Setting up in the UK ― branch or subsidiary

By Tolley

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Setting up in the UK ― branch or subsidiary
  • Choosing between a branch and a subsidiary
  • Tax considerations
  • Summary

A company doing business in the UK may initially undertake activities without a taxable presence in the UK.

However, where activities will actually be undertaken in the UK, the parent should consider whether to set up in the UK through a branch (which will usually be treated for tax purposes as a permanent establishment), or a subsidiary.

An overseas company may also acquire a UK permanent establishment without intending to do so. Where the business in the UK develops to the point that the company has a fixed place of business in the UK through which the business of the company is carried on, it will have a permanent establishment. The company may also acquire a UK permanent establishment where it has a UK agent who habitually exercises authority to do business on behalf of the company.

In both cases, care should be taken by overseas companies with operations in the UK, either directly or through an agent, to ensure that those UK operations do not amount to a permanent establishment unless and until that is intended by the parent company (see the Permanent establishment guidance note for more information on what amounts to a permanent establishment in the UK).

Choosing between a branch and a subsidiary

Arguably, there is little difference between setting up a branch and setting up a subsidiary. Both require Companies House registration, and similar registration with HMRC for direct tax, VAT and PAYE / NIC as appropriate. See the CTSA requirements guidance note regarding registration for new companies and the Business compliance guidance note (subscription sensitive) regarding registration with HMRC for other purposes.

A branch is easier to wind up, if the activities prove unsuccessful, as it is automatically closed when the trade of the branch ceases. In contrast, closing a subsidiary requires a formal procedure (winding-up, striking off or the appointment of a

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