will claim the remaining 9 shares of 1,000.00 euros from you.

It is therefore advisable to set the share capital so that there is no problem with unpaid shares. In practice, an English Limited is often formed with a low share capital, for example 100 shares of 1 euro. Thus, the shareholder should deposit 100.00 euros for this purpose.

Minimum wage director

Mandatory salary director/director English Limited with registration in the Netherlands

If you are a director and also a shareholder of an English Limited (more than 5% shareholder), you must receive at least a gross salary from the Limited of at least EUR 42,000.00 (Article 12a of the Payroll Tax Act). This salary does apply if working full-time for the Limited. For example, if you only work 20 hours a week for the limited liability company, then a salary reduction by half is possible. However, it is advisable to brief this in advance with the Internal Revenue Service. If required, we can take care of this process for you.

If it is customary in your industry, to receive a salary higher than 42,000.00 euros gross, then what is customary applies. Suppose a comparable person with the same position and who is not a shareholder earns a salary of 60,000.00 euros, you should receive the same salary, and not the prescribed 42,000.00 euros. You should also be careful not to earn less than your employees.

Another important point of interest is national insurance contributions. If you have more than 50% of the shares/voting rights in the Limited, you do not have to pay national insurance contributions on your salary. If it is less, the premiums are due. The reason for this is that if you own more than 50% of the shares/voting rights, there is no authority relationship with the Limited, and you can, for example, stop a dismissal or suspension yourself. A minority interest (less than 50%) is then not possible, and there is a relationship of authority, and therefore payment of national insurance contributions.

In the above, the premise is that the English Limited is registered in the Netherlands (Chamber of Commerce and Tax Office) and is therefore actually domiciled in the Netherlands. Therefore, no minimum salary requirement applies from England.

If you would like to know more about this, please contact us.

Tax burden Ltd Netherlands

An English Limited in the Netherlands is subject to the following tax types:

Corporate tax

Corporate income tax is levied based on the following rates (2012):

  • € 0 – € 200,000: 20%
  • €200,000 and more: 25%

A special rate optionally applies to profits from patented fixed assets or assets for which a WBSO statement has been issued. The tax burden on such assets is 5% instead of the above rates.

Sales Tax

Value added on the sale of goods or provision of services is subject to BTw. Until Sept. 30, the normal rate is 19%; as of Oct. 1, it is 21%. The VAT rate for food, books, hairdressing, bicycle repair, clothing repair, culture, sports, recreation and passenger transportation is 6%.

Dividend tax

The tax on paying dividends is 15%. In the case of distributions from a subsidiary to the parent (work LTD to holding LTD), the participation exemption applies, and no dividend tax is levied.

Payroll tax

In the case of employees performing work for the Limited, income tax is payable on gross wages. In the case of a director who also holds more than 5% of the shares of the Limited, you must take into account the minimum DGA salary of 42,000.00 euros (Article 12a of the Payroll Tax Act).

Transfer tax

The transfer tax rate for business property transactions is 6%. The rate for residential properties is 2%, i.e., if a Limited, for example, has a property that is used both as a business and as a residence, the low rate of 2% applies only to the residential portion. The business portion will be subject to 6% transfer tax.

Registration with the Chamber of Commerce NL

If you wish to use the Limited for commercial activities in the Netherlands, you must arrange for registration with the Dutch Chamber of Commerce. To do this, you must visit the Chamber of Commerce in person for identification and registration. Without registration with the Chamber of Commerce, it is not possible to obtain a tax number in the Netherlands, or open a bank account.

Set up your limited liability company with van Lier advice.

Do you still have questions regarding the incorporation of a limited liability company or would you like us to start working for you right away? If so, please fill out the contact form.