There are a number of issues which you must consider when you are looking to set up your business in the UK. This video will take you through some of the common questions that we come across and it also gives you practical advice about the issues that you need to consider.
The UK continues to be one of the world’s leading locations for global inward investment, however there are a number of key issues which need to be taken into consideration when setting up a business.
The first thing is you’ll need to decide type of entity or what business structure will fit your business model and plan. Of course, this decision will be motivated by your situation and business needs but an informed choice early on will help you establish the correct business structure, to enable growth and viable financial and tax models.
The two main structures are establishment, better known as creating a branch for your overseas business; or limited company which provides a limited liability to a UK company and ring-fences the company to the UK. But which one should you consider?
For ease, we’ve detailed the key areas which may impact you, depending on what business structure you choose.
There are other commercial considerations you should contemplate, including the cost of compliance and administration. Generally, having a UK company or LLP will require more admin and compliance time and costs than having an establishment.
But what if you want to use the UK to set up your holding company? This is a query we receive a lot and because of the UK’s competitive tax structure, and falling corporate tax, it is a very attractive proposition.
If you’re considering using a holding company you should note three things:
- Virtually all dividends received by a UK parent company unless received from a company established in a tax haven, whether from the UK or overseas are exempt from UK taxation;
- The UK will not levy a withholding tax on dividends paid to its shareholders, whether they are based in the UK or overseas; and
- The UK has the largest network of double taxation treaties in the world!
For your ease, we have created a factsheet for setting up a UK business and this can be found under resources on our international page: https://www.krestonreeves.com/international-reach
Clearly, your colleagues’ benefits, taxes and social security will always be a matter of importance!
And it is your legal responsibility to pay their tax and social security deductions in respect of payroll to the UK tax authorities, if they’re a UK tax resident.
There are significant tax reliefs available to employees seconded from overseas to the UK if the secondments are for less than two years. There are also potentially reductions in tax if work is carried out overseas for the first three tax years of employment in the UK.
If your colleague is legally defined as an overseas national then social security can be a complex area and individual advice needs to be taken.
The UK doesn’t just benefit your colleagues through social security. The UK has a number of approved share option plans which give tax benefits to employees and employers alike and it is often possible to adapt an overseas stock option plan to fit into one of these plans.
Finally, all businesses looking to set up in the UK should be aware of Value Added Tax, or VAT.
VAT applies to broadly all goods and services that are purchased or sold for use or consumption in the EU and any established business supplying taxable supplies, in excess of £85,000, in any 12 months needs to register for VAT.
I hope this brief introduction to setting up a business in the UK is helpful.
My name is Andrew Griggs and I’m Kreston Reeves’ Senior Partner and I’m also a global audit executive of the international network Kreston of which we are a member.
If you’re interested in learning more, or if you’d like some help, please feel free contact me or a member of our international team and we’d be more than happy to help! Or download our free 'Setting up a business in the UK' on our International reach webpage.