An overseas business looking to establish itself in the UK will need a local adviser "on the ground" to make sure that it fulfils all of its statutory obligations as well as to identify planning opportunities, maximise commercial impact and minimise risk. What are the main tax and legal considerations in establishing a UK base of an overseas business?

  1. Choice of UK business entity:
    • Representative office. Restricted to preparatory and marketing activities on behalf of Head Office. Typically no UK tax presence if implemented correctly. The first step for many overseas businesses coming into the UK.
    • UK Branch of overseas company. A UK trading arm of an overseas entity, typically with a tax presence in the UK limited to the profits earned by the branch or "permanent establishment". Often advantageous in the early days as less costly and opening years' losses may be relievable against taxable profits in the country of residence. Tax reliefs are typically available in the UK on the subsequent conversion of a trading branch to a UK subsidiary.
    • UK subsidiary of overseas parent. A separate legal entity incorporated in the UK as a limited company. Subject to UK tax on worldwide profits but with the benefit of a separate legal personality with limited liability.
    • UK Partnership structure. Less common but becoming more popular and may be appropriate for joint ventures.
  1. Structural tax considerations. It is essential to ensure that the UK business/entity fits well in an international tax context. Considerations include tax treaty planning (typically income flow planning, withholding tax and residence issues), transfer pricing and thin capitalisation issues, and the mitigation of future capital gains on group disposals.
  1. Statutory registrations and filings. These include the requirements to register a branch or representative office with Companies House and registration with HMRC for corporation tax and VAT, with ongoing obligations including annual statutory accounts and tax returns.
  1. Employee issues. These may include securing the right for foreign employees to work in the UK, establishing and administering a UK payroll and putting in place employee and executive incentive packages.

The UK is a very business-friendly jurisdiction and actively welcomes foreign direct investment. Nevertheless, advice should always be taken in advance in order to take maximum advantage of the opportunities available.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.