05 October 2021

Inward Investment – key things to consider when setting up business in the UK


Expansion & Improvement

The UK has always been an attractive location for inward investment from abroad. Despite challenges brought about by Brexit and the pandemic a healthy level of inward investment activity is continuing.

Mark Newbold talks through the options available when looking at inward investment in the UK and the pros and cons to businesses.


What are the options?

If inward investment into the UK is the next step on your business plan, there are different options to consider. You could open a UK branch as an extension to your company or you could set up a subsidiary company. There are pros and cons to both options depending on your business's structure and strategy. Professional advisers with experience in this field can help you navigate the best route.


Option 1 – Opening a branch

If you choose to open a branch based in the UK and create a permanent establishment then it is treated as a direct extension to your company, wherever it is established. The key point to note is that your existing company will be liable for all obligations and financial commitments of this branch, unlike a subsidiary company that benefits from the protection of limited liability status.

Setting up a branch can be less expensive and less complicated than setting up a subsidiary. This option could be worth considering if you are dipping your toe in the water to see how your business could fare in the UK market.

From a practical perspective, it’s worth noting that some businesses will prefer to trade with UK registered companies which could restrict your ability to enter into certain legal agreements such as leasing premises or vehicles etc.

In addition to the above every registered branch in the UK must file the accounts of its overseas company at Companies House, even when these aren’t published in its home country. This can be one of the main reasons why overseas businesses choose to set up and operate a UK company rather than a branch.


Option 2 – Setting up a UK company

Setting up a company can be an appealing option if you already have established UK customer base and want to capitalise on a growing your UK income. You also have the benefit of potentially ring fencing the liabilities of the operations to this company alone, should the need arise.

The downside of establishing a UK company is the cost. There are more detailed regulations to abide by and you will need to go through a more formalised financial reporting process and possibly an annual audit. Brexit has also brought more complications with the withdrawal of the parent company guarantee for claiming audit exemption for EU subsidiaries.

In addition to the administration cost the tax relief for any initial trading losses may be deferred until such time that the company is making a profits whereas in a branch relief could be given sooner as it is an extension of an existing trading business (depending on the tax regime in the parent’s jurisdiction).


Where do you go from here?

Either option for inward investment can work for your business, depending on your aims and objectives. One is not always necessarily better than the other. Sometimes the decision can come down to how potential employees or customers view your business and that can be the deciding factor.

In order to have a seamless transition into the UK you’ll need to consider all of these elements in the planning process including setting up a UK bank account which can take a surprisingly amount of time. Fortunately advisers like Haines Watts can provide a solution to this by maintaining a client account for you until the process of opening a bank account is finalised.

 Haines Watts have the experience to help your business clear the key milestones in this process and begin trading in the best shape possible.


For help and to have an initial conversation about your inward investment needs get in touch.