We are frequently asked about a branch vs. a subsidiary (Ltd) company and benefits/drawbacks of both.
A branch can also be referred to as a representative office, or a UK establishment.
A subsidiary is sometimes referred to as a sub, or UK wholly owned subsidiary.
The subsidiary is a completely separate legal entity from the overseas parent company.
We have previously explained the advantages and disadvantages of a subsidiary in these pages.
A branch is an office – whether physical or not – of the presence of the overseas company, registered with Companies House in the UK. It is not governed under UK law but does have some filing requirements. This means the branch legally separated, and the parent company is liable for these reporting requirements, obligations and debts that may be ensued for the UK branch.
Branch in the UK
UK Ltd Company / Subsidiary in the UK
|Not a separate legal entity||Own legal entity in the UK – so is perceived as having more substance than a branch|
|Extension of parent company wherever established||UK company has limited liability so can be ring fenced from overseas parents|
|Overseas company liable for obligations and liability||Directors have limited liability|
|Requirement to file FULL Profit & Loss of Parent company at Companies House (public records office)||Can engage seamlessly into contractual arrangements|
|These need to be in a specific format approved by Companies House||Needs a Registered Office|
|Requirement to file director details of parent company within one month of opening||Closure time can be six months or longer|
|Difficulty in engaging in legal contracts; practicalities such as mobile phone contract as not perceived to be as ‘good’ as Limited companiesReporting requirements of annual accounts and annual return||Reporting requirements of annual accounts and annual return|
|Tax treatment between UK operation and overseas parent company opportunistic||Easier to register payroll scheme: e.g. Director of Co must have UK National Insurance number, but there are work-arounds for this.|
|Difficulty (but not impossible) in registering a payroll scheme.|
What this means for customers/clients
A UK Branch can be easier to establish and closed down if unsuccessful. However, UK and European based customers may prefer to deal with a UK company rather than the branch of an overseas company.
The simple way to describe this, if you’re purchasing a product on an e-commerce website, would you rather purchase from a local company, or one based overseas? Invariably the answer is the same, but this is company/objective specific. If you only need a ‘light’ presence for a market tender process, for example, then a branch may be a better option.
We would be happy to discuss your UK setup requirements. Every client is different, we appreciate that, and should be treated on an individual basis – depending on what you are trying to achieve in the UK/Europe. Get in touch for further support.