If you are setting up a UK subsidiary and plan to hire a team to work there, then the registration is straightforward – you simply register a payroll in the name of your UK subsidiary.
However, we have seen US companies register the payroll in the name of the US parent company, and even in the name of their first UK employee.
Let’s look at the pros and cons of each approach.
Registering the payroll in the name of the US parent
This is entirely possible when registering a branch of the US company. But when you have a UK subsidiary, a payroll registration in the name of the US company means you will likely have a conflict with the employment contracts your UK employees have been issued with (in the name of the UK subsidiary). You will also open the possibility of creating nexus/permanent establishment of the US company in the UK, alongside the UK subsidiary.
Registering in the name of their first UK employee
In certain limited circumstances this is possible. Though this is unlikely to work for multiple employees as it is linked to the individual and is limiting as there can be no business address in the UK. The social security contribution process is complicated, and payments/refunds will be made in the name of the employee.
A case study
A US company were incorrectly advised to register their UK payroll in the name of their first employee, because it would be cheaper on day one. They then overpaid contributions to the Government and terminated the employee as a bad leaver. When they then tried to hire new staff and tried to reclaim the overpayments, they found that the Government would only issue repayments to their former employee and that an entirely new payroll was needed for the new hires. Overall, rather than saving a few pounds, it cost them a few thousand pounds to correct.