U.K. Professional Clients
U.K. Private Customers
Branch establishment or subsidiary company incorporation? What is the difference in between the establishment of a branch of a foreign company and a subsidiary company registration? There are two ways for a foreign business to start trading in the UK. You can choose to either establish a branch of your limited company, or register as a subsidiary.
Either route requires careful consideration, as each of these options require complying with different rules and regulations, with equally differing consequences. Expert help is recommended in both cases. Coddan Formations Agency is the professional company of choice, which can advise on the correct choice for your limited company's needs and assist with compliance.
The main difference between a branch and subsidiary is that opening a branch means establishing a physical presence in the UK in which to carry on the business (or agency) of the foreign parent company. With a branch the parent company bears liability. A subsidiary, however, means registration a separate legal entity that is responsible to itself..
Both options require registration with Companies House in the UK, as well as registration with Her Majesty's Revenue and Customs (HMRC) for direct tax, VAT, Pay as You Earn (PAYE) and National Insurance Credits (NIC) where necessary.
If things go wrong, a branch is easier to wind up (it just closes automatically when trading ends), but a subsidiary requires you to follow all the required procedures that would apply to a native UK company in order to be liquidated.
The financial aspect is of major consideration in deciding between a branch or a subsidiary. A branch, for example, has to file the accounts of its foreign parent company at Companies House in the UK, whereas a subsidiary has to disclose only its own financial statements.
Coddan advises that the choice depends mainly on the foreign parent company's individual attitude to financial capital investment. A subsidiary may well be more expensive to maintain than a branch, especially when tax considerations are taken into account.
At Coddan, we receive enquiries from business people all over the world about the best possible route to establishing a business presence in England, Wales, Scotland and North of Ireland - this includes requests for advice about whether it is more beneficial to form a UK-based limited company branch or an entirely separate business entity.
In a similar manner to other areas of business, it all comes down to taxation issues, and private company directors also have to ask themselves exactly how much interaction the UK-based element could have with linked companies in other areas of the EU and beyond. Fortunately, our team of business experts have a wealth of experience in this area, and this means that you will have all of the necessary information to make an informed choice.
Although the precise tax situation for any business can be made clear by an accountant with expertise in this area (Coddan Formations Agency enjoys a working relationship with many professionals in the field of tax advice), it is usually possible for a branch to have start-up costs offset against UK-based corporation tax that takes into account branches in other countries.
When private company directors have a global network of branches, there will be a certain extent to which these can collectively report their profit and loss information, and this can relieve some of the financial pressures that occur when registering a branch in a new territory. Legal liability is also something to take into account when setting-up a branch (or a permanent establishment) within the Great Britain, as it can equally be spread between the branch itself and the parent limited company.
At the same time, from a customer relationship point of view, registering a separate UK-based limited company may appeal to your client base more - it gives them the opportunity to deal with a native business and not the impression that it is just a small part of a global corporation.