--- title: "Setting up a UK company as an EU founder after Brexit" url: https://www.boruconsulting.com/blog/uk-company-for-eu-founder-after-brexit category: "Corporate Structuring" author: "Dan Mould" published: 2026-10-17 modified: 2026-10-17 --- # Setting up a UK company as an EU founder after Brexit > Brexit did not close the UK company to EU founders. You can still own and run one from the EU with no residence test on directors. What changed sits underneath: the EU directives no longer apply, payments fall back on treaties, UK VAT can start at the first sale, and every director must verify their identity. ## Key Takeaways - Brexit did not change your right to form a UK company. A UK company still needs no UK-resident director and no UK shareholder under the Companies Act 2006, and the UK charges no withholding tax on dividends. What changed from 1 January 2021 is the tax and single-market treatment around the company, not the ability to own one. - The EU Parent-Subsidiary and Interest and Royalties Directives stopped applying to the UK from 1 January 2021. Interest or royalties your UK company pays to a connected EU company now face 20% UK withholding tax under section 874 of the Income Tax Act 2007, unless the double tax treaty with that country reduces it, and the relief has to be claimed. - A UK company with no fixed establishment in the UK is a non-established taxable person for VAT under Schedule 1A of the Value Added Tax Act 1994. The £90,000 registration threshold does not apply to it, so it must register from its first UK taxable supply, not once it reaches a turnover figure. - Moving physical goods between the UK and the EU needs a GB EORI number and brings customs declarations and import VAT at the border. Selling digital or professional services is usually lighter to run than selling goods, and the difference should shape how you set the company up. - Every director and person with significant control of a UK company must verify their identity under the Economic Crime and Corporate Transparency Act 2023. A new company verifies at formation, usually through an Authorised Corporate Service Provider when the people are abroad, and existing directors must verify by 18 November 2026. ## What Brexit changed for an EU founder with a UK company Brexit did not take away your right to own or run a UK company. It removed the EU tax and single-market reliefs that used to sit around it. If you are a founder in Riga, Vilnius, Berlin or anywhere in the EU, the English limited company is as open to you now as it was in 2015, and the thing that changed is everything downstream of the formation: how payments cross the border, how VAT works, and how customs treats your goods. That distinction matters because the two halves pull in opposite directions. The company itself got no harder to set up. The tax and trading rules around it got meaningfully more involved from 1 January 2021, when the transition period ended and the UK stopped being treated as part of the EU for these purposes. In practice, this is where I see EU founders come unstuck. They form the company easily, assume the rest runs on EU rules they already know, and then meet a VAT registration or a withholding tax they did not budget for. This note walks through what actually changed, who it affects, and what to set up before your first invoice. ## The company is as easy to own as ever, which is where people relax too soon A UK company still needs no UK-resident director and no UK shareholder, so forming one from an EU address is as straightforward as it was before the referendum. The Companies Act 2006 (CA 2006) sets no nationality or residence test for directors or shareholders, and a single person can be the sole director and sole shareholder. The mechanics of forming the company, appointing the first director and issuing shares are the same for a founder in Latvia as for one in London, and they are covered in the note on [forming a UK company as a non-resident](https://www.boruconsulting.com/blog/uk-company-formation-non-resident-eccta-banking). The ease is real, and it is also the trap. An EU founder tends to carry over a set of assumptions from the single market: that payments move between group companies without tax at the border, that one VAT registration covers cross-border sales, and that goods flow without customs. Each of those assumptions was true while the UK was in the EU. None of them is reliable now. The company is the easy part. The rules it trades under are the part that needs attention. ## Dividends, interest and royalties no longer ride the EU directives Since 1 January 2021 the EU Parent-Subsidiary Directive and the Interest and Royalties Directive no longer apply to the UK, so cross-border payments between your UK company and the EU fall back on the relevant double tax treaty rather than on an automatic EU exemption. Before Brexit those directives switched off withholding tax inside EU groups. Now the question is answered one country and one treaty at a time. For a typical EU founder, three flows are worth knowing in advance. - **Dividends you draw from the UK company.** This is the good news. The UK does not charge withholding tax on dividends, so a dividend paid by your UK company to you as an EU shareholder leaves the UK with no UK deduction. Your own country then taxes the dividend in your hands under its own rules, but there is no UK withholding step to reclaim. - **Interest or royalties the UK company pays to a connected EU company or to you.** Here the directive mattered, and it is gone. A payment of yearly interest or a royalty arising in the UK carries 20% UK withholding tax under section 874 of the Income Tax Act 2007 (ITA 2007). The double tax treaty between the UK and your country can reduce or remove that charge, but relief is claimed, not automatic, and the payer has to hold the position before paying gross. - **Dividends the UK company receives from an EU subsidiary.** If you place an EU trading company under your UK company, the EU country may now withhold tax on dividends paid up to the UK, and only its treaty with the UK reduces that. The automatic nil rate the Parent-Subsidiary Directive used to give is no longer available. The practical point is simple. If your structure only ever pays dividends out to you, Brexit barely touches the tax plumbing. The moment it involves interest, royalties or an EU subsidiary, you need the treaty position checked before the money moves. ## UK VAT can apply from your first sale, not your ninety-thousandth If your UK company has no fixed establishment in the UK, the £90,000 registration threshold does not apply to it, and it must register for UK VAT from its first taxable supply here. A business that is established in the UK only registers once its taxable turnover passes £90,000. A company that is incorporated in the UK but actually run from the EU, with no UK office, staff or other fixed establishment, is a non-established taxable person under Schedule 1A of the Value Added Tax Act 1994 (VATA 1994), and the threshold for that person is nil. This catches founders out because incorporation feels like establishment, and for VAT it is not the same thing. The company is British on the register and non-established in practice, and HMRC looks at where the business actually operates, not where it was formed. Goods add a second layer. If your company moves physical goods between the UK and the EU, it needs a GB EORI number to clear them, and the movement brings customs declarations and import VAT at the border in both directions. Selling digital or professional services is usually lighter, because there is no customs leg, though the place-of-supply rules still decide where the VAT falls. The difference between a goods business and a services business is one of the biggest factors in how heavy your UK company is to run, and it should shape the setup from day one. ## Someone still has to prove who they are Every director and person with significant control of a UK company must now verify their identity under the Economic Crime and Corporate Transparency Act 2023 (ECCTA 2023). This applies regardless of where you live, and it is a real step rather than a tick-box, so it is worth planning before you file. A new company verifies the identities of its directors and people with significant control as part of incorporation. When those people are abroad, verification is usually done through an Authorised Corporate Service Provider rather than through the GOV.UK One Login route, because the One Login identity-checking apps expect certain UK documents. Directors of companies that already exist have until 18 November 2026 to verify, the deadline covered in the note on [the Companies House identity verification deadline](https://www.boruconsulting.com/blog/companies-house-identity-verification-deadline-2026). The company also needs an appropriate registered office address and a registered email address in the UK, which an EU founder running the business from home does not automatically have. ## Where you actually run the company still matters Your UK company is UK tax resident because it is incorporated here, under section 14 of the Corporation Tax Act 2009 (CTA 2009), but if you run it entirely from the EU your home country may also treat it as resident there, and a treaty tie-breaker then decides which country wins. Most EU countries test corporate residence on where a company is effectively managed, so a UK company whose only director sits in Tallinn and takes every decision there can look resident in Estonia as well as the UK. The treaty between the two countries resolves the clash, usually by place of effective management. This is a question to settle early rather than discover in an audit, and the mechanics of corporate residence across a corridor are set out in the note on [where a company is tax resident when you live in one country and run it from another](https://www.boruconsulting.com/blog/living-between-ireland-spain-uae-company-tax-residence). For most founders the answer is to decide deliberately where the company is managed and to keep the evidence that supports it. ## Who this affects, and who it does not If you sell digital or professional services from an EU base, a UK company is light to run, and Brexit changes little beyond the VAT registration question and the identity checks. There is no customs leg, dividends leave the UK without withholding, and the compliance is manageable. This is the profile that forms a UK company for its name, its legal certainty and its access to UK and global clients, and finds the setup close to what it expected. If you move physical goods between the UK and the EU, or you plan a group with an EU subsidiary under the UK company, the picture is heavier. Customs, import VAT, EORI registration and the loss of the directive reliefs all land on you, and the UK company needs to be set up with those in view. Neither profile is a reason to avoid the UK company. They are reasons to set it up for the way you will actually trade. ## What to set up, and what to keep Set the company up for the border it now sits on, then keep the records that prove how it operates. The work is mostly done once, at the start, and the founders who do well are the ones who treat it as setup rather than paperwork to catch up on later. - **Get the formation basics right.** A UK registered office, a registered email address, and identity verification for every director and person with significant control. The note on [forming a UK company as a non-resident](https://www.boruconsulting.com/blog/uk-company-formation-non-resident-eccta-banking) covers the route from abroad. - **Decide VAT before the first invoice, not after.** If the company has no UK establishment and will make UK taxable supplies, register from the first supply. If it moves goods, apply for a GB EORI number at the same time. - **Check the treaty before any interest or royalty payment.** Confirm the rate in the double tax treaty between the UK and your country, and hold the paperwork, before the company pays interest or a royalty to you or to a connected EU company. - **Keep evidence of where the company is managed.** Dated board minutes and decision records that show who decides what, and where. This is what answers a residence question later. - **Open the UK bank account early.** Banking a foreign-owned UK company takes longer than forming it, as the note on [opening a UK business bank account as a non-resident](https://www.boruconsulting.com/blog/uk-business-bank-account-non-resident) explains, so start it in parallel with incorporation. - **Keep your home-country filings in step.** The company and you are taxed where you live as well, so the UK accounts and the home-country position need to be prepared together rather than in isolation. If you would rather hand the destination work across, the formation, the registered office, the identity verification and the ongoing UK accounting are exactly what the [UK company formation for non-residents](https://www.boruconsulting.com/uk-company-formation-for-non-residents) and [UK accounting for non-residents](https://www.boruconsulting.com/uk-accounting-for-non-residents) services are built to carry, so you keep the home-country analysis and let the UK compliance run. ## A calm way to think about it None of this makes a UK company a poor choice for an EU founder. It makes it a company that has to be set up for the border it now sits on, with the VAT position decided early, the treaty checked before cross-border payments, and the identity checks done at the start. Get those three right and a UK company run from the EU is a clean, well-understood structure. Leave them to chance and the first surprise usually arrives with a VAT registration you were not expecting. ## Frequently asked questions ### Can an EU citizen set up a UK company after Brexit? Yes. There is no nationality or residence requirement for the directors or shareholders of a UK company under the Companies Act 2006, and that did not change with Brexit. An EU founder can be the sole director and sole shareholder of a UK limited company formed entirely from abroad. What changed is the tax and trading treatment around the company, not the right to own one, so the formation is straightforward and the setup afterwards needs more thought than it did before 2021. ### Do I need to live in the UK to be a director of a UK company? No. A UK company director can live anywhere, and there is no requirement for any director to be UK-resident. You do need a UK registered office address and a registered email for the company, and you must verify your identity under ECCTA 2023. Where you live does affect where the company is treated as tax resident if you also run it from there, which is a separate question from whether you are allowed to be the director. ### Is there UK withholding tax when my UK company pays me a dividend in the EU? No. The UK does not charge withholding tax on dividends, so a dividend paid by your UK company to you as a shareholder in the EU leaves the UK with no UK deduction. Your own country will tax that dividend in your hands under its own rules, and you should check how it treats UK dividend income. The absence of a UK withholding step is one of the points that did not change with Brexit, because it comes from UK domestic law rather than from any EU directive. ### What happened to the EU Parent-Subsidiary Directive for UK companies? The EU Parent-Subsidiary Directive and the Interest and Royalties Directive stopped applying to the UK from 1 January 2021, at the end of the transition period. While they applied, they switched off withholding tax on dividends, interest and royalties inside EU groups. Now a payment between your UK company and an EU company is governed by the double tax treaty between the UK and that country instead. For dividends out of the UK this makes little difference, because the UK has no dividend withholding tax, but for interest and royalties it matters. ### Does my UK company have to register for UK VAT if I run it from the EU? Often yes, and from the first sale. If the company has no fixed establishment in the UK, it is a non-established taxable person under Schedule 1A VATA 1994, and the £90,000 registration threshold does not apply to it. It must register for UK VAT from its first taxable supply in the UK. A UK company that is actually established here, with an office and staff, uses the normal threshold instead, so the answer turns on where the business genuinely operates rather than on where it was incorporated. ### Do I need an EORI number to sell goods between the UK and the EU? Yes, if the company moves physical goods across the UK border it needs a GB EORI number to make the customs declarations, and the movement brings import VAT and customs formalities in both directions. A business that only supplies digital or professional services does not have a customs leg, so it does not need an EORI number for that, although the VAT place-of-supply rules still decide where the tax falls. The goods-or-services distinction is one of the first things to settle, because it drives most of the ongoing work. ### Does running my UK company from the EU make it taxable in my home country? It can. A UK company is UK tax resident because it is incorporated here, under section 14 CTA 2009, but most EU countries also test corporate residence on where a company is effectively managed. If you take all the company's decisions from your home country, that country may treat the company as resident there as well, and the treaty tie-breaker then decides. The safe approach is to decide where the company is managed from the start and keep the board records that support it. ### How does a non-resident director verify their identity with Companies House? A director who lives abroad usually verifies through an Authorised Corporate Service Provider, a regulated firm that confirms identity on behalf of Companies House, rather than through the GOV.UK One Login route that expects UK documents. The verification is required for every director and person with significant control under ECCTA 2023. For a new company it happens at formation, and directors of companies that already exist must complete it by 18 November 2026. ## Glossary concepts in this article - [Withholding Tax](https://www.boruconsulting.com/glossary/withholding-tax): Tax deducted at source from cross-border payments such as dividends, interest, or royalties before they reach the recipient. - [Person with Significant Control (PSC)](https://www.boruconsulting.com/glossary/person-with-significant-control): An individual who ultimately owns or controls a UK company, typically by holding more than 25% of the shares or voting rights, or the right to appoint or remove directors. - [Authorised Corporate Service Provider (ACSP)](https://www.boruconsulting.com/glossary/authorised-corporate-service-provider): A firm registered with Companies House and supervised for anti-money-laundering purposes that is authorised to file information and verify identities on behalf of UK companies. - [Registered Office](https://www.boruconsulting.com/glossary/registered-office): The official statutory address of a company, used for legal correspondence from the registrar, tax authority, and courts. --- Source: https://www.boruconsulting.com/blog/uk-company-for-eu-founder-after-brexit