UK Subsidiary
UK subsidiary setup is a long process that involves time, money, and resources. While there are other options, if you commit to working alone, you need to understand the processes and laws associated with setting up a UK subsidiary.
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UK subsidiary setup is a long process that involves time, money, and resources. While there are other options, if you commit to working alone, you need to understand the processes and laws associated with setting up a UK subsidiary.
How to set up a UK subsidiary
Correctly setting up a UK subsidiary involves a thorough legal process. Start by deciding on an official name if your UK entity will have a different title from your main office. You also need to find a registered office address. You will need at least one named Director and a residential and service address for him or her, a statement of capital, and more. From there, you need to verify your Standard Industrial Classification of Economic Activities (SIC) that helps identify exactly what your business does. You will also be required to create a register containing details for the Persons of Significant Control (PSC), who are the subsidiaries shareholders; the PSC register needs to be filed on an annual basis.
You will need to provide the Companies House, the agency that maintains the register of companies and is responsible for incorporating all forms of companies in the UK, with a number of documents, the most important of which is the Articles of Association.
Next, you need to register for VAT which is mandatory if your taxable goods and services from the prior year were over GBP 85,000. You also need to register for Pay As You Earn (PAYE) tax in the UK — which contributes to national insurance (social security) — through His Majesty’s Revenue and Customs (HMRC). Finally, you need to find an employer’s liability insurance plan at a minimum of GBP 5 million.
UK subsidiary laws
UK subsidiary laws will govern your entity in the UK. These laws require you to take money out of your employees’ paychecks for the PAYE tax and National Insurance Contributions (NIC). You also need to pay corporate taxes on your UK profits. Depending on the size of your company, you may need to make quarterly payments instead of annual ones.
Additional laws relate to employment, compensation, and benefits. During the UK subsidiary setup stage, it’s essential to ensure you hire talented candidates while offering generous benefits and salary.
In the UK, you legally need to draft an employment contract that you give to employees within 2 months of their start date. This contract helps ensure you stay compliant with UK subsidiary laws, and you can spell out what benefits employees will receive.
Benefits of setting up a UK subsidiary
The most significant benefit of setting up a UK subsidiary is that you can grow your company beyond your home base. It also helps you avoid liability if you are seeking talent in the UK.
In any subsidiary situation, the parent company typically has control over an entity location’s behavior — which means any compensation issues or litigation will go to the parent company and not to the subsidiary. Although it diminishes your liability, setting up a UK subsidiary gives you a greater degree of independence. Subsidiaries can develop their own culture, brand, and management systems that fit the country’s culture.
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THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). G-P does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect G-P’s product delivery in any given jurisdiction. G-P makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.