Establishing a UK operation: the basics

Setting up a UK operation can be straightforward provided you have access to experienced advisors.

Companies with very well-established operations in their home jurisdiction, often struggle to enter the UK market due to an assumption that they are familiar with British culture.

Working closely with an advisor is crucial to make sure you aren’t tripped up by the myriad of legislation that must be navigated. So, what do you need to know when looking to establish a presence in the UK?

Choosing a legal structure

With a number of options available, it largely depends on the objectives and plans that the business has for the longer-term.

A branch often referred to as a UK establishment, can work well for companies testing the marketplace, or those wishing to set up on a short-term basis. It can also be de-registered swiftly if no longer required. Depending on parent company jurisdiction law, it’s full profit and loss statement may become a matter of public record.

A limited company, whether owned by a parent company (a subsidiary) or owned by individuals, is a very effective vehicle, governed under UK law, with all the panache and credibility of British business.

Partnerships and joint ventures are also available.

Company secretaries and permanent representatives

This is not a required role, but where there are no UK-based directors, then we strongly recommend this role is occupied. It is an officer of the company but without binding power.

It allows the office-holder to communicate with Government Offices such as Companies House, or Her Majesty’s Revenue and Customs (HMRC) – and can enter contractual obligations on instruction from a director of the UK company.

This role enables someone to be ‘on-the-ground’ in the UK, which could be part of the requirements with some UK banks when opening a real bank account.

We are usually appointed as Company Secretary or Authorised Representative to our clients’ UK companies. Our address is also the Registered Office of the company, allowing for efficient handling of administrative documents from Companies House and HMRC.

Bank account opening

Every company needs a bank account, but attempting to open one without guidance, support or the right documents will prove costly from a time and financial perspective. We advise this process can take up to three months.

Some jurisdictions, such as Australia and New Zealand, allow shares in the parent company to be held in a family or discretionary trust. Trusts in the UK are not common and selected UK banking partner will require the settlor, trustees and named beneficiaries within the trust to be formally identified as part of the bank account opening process.

Home address identification documents must be dated within the previous three months. The addresses must match, and photographic identification must be provided and notarized, either by an accountant or lawyer. An accompanying cover letter for each individual that has been identified will be required as part of the process.

Once we are satisfied as to our client’s identity, we will operate a client trust account on their behalf. This is a designated client account for receiving payment and processing of supplier invoices, payroll and taxes etc. This is used until the real bank account is operational.

Understanding VAT

VAT is an amount charged on most goods and services that are purchased in the UK and Europe. It is very similar to GST (Goods and Sales Tax), but not the same.

A business registered for VAT will charge it on to other businesses and consumers that it trades within the UK. The good thing is that VAT registered business is able to recharge the amount of VAT that has been charged to them. The negative is that non-VAT registered business and consumers are not able to claim back the VAT. Effectively it is a ‘sale of goods’ tax to consumers at a standard rate of 20 per cent.

A business can register voluntarily for VAT, which may give rise to a cash flow benefit, as well as giving perceived comfort to your customers. The reporting requirements to HMRC must be adhered to, usually quarterly.

If you need any support to establish a UK presence then please contact us directly – [email protected].