Hamilton Pratt

Setting Up

When setting up business on your own in the UK, the main factor in deciding which type of vehicle will best suit your needs is likely to be how it will be treated for taxation purposes.

Options for Setting Up in the UK

If you decide to set up business in the UK on your own, you have three options:-

  • to establish a representative office (in a franchising context this is unlikely to be of interest);
  • to establish a branch; or
  • to set up a separate UK subsidiary company.

In deciding whether to set up a representative office, branch or subsidiary, you must consider your commercial objectives, the nature and scale of your proposed activities in the UK and the potential tax treatment of your preferred structure.

There are no statutory definitions of the terms "representative office" and "branch". However, the distinction is important because of the different tax treatment applied by the UK tax authorities to a branch and a representative office.

Representative office: The term "representative office" is used to describe an office which advertises and promotes the business of its head office – it typically collects and distributes information and introduces and refers potential customers to its head office abroad. To maintain its status as a representative office (which is relevant for tax purposes), it should not negotiate or conclude contracts directly with local customers and third parties.

Branch: A "branch" is part of an overseas limited company organised to conduct business through local employees in the UK rather than referring that business abroad. The term "branch" therefore implies a permanent place of business which has its own management and is authorised to negotiate contracts with third parties without reference to head office.

The most common form of company in the UK is the private company limited by shares. It is also the most popular choice for overseas businesses setting up a UK subsidiary company. Accordingly, for the purpose of this guide, we have assumed that if you wish to set up a subsidiary, you will set up a private company limited by shares.