Home to one of the world’s most important financial centers, the United Kingdom is now seeing new startups pop up in areas such as insurtech, edtech, and alternative finance. It’s too early to know how Brexit will affect the United Kingdom in the long run. Regardless, many employers are still interested in hiring people based in the country. The United Kingdom’s impressive education system and diversity make it one of the most appealing countries to find top talent.
To set up your subsidiary in the UK, you will need to follow a thorough legal process in order to avoid improper setups, which can lead to unnecessary fines and legal action. You will need to learn about all of the key laws in the UK surrounding employment and taxes.
Most importantly, you will need to:
Set aside time and money to travel back and forth to the UK
Make sure that you set up a legal team as support that gives you advice on proper incorporation and
Establish a strong HR team to handle accounting and run payroll
Here is an overview of everything foreign corporations and businesses should consider before opening a subsidiary in the UK, as well as other alternative options to establishing a legal entity within the country
To begin the subsidiary process, you will need to verify your Standard Industrial Classification of Economic Activities (SIC). This process helps identify exactly what your business does and how it will function in the United Kingdom.
You will also be required to create a PSC register containing details for the Person’s Significant Control. This identifies all of the shareholders in the subsidiary.
The most common form of subsidiary set-up is a private UK limited company (LTD). To complete all of the necessary steps of incorporation for an LTD, you must do the following:
Apply for the Companies House for the standard registration process
Have at least 1 named director
Have a registered address for the director as well as a residential and service address
Name at least one other individual as a shareholder or the parent company as a shareholder
Provide companies statutory accounts to Companies House
Register for corporation tax (in most cases)
Register for VAT and payroll tax
Open a UK bank account
Filing the paperwork with the Companies House for the UK subsidiary only takes a few hours, but it can take a while to gather all of the required documents for incorporation. Most importantly, the subsidiaries Articles of Association must be filed with the Companies House.
As the overseas parent company, you will need to make sure that you are closely governing your entity in the UK.
As the employer, you are required to take money out of your employee’s paycheck for PAYE tax and for their National Insurance Contributions. As an employer, you are also required to obtain a liability insurance plan with a minimum coverage of 5,000,000 GBP.
Parent companies are required to pay corporate taxes on all UK profits to Her Majesty’s Revenues and Customs (HMRC). Depending on the size of your company, you may need to make quarterly payments instead of annual payments.
Because employees are so well protected by laws in the United Kingdom, you need to make sure that you offer generous benefits and salary that are equal to the work that they are doing for your subsidiary.
As the parent company, there are two main options for setting up business in the UK. You can set up either a branch or a subsidiary, with subsidiaries being the most popular option. However, branches do have some advantages.
Subsidiaries operate as local operations and are separate from their parent company. UK branch offices, on the other hand, are not technically resident corporations. Once a subsidiary is established, it is viewed as a local British company. As a local operation, there are more opportunities for trade and attracting employees.
As a subsidiary, you retain full independence from the foreign parent company. Independence makes it easier to tailor your business practices to British culture.
Setting up a subsidiary in the UK allows you a lot more freedom from the parent company, as long as you have the time and money. The process is actually relatively short, but you will need to understand some of the more complex British laws that govern businesses.
Most importantly, you will need a team of legal advisors to help guide you through tax laws, subsidiary laws, accounting, and drafting strong employment contracts to protect you from any potential lawsuits.
Many expanding companies want to hire employees in the UK, but aren’t sure about where to begin the process. Using a global EOR service like Via expedites the process and ensures that companies follow all hiring and employment laws correctly without having to establish a subsidiary. With Via, we help you hire, onboard, and pay remote employees across the world. As your employer-of-record abroad, we take care of the local human resources (HR) logistics, such as salary, payroll, benefits, paid leave, and tax deductions. Maintaining compliance is our responsibility. You simply focus on building your team and running your business.
If you’re looking to test out a market or start building a local talent hub based in the UK, partnering with an EOR like Via (as opposed to opening a subsidiary) is probably the strategic move.
Opening a subsidiary can be costly, as you will need to build out a team of local HR, labor, and legal experts. With Via’s transparent pricing, on the other hand, you can pay full-time employees or contractors in the UK with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums–start with 1 employee and scale up at your own pace.