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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?
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.
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.
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.
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.
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