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Advantages of the UK branch office registration or opening an establishment: when an overseas company decides to open up in the UK, they have two options that may appeal to them. They can choose to either open as a subsidiary of the foreign parent company, or they can open a branch of that company instead.
The basic registration for both these types of company is arguably very similar, since both are expected to register with Companies House and supply accounting and constitutional information, however, there are a few differences that mean some careful thought should go into deciding which one to go with.
There are some advantages for both of these options, but here we want to explain to you the benefits of opening a UK branch.
Physical branch: having a physical branch establishment in the UK is often seen as beneficial because customers are more likely to trust a company that is based in their country. Marketing is very much about establishing trust in the eyes of customers, and the power of having a physical establishment in the UK cannot be underestimated.
Winding down: a branch is far easier to wind down than a subsidiary. In the case of a branch, all you have to do is cease trading. This means that the branch is automatically closed. By contrast, a subsidiary needs to be formally wound down, and this can be both expensive and time-consuming.
Start-up costs: UK branch start-up costs are considerably reduced when a branch is opened in the UK, due to the fact that they can be offset against any UK corporation tax due on home profits or against the overall profits held by the parent company. A subsidiary would not be able to do this, as they would be expected to carry the start-up costs forwards, offset against profits obtained in the future in the UK.
Legal liability: a branch may defer its legal liability to its parent company; or, it might share the liability with its parent. A subsidiary cannot do this, as it is a separate entity in its own right. From a tax perspective, a branch is subject to corporation tax on the parent company's profits that are attributed to the UK branch. By contrast, a subsidiary is subject to the corporation tax in the UK on its worldwide profits.