Updated for 2018
The UK has, in the past, been an attractive place to start a business if you’re a foreign national. A series of changes in the last half decade may have made this more difficult, but with a good idea and a well-executed plan, there’s still plenty of room for optimism.
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The introduction of a points-based immigration system made it harder for foreign nationals to get the visa required in order to start a business in the UK. But the largest looming question is, of course, Brexit, the impact of which is still not clear and may not be for some years.
How to start a business in the UK as a foreigner
To start a business in the UK as a foreign national, you need to consider the following steps:
- Think about your visa position. Depending on what nationality you hold, you may be required to apply for a work visa before you can start a business in the UK. More information on visas is given below.
- Apply for the correct visa if required. If you do need a visa, you need to apply ahead of time. Tier 1 (Entrepreneur) visas are usually accepted or declined within three weeks, but you can apply up to three months before you apply.
- Consider your business’s legal structure. Once you are legally allowed to start a business in the UK, you can get down to the nitty gritty. Presuming that you already know what your business will do, your first step is to decide on a legal structure. Read more about choosing a legal structure for your business.
- Incorporate your business if required. If you decide to operate as a limited company, you’ll need to register with Companies House or have an intermediary do so for you.
- Register for tax. Next, you’ll need to register for tax. You’ll need to register for Corporation Tax if you’re incorporated, and you’ll need to register as a Self Assessment taxpayer with HMRC.
Starting a business in the UK: European citizens
As the situation currently stands, EU citizens do not need special permission in order to start a business in the UK. The right of EEA nationals to live and work in other EEA member states is enshrined in the agreements to which all of the members have signed up.
At this point, the only exception to this involves nationals of countries that acceded to the European Union in 2004 – Bulgaria and Romania. If you are a Bulgarian or Romanian national, you may have to apply for permission unless you qualify for an exemption.
Advice on exemptions, as well as guidance for applications, can be found on the UK Border Agency website.
However, this situation is likely to change as soon as the UK leaves the EU. The picture after this date, however, is unclear, and may not be clarified for some time.
Prospective entrepreneurs tend to receive favourable treatment from the immigration authorities. The points-based system is divided into ‘tiers’, with Tier 1 dedicated to “highly skilled workers, investors and entrepreneurs”. The UK Border Agency understands this to mean those who are “setting up or taking over, and being actively involved in the running of one or more businesses in the United Kingdom.”
The eligibility criteria for a Tier 1 (Entrepreneur) visa are strict. In particular, you must have access to at least £50,000 in investment capital, or have already invested at least £50,000 in a UK business within the 12 months before you apply. If you’ve not already invested, the money must come from:
- a DIT-endorsed UK entrepreneurial seed funding competition
- a venture capital fund registered with the FCA
- or a UK government department, which has made funds available in order for them to be used to start or expand a UK business
Alternatively, you can also apply for a Tier 1 (Entrepreneur) visa if you have access to £200,000 in investment funds and the money is either:
- provided by a third party such as an investor or spouse
- or in a joint account held with a spouse or partner, provided that they are not applying for the same visa
In addition, you will be required to fulfil the criteria that apply to general Tier 1 applications. This means you will need to demonstrate that you are either from a majority English-speaking country, or that you have successfully taken a recognised and accredited English language qualification.
Extensions to visas
If you are applying for an extension to an existing Tier 1 Entrepreneur permit, you will be required to fulfil further criteria. You must have invested at least £200,000 in a UK business, excluding any commercial property or director’s loan.
You must be involved in the running of the business at the time of your application for extension, and you must have registered either as a director of a company with Companies House, or as a self-employed individual with HM Revenue and Customs, within three months. Read our guide on how to set up as self-employed with HMRC for more information.
As may be expected, there are wide-ranging regulations on the behaviour of foreign nationals who wish to start a business in the UK. The fundamental point to remember is that you will need permission to work in the UK in order to start a business here, in exactly the same way that you would require a permit to be a builder or work in an office.
However, the restrictions in place make it very difficult for entrepreneurs to set up shoe-string companies upon arriving in Britain.
It is important to remember that immigration laws are strictly enforced, and it is vital that you comply with them otherwise you may find yourself in trouble. As such, you may wish to take specialist, independent legal advice in advance of any action.
Got any further questions? Ask us in the comments section below.