The United Kingdom is among the world’s most attractive countries for companies and businesses planning international expansion. The UK’s talent pool, commercial infrastructure, strong currency and robust market potential create an exceptionally promising environment for global expansion.
In addition, world-leading research and development has made the UK one of the most innovative globally – ranked in the top five in the 2019 Global Innovation Index – with Government support helping companies develop new ideas into commercial success.
International expansion involves considerable challenges, from finding staff at the beginning of the process to complying with strict employment laws and tax and payroll regulations. These challenges can be overcome working alongside a Professional Employer Organisation (PEO) such as Bradford Jacobs and relying on our complete understanding of the UK market, its culture, customs and business practices.
Starting a business in the UK
Bradford Jacobs are perfectly placed to steer the most efficient course through the complex procedures when expanding operations into the UK, including compliance with UK taxation, payroll, employment, filing and banking, set-up and registration.
This guide is your essential briefing on expanding into the UK market, ‘fast facts’ about the sector, plusses and minuses of the UK market and why companies like doing business in the UK. Other items on the agenda for expansion concern whether to form a limited company subsidiary or open a branch, legal structures, corporate and business taxes, banking and registration.
Expanding business into the UK
The United Kingdom is a prime target for companies building on success in their home country by expanding internationally. This involves huge decisions with massive implications. Begin the journey in consultation with Bradford Jacobs, a PEO with global market experience, to utilise our expert knowledge of the UK.
Our expertise is allied to Employer of Record services that have all the answers to mitigate potential risks. Partnering a PEO enables international companies to assess their new market without the financial hazards of establishing an entity or subsidiary.
UK Business Facts
- United Kingdom Home Nations – England, Scotland, Wales, Northern Ireland
- Capital City – London
- Population – 67.88 million
- Official language – English
- Economy and world ranking – 2.83 trillion, 6th in world
- Leading sectors – Finance and banking, information technology, construction, oil and gas, government, healthcare, manufacturing
- Main exports – Machinery including computers, vehicles, gems and precious metals, mineral fuels including oil, electrical machinery, pharmaceuticals
- Main imports – Crude and refined petroleum, vehicles, packaged medicines, computers
- UK’s main trading partners – European Union, USA, Germany, Netherlands, France, China, Ireland, Spain, Belgium, Italy
- New Year’s Day
- Good Friday
- Easter Monday
- Early May Bank Holiday (May)
- Spring Bank Holiday (May)
- Summer Bank Holiday (August)
- Christmas Day
- Boxing Day
Benefits and disadvantages of the UK Market
- The UK is the ninth easiest country in the world to carry out business, according to the World Bank
- UK Corporation Tax is 19%, the lowest in the G20, payable by an overseas company on profits arising in the UK
- The UK has a 10% Corporation Tax rate for profits on inventions patented in the UK
- UK-based companies are in easier geographical reach of 500 million potential customers in the EU alone
- The UK’s 30 million workforce includes world class academic and research talent and highly skilled workers
- Overall labour costs in the UK are lower than many European competitors, such as France, Germany and the Netherlands
- Post-Brexit the UK is free to set tax, legal and finance regulations independently and react flexibly to market changes
- The Organisation for Economic Co-operation and Development ranks the UK with the fewest barriers to entrepreneurship and the third fewest barriers to trade and investment
- Brexit, from January 2021, allows the UK Government to seek new trade deals with more vibrant markets
- The UK boasts a range of ‘business clusters’ nationwide including advanced engineering and medical technologies, life sciences and renewable energy
- Leaving the EU brings uncertainty over cross-border commerce. British companies exporting to the EU face new tariffs, while EU businesses exporting to the UK could be discouraged if they also face new tariffs
- Cost of establishing/terminating a subsidiary or entity. Whether committed to long-term expansion or testing the market, set-up and shutdown costs must be factored in
- Fines and penalties for failing to comply with employment, taxation and immigration regulations
- Business practices and cultural barriers
- Managing payroll and HR obligations of international employees remotely
- Costs and timeframes of setting up a foreign subsidiary
Why companies like doing business in the UK
Increasing sales, revenue and extending global reach are the obvious advantages of expanding into the United Kingdom. Accessing a market of over 60 million people, support for research and development and the lowest rate of Corporation Tax in the G20 are among the benefits.
The highly skilled workforce includes graduates from some of the world’s finest universities who have pushed the UK into the top five of the countries rated the most innovative. These are among the factors ranking the UK as one of the world’s prime locations for international expansion.
Establishing a limited company subsidiary or entity in the UK
The most common business unit in the UK is a limited company (Ltd.), which is a separate legal entity owned by shareholders and managed by directors. Profits are liable for Corporation Tax. This is often the preferred option for international companies planning UK expansion by establishing a subsidiary.
A subsidiary is its own legal entity and limited liability protects its directors and the parent company. Operating from a registered office, the subsidiary can more easily enter into independent contractual arrangements.
Alternatively, a parent company may consider registering a branch office in the UK. This is not a separate legal entity to the parent company, which will be responsible for debts, liabilities and operations.
Legal structures for UK market entry
Companies planning international expansion into the UK have to decide on the legal structure of their new entity. The most common options include:
Incorporating a limited liability company (Ltd.)/subsidiary. These must be registered with Companies House and supply the company’s name and registered address; have at least one director and shareholder; supply details of the company’s shares and ‘articles of association’ outlining the rules by which the company will be run.
- Pros: less personal financial exposure with protection from liability
- Cons: involves set-up costs; must publish annual accounts and financial reports
Setting up a branch office. A UK branch (also known as a UK establishment) must be registered with Companies House. The overseas parent company gives the branch a name, which may be the parent company’s name or an alternative title under which it plans to trade in the UK. Companies House may ask for copies of latest accounts and ongoing information and reports. Companies must open a UK bank account.
- Pros: Attractive method of assessing suitability of the market, while establishing a presence
- Cons: Complex process which will be difficult to manage from overseas; parent company responsible for debts, fines and liabilities
UK Business Tax
Companies resident in the UK must pay Corporation Tax of 19% on company profits arising in the UK.
Capital Gains Tax can apply when, for example, assets are sold. Companies must register for Value Added Tax (VAT) if their taxable turnover in any 12-month period is £85,000 or over. The current rate is 20%.
National Insurance Contributions
Employers contribute 13.8% to National Insurance and a minimum of 3% to the Workplace Pension for a total of 16.8%.
UK workers have a personal tax allowance that can be earned without having to pay income tax. If earnings exceed the personal allowance, tax is paid at the applicable rate on all earnings above it. The personal allowance remains untaxed.
|Band||Taxable Income||Tax Rate|
|Personal Allowance||Up to £12,500||0%|
|Basic Rate||£12,501 to £50,000||20%|
|Higher Rate||£50,001 to £150,000||40%|
|Additional Rate||Over £150,000||45%|
Opening a business account in the UK
Foreign companies must open a UK Business Account. The UK’s world-class banking system allows international companies to make and receive payments without incurring exchange rate fees.
The UK’s innovative ‘FinTechs’, which facilitate and support banking services, have made accessing UK business banking services easier for international entrepreneurs and businesses, whatever their size. Although not a full solution, these products accelerate their UK entry and help fulfil their compliance requirements with HMRC
In addition, banks are legally required to carry out Anti-Money Laundering (AML) and Know Your Customer (KYC) checks before offering a business bank account. Some banks may not accept certain businesses for their own reasons. This means that although there are a range of different account solutions available, some will be more appropriate than others.
If the parent company’s bank has representation in the UK this might speed the process in terms of proving some credit worthiness.
Register a company in the UK
A framework exists for incorporating a subsidiary or establishing a branch in the United Kingdom, but expert guidance and assistance from a company such as Bradford Jacobs is essential in avoiding potential difficulties in the process.
Incorporating a private limited company as a separate legal entity is the most popular choice among companies planning international expansion.
Before getting started companies must supply:
- A company name
- A company address, anywhere in the UK
- At least one director, who does not need to be a UK resident
- At least one shareholder, an individual or company
A company registering in the UK must have a ‘memorandum’ and an ‘articles of association’ document in place at the time of incorporation. Professional advisers can create them on your company’s behalf.
Although it’s not a legal requirement to have a director or shareholder resident in the UK to set up a UK company, many banks will require UK resident directors or shareholders before they will open a business bank account.
Find an office in the UK
The UK has thriving and rapidly-developing ‘business clusters’ where employers can draw on world-class academic and research talent and highly skilled employees. Locating in the relevant business cluster can help companies to:
- Access a larger pool of labour with the appropriate skills
- Improve supply chains
- Maximise ideas, knowledge, research and development opportunities
Business cluster examples include:
- Leeds and Manchester – Digital hubs
- Midlands – Aerospace and automotive
- Thames Valley – UK’s ‘Silicon Valley’ for technology companies, plus motorsport
- London – Finance, banking
- East Midlands, Lancashire, West Yorkshire – Textiles
- Enterprise Zones – Currently over 50 existing or planned in the UK, offering a broad range of support for companies establishing businesses
Bradford Jacobs, as part of their international expansion services, can act as office brokers for companies expanding into the UK. Contact Bradford Jacobs today.
Finding a UK manufacturer
Companies may need to partner manufacturers in the UK. Checking the options before making the move is critical to success. Globally ambitious businesses and entrepreneurs must ask key questions in their search for a manufacturing partner.
- Do they hold relevant quality certificates?
- Can they deliver direct to customers?
- Can they keep up with demand?
- Are they financially sound?
Research and check their reputation in the industry and explore links to UK manufacturers.
Finding a UK distributor
A successful move into the UK will prove wasted without a front-line distributor to move the products around the country, or into mainland Europe and farther afield. Finding the perfect match among the distributors is critical to accomplishing your objectives. Treat distributors as long-term partners and work with them to formulate goals and business plans. Explore links to distributors, such as:
Enter new markets with Bradford Jacobs
Bradford Jacobs are the gateway for companies seeking to enter new markets in the UK and worldwide. Our specialist teams have in-depth global knowledge of how to enter new territories, how to comply with laws relating to employment, registration, taxation and payroll. We provide ongoing consultation on human resources through our experience of individual cultures and customs of every county being targeted for international expansion. Partner with Bradford Jacobs to effortlessly navigate expanding into the United Kingdom Market.