Setting up business as a UK limited (Ltd.) company

A friend is looking at setting up a limited company but is put off by the 20,000 euros (not sure of the exact cost) needed for a GmbH here in Germany.

If they set up the business as a UK Ltd company, which can be done much cheaper, but wanted to run it from Germany (the company would be internet based) what would the implications be? Is this legal, what about paying company tax and personal tax as the employee(s) would all be in Germany?

Any advice would be welcome.

Apparently, as of 1/1/08, minimum capital requirements for GmbHs will be lowered to 10,000 € (with the option to pay in only 1 € and to accumulate the rest from future retained profits):

http://www.gruendungszuschuss.de/service-m...zum-112008.html

UK LTDs do offer potential for anonymity if thats an issue.

See also:

Running a UK limited (Ltd.) company from Germany
Running a British limited company in Germany