Setting up a UK Branch

Setting up a UK branch (sometimes called a UK establishment) can be a great way for an overseas entity to establish itself in the UK. 

You may wish to set up a UK branch or establishment to: 

• Test market conditions
• Build awareness
• Develop local knowledge
• Offset tax liabilities

Unlike incorporating a separate UK company, when registering a UK establishment it is the overseas entity that will enter into contracts and undertake business. To understand more about the differences between a branch and subsidiary visit our guide.

Tax advice for UK Branches

Setting up a UK establishment for an overseas entity can raise a number of tax considerations. Elemental specialises in helping UK establishments to navigate these.

• Permanent Establishment – A branch (which is required to be registered at Companies House) is, by definition a Permanent Establishment (“PE”), however an office, construction site, factory or other installation may also meet the domestic definition of a Permanent Establishment.  The UK government’s intention is to update domestic legislation to remain aligned with OECD definitions.
• Corporate Tax – Any U.K. Permanent Establishment (such as a branch) will be subject to UK corporation tax on domestic profits. The calculation of this tax liability must be based on accounting statements drawn up in IFRS or UK GAAP.
• BEPS – The UK is fully committed to implementing Pillar 2 of the OECD’s BEPS project. The multinational top-up tax (MTUT) and the domestic top-up tax (DTT) will both apply to large multinational enterprises for accounting periods beginning on or after 31 December 2023.
• Transfer Pricing – The full weight of the UK’s transfer pricing regime applies only to large businesses, but can also be applied to SMEs where transactions between related parties are entered into at abusive prices or with a tax evasion motive
• Withholding Tax – The UK does not levy withholding taxes on the repatriation of business profits but may charge WHT on interest and royalty payments subject to the provisions of relevant double tax treaties
• Value Added Tax – A UK branch will be subject to the same registration requirements as any other UK business.  However, HMRC will often require a business to demonstrate a physical place of business in the UK before proceeding with a registration.
• Double Taxation Relief –  The UK has one of the world’s largest double tax treaty networks available to British taxpayers (including UK branches of foreign companies).