Typically, there are two main entity options available when setting up in the UK. 

  • Option one: a fully owned subsidiary
  • Option two: a branch of the parent entity. 

Here, we take a closer look at the main differences between them.

 

  Subsidiary Branch
Ease of setting up One simple form. One form and must provide certified, translated documentation on the parent entity.
Legal standing A subsidiary is a legal entity in its own right, and therefore risks being ring-fenced. The UK subsidiary cannot contract until it is incorporated. Commercially, a branch is part of the parent company, so any risk flows directly to that entity. Suppliers and customers do sometimes have concerns over contracting with a branch, as it is perceived as easier to take legal action against a UK company. The overseas company can contract regardless of whether the branch is established.
Costings Typical costs for a subsidiary are half that of setting up a branch. Typical costs for a branch are double that of setting up a subsidiary.
Timeframe to set up (approx) 24 hours Typically, three-six weeks.
Physical location A UK subsidiary only requires a UK registered office, which can be that of a service provider, so it does not need to have its own physical address. A branch requires a physical location in the UK from which the overseas company carries on business and where it can be contacted. The branch can be registered only once the company is in situ at the said address.
Banking setup On average, will take three months (once you have found a bank that will open an account for you). Some UK banks will not open an account for a branch, so this may be difficult.
VAT Registration On average, the application is accepted 40 days after submission. You will need a UK bank account for VAT refunds, but it's not required before the application is submitted. HMRC often challenges branch VAT registrations so may take longer (and the bank account issue will be a problem).
Accounting requirements Financial statements for the UK entity due to be filed nine months post year-end date. The first set of accounts need to be filed within 21 months of incorporation. No UK statutory accounts required, but management accounts under UK GAAP are required. The parent entity's accounts will also need to be filed on the UK public record. in the UK. Format of the parent company accounts and filing deadlines will depend on the home jurisdiction's requirements.
Audit requirement in UK Yes, if the global group exceeds the thresholds. None.
Corporate tax requirements Similar for both entities. Similar for both entities.
Employee related requirements Similar for both entities. Similar for both entities.
Employee Seed/ Enterprise Investment Scheme In isolation, a UK subsidiary of an overseas company will not allow the group to qualify for SEIS / EIS. An overseas company with a UK branch can potentially qualify as a SEIS / EIS company which may incentivise UK investors. The company and investors will need to meet specific requirements to qualify, and they may need to submit an application to HMRC.

How we can help

With us you have access to a dedicated foreign direct investment team experienced in advising businesses on the complexities of setting up in the UK.

We understand that every business is unique. That's why we work closely with you to understand your long-term objectives.

Our team will help you explore the various options available, ensuring you make informed decisions and can provide find the solutions you need.