Key Strategies to Expand your Business to the UK

The UK is ranked within the top 10 of the World Bank’s Ease of Doing Business Index. It is therefore understandable why businesses seek to expand their operations into the UK.

There are three primary ways to achieve business expansion to the UK: trading as an entity, setting up a UK branch, and trading directly from overseas. Below, we’ll explore each approach, its benefits, and the key considerations.

Trading as an Entity in the UK

Trading as a new UK entity is the most common way for overseas businesses to expand to the UK. This involves setting up a business in the UK under one of the available structures: sole trader, partnership, limited liability partnership, limited company.

Due to the legal and financial advantages offered, the limited company tends to be the structure of choice.

Key Benefits:

Protection: the UK limited company will be treated as a separate legal entity from the parent company. This means that the parent company’s financial exposure is limited to the value of its shares in the UK limited company.Easy to set up: it is relatively simple to set up a limited company and does not require resident shareholders or directorsCredibility: the limited company structure is recognised by UK customers and other UK businesses as a trusted way of doing business Limited exposure: only the accounts for the UK limited company needs to be filed and not that of the parent company (unlike the UK branch structure).

• Protection: the UK limited company will be treated as a separate legal entity from the parent company. This means that the parent company’s financial exposure is limited to the value of its shares in the UK limited company.
• Easy to set up: it is relatively simple to set up a limited company and does not require resident shareholders or directors
• Credibility: the limited company structure is recognised by UK customers and other UK businesses as a trusted way of doing business
• Limited exposure: only the accounts for the UK limited company needs to be filed and not that of the parent company (unlike the UK branch structure).

A key consideration is that the UK limited company is liable to corporation tax and filing requirements which can be costly.

This option is ideal if you’re planning a long-term presence and want your business to be fully integrated into the UK market.

Setting Up a UK Branch
For businesses looking to expand without forming an entirely new entity, establishing a UK branch is a strategic choice.

A branch is an extension of the parent company, not a separate legal entity therefore the whole business is financially exposed and the overseas company will be liable in the event of insolvency or winding up.

Unlike the UK Entity, the UK branch is not as easy to set up. It must still beregistered with Companies House as an overseas company and notarised documents (including translations if necessary) relating to the parent company, its directors and its business, needs to be submitted.

Key Benefits:

Management: Simplifies management as it remains part of the parent company.Financial statements: Unlike the UK entity, no separate financial statements need to be filed for the UK branchTax: a trading loss can be offset against profits made by the parent company. This is beneficial if opening the UK branch is expected to incur losses.Credibility: a UK branch is usually seen as less credible and more temporary than a UK entity

• Management: Simplifies management as it remains part of the parent company.
• Financial statements: Unlike the UK entity, no separate financial statements need to be filed for the UK branch
• Tax: a trading loss can be offset against profits made by the parent company. This is beneficial if opening the UK branch is expected to incur losses.
• Credibility: a UK branch is usually seen as less credible and more temporary than a UK entity

This is a preferred option for companies planning significant expansion operations or looking to build a local customer base.

Trading Directly from Overseas

Overseas businesses seeking to test the waters in the UK or that are managing operations remotely may prefer to trading directly from overseas.

Key Benefits:

No need to establish a physical presence in the UK.Tax: as there is no UK establishment, the business will not be liable to corporation tax. However the business may need to register for Value Added Tax (VAT) if selling goods or services.

Like the UK branch, trading directly from overseas could impact customer trust and can be seen as temporary.

This is best suited for businesses exploring the UK market with minimal upfront investment or those leveraging e-commerce platforms.

Final Thoughts

Each of these approaches has unique advantages and challenges, so it’s crucial to evaluate your goals, resources, and long-term vision. For tailored advice and assistance with setting up a UK presence and legal compliance, consult with Templeton Legal Services.

Ready to expand into the UK? Let us guide you every step of the way.