UK Branch vs Subsidiary – What’s the Difference?
Are you thinking about setting up a UK operation? Initially, you may want to test the waters by operating from your home country, with no taxable presence in the UK. However, once a taxable presence in the UK is needed you should consider whether to set up a UK establishment (which includes both branch and place of business), or a subsidiary.
In simple terms, a UK establishment is an extension of the overseas company, while a subsidiary is a separate legal entity and therefore carries less risk towards the parent company. Let’s look at some of the difference and similarities between the two.
Both a UK establishment and a subsidiary require registration with the UK authorities.
An overseas company may prefer the relative anonymity of a subsidiary as it is only required to file its own annual financial statements whereas a UK establishment is required to file the financial statements of the overseas company
Closing the business
If a UK establishment proves unsuccessful it is automatically closed when its trade ceases. On the other hand, closing a subsidiary involves a few more steps.
From a tax perspective, a UK establishment will only be subject to UK corporation tax on the portion of its profits attributable to it. A subsidiary is subject to UK corporation tax on its worldwide profits.
The choice between a UK establishment and a subsidiary will ultimately depend on the overseas parent company in terms of its group structure, time frame involved and the general business activities.
Goodwille have helped hundreds of businesses with setting up UK establishments and subsidiaries and while most of our clients have historically favoured a subsidiary, it is worth taking specialist advice to make sure the decision you make is right for your business. Read more about the differences between a UK establishment and a subsidiary here and contact us today for advice on the most suitable setup for your business.