If you have an international or overseas business and are looking to set up a branch in the UK, there are certain protocols that you need to follow in order to be completely above board and compliant. The same goes for if you want to open up a branch of an international franchise.
In this article we look at how you can set up and register an overseas company in the UK, and what is required from you as a foreign business owner.
When is an overseas company required to register in the UK?
Any international or overseas company that operates within the UK is only required to officially register the business when there is a physical presence. This usually refers to a place of business such as a factory, a store or offices.
You are not required to register if you simply have distributors, independent agents or the occasional visiting employee to the UK.
Sometimes the lines can be a little blurred, so it is very important to determine whether or not you are required to be registered. You will find further guidance on this matter on the Companies House website.
How do you register an overseas company in the UK?
The first step in registering an overseas company in the UK involves completing and submitting the OS IN01 form. It should be submitted to Companies House along with the required registration fee. Ensure that this form is filled out accurately with attention to detail.
On the form, the following will also be stated that you should take note of:
- The international company is allowed to choose a name for their UK establishment. This name is allowed to be used as the international company’s name when it comes to all trading in the UK, although trading disclosure rules will all need to be complied with.
- Once the overseas company has been registered, they will be given a code by Companies House. The code will begin either with ‘FC’ or ‘BR’ depending on whether or not it is a branch.
- Companies House will need to be informed about any changes that are made to the company, including appointing new agents, distributors or franchisees.
Read over all of the information provided by Companies House very carefully as it will help you remain fully compliant. Before you are legally registered, you may need to pass certain anti-money laundering checks.
What is the difference between a subsidiary and a branch?
When registering and setting up your business in the UK, there are basically two options available to you. These options include opening up a branch or a subsidiary.
A branch is essentially an extension of the parent country. The only difference being that the UK branch will be operating under the laws of the UK and not the laws of the country of origin. The main thing to note is that it is not a separate legal entity.
We have already mentioned that a UK establishment can have a different name from its parent company, and this name can be used for trading. But it is important to note that any UK establishment is not a separate legal entity. When it comes to any legal issues, the parent company will assume all liabilities.
Also, note that ‘branch’ and ‘UK establishment’ are terms that are often used interchangeably.
In most cases, a subsidiary would be registered as a limited company. It is its own separate legal entity, even though it is still owned and run by its parent company. Subsidiary companies are relatively easy to register, but directors will need to be appointed for each subsidiary created. Directors will have a wide variety of duties required of them.
Think carefully about which of these terms should be most closely linked to your international business. Speak to a business advisor if you are unsure about legal entities. There is no better or worse option than the other, but each has its pros and cons that you should be aware of before making a decision and filling in paperwork.
What about compliancy?
All international businesses registered in the UK must remain compliant at all times in order to avoid any legal issues and fines. Once we have been registered with Companies House, you will be required to inform them of any changes that occur. You’ll also need to submit your year-end financials and other documents to Companies House using an OS AA01 form to do this. Later in the article, we will get into some of the other requirements that UK establishments need to take into account.
What are the tax requirements for international companies in the UK?
There are many tax requirements that international companies operating in the UK need to be aware of, as profits that they generate in the UK are definitely taxable.
Corporation tax is where most of your tax may go. UK law involves double taxation treaties, which means that it will be unlikely for you to be able to charge artificial prices or management charges. Excessive interest rates that occur between the UK branch and its parent company are also usually not possible and cannot be used to reduce corporation tax. Corporation tax can be paid in the same way in which domestic companies pay their corporation tax.
What about VAT?
Whether you have a subsidiary or a branch, VAT criteria is the exact same as it is for local companies, and you’ll need to apply for VAT should you reach certain benchmarks. If you make a yearly turnover of £85,000 or more, you will be required to register. Otherwise, you can always register voluntarily should you want to reap some of the benefits that VAT has to offer.
There are some cases in which international companies could be exempt from tax, but these cases are very few and far between.
Is a UK bank account required?
International companies with branches or subsidiaries in the UK are not legally required to have UK bank accounts. However, it usually ends up being necessary simply for the practicalities of handling business finances in the UK, especially when the establishment reaches a certain size. If you are a UK limited company, it would be easier to set up a UK bank account. But in either case, you could be in for quite a lengthy process when setting up your UK business bank account. It is probably better to get started on this process sooner rather than later.
Can a UK business be run by a UK non-resident?
If a non-resident wants to set up and register a company in the UK, it is possible for them to do so through a business agent. This will involve a commercial agreement where a UK entity agrees to act as an agent for the international company. There are fees involved that depend on the level of services required of the UK entity.
Does the UK welcome international businesses?
Despite all the admin and red tape involved in registering and setting up an international business in the UK, the UK does indeed welcome international businesses. The UK provides many opportunities for success for a wide variety of industries, and UK residents support international businesses of all kinds. Compared to other countries, setting up an international business in the UK and being 100% compliant is actually relatively straightforward.
There is a large community of international businesses in the UK, and it is easy to find resources and advice from fellow business people should there be anything that you are uncertain of.
What are the payroll options?
When you start employing employees in the UK, you need to start thinking about your payroll options to ensure that you are fully compliant in this area. A branch is able to legally operate a PAYE scheme in the UK so long as they have employees in the UK and meet the other requirements involved with PAYE schemes.
What are some of the ongoing requirements of an international company registered in the UK?
Like any other business, international businesses will need to meet a number of ongoing requirements to remain compliant within the UK. Some of the requirements include:
Any changes made to the original details that you used to register with the Companies House should be made within 21 days of the occurring change.
Signs are a very important requirement. In any place that the international company carries out business, a clear sign will need to be exhibited. This sign should display the company’s name and the country of incorporation. A notice will also need to be displayed that names the company’s members/shareholders and that they maintain liability. Those who maintain liability are also required to have their addresses listed on these notices.
All international companies operating in the UK are required to disclose the following information on all letters, notices, bills and other official documents and publications:
- Country of incorporation
- A statement regarding the liability of shareholders and members
For any international companies that are incorporated outside of the European Economic Area (EEA), companies also need to disclose where the business was registered and the branch’s registration number, as well as the head office location, registration number in the country of incorporation, if the company is being wound up, and the company’s legal form.
All international companies registered in the UK need to file their accounts on a yearly basis with the Registrar of Companies. There is a filing fee involved for each set of accounts. The company will need to file all of the same accounts that it needs to in its home country as well as things like director’s reports, auditor’s reports, and these should be separate for each UK establishment that has been registered.
Once these accounts have been filed in the home country, the company has three months in which to file them in the UK.
In the UK, all registered international companies need to register a charge or mortgage over a property. It works in very much the same way that domestic companies have to do this.
If an overseas company registered in the UK decides to wind up their business or become insolvent, they will need to file all the necessary documents with Companies House and follow the same procedure that is required of local businesses when winding up.
Changes in activity
If the status of your business changes ‒ for example, if your ‘place of business’ has an increase in activity so much so that it becomes a ‘branch’ ‒ you will need to re-register your business as a branch. In the same vein, if you have a registered branch in the UK but the activity decreases so much that you fall more into the ‘place of business’ category, then you will also need to re-register.
Movement in the UK
Suppose the place of business or branch of an overseas company moves within the UK. In that case, Companies House will need to be officially notified by a letter that has been signed by the overseas company’s officer or another authorised person.
Any overseas company that has been registered in the UK is required to comply with all of the general legal requirements as well as industry-specific guidelines that are set out in the UK.
What are the penalties involved with failing to register?
If you fail to register your international business in the UK, or fail to meet the requirements that the UK government sets out for international business in the UK, you may receive various fines and penalties.
If you are opening up a branch or a subsidiary of an international business in the UK, you must ensure that you have followed the setup and registration procedures with precision. If there is anything that you’re unsure of, you should speak to a professional business advisor in both the UK and country of origin.