Entering the UK Market

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Entering the UK Market

Foreign companies who wish to expand into the UK will be met with a world-renowned business hub that includes a highly educated workforce, attractive tax rates and incentives, as well as low labor and administration costs.

However, setting up shop in an unfamiliar place comes with its own challenges. Foreign businesses must comply with employment, tax, payroll, and corporate legislation whilst ensuring that their employees are working productively and efficiently.

The alternative solution to overcoming these issues involves working with a Professional Employer Organization (PEO) such as Bradford Jacobs, using our Employer of Record (EOR) in-country experts to handle every aspect of compliance. You can depend on our specialists’ in-depth knowledge of the UK’s culture, customs, and business practices.

Starting a Business in the UK

The UK’s geographical position benefits from access to diverse marketplaces in Europe, North America, Asia, and Oceania. With strong commercial services, communications, and manufacturing sectors, as well as high-quality logistics and infrastructure, this creates an attractive environment for any business owner who seeks to expand their business.

To start a business in the UK you must go through a company registration procedure, which is straightforward and designed to be executed easily. These steps can be done in person or online through the government website or electronic software filing.

The necessary steps to start a business in the UK include:

  • Decide on the company type that suits the nature of your business, your business goals and matches your own capabilities to meet establishment requirements.
  • Obtain a business address in the UK. The business address must be in the same country that the company is being registered in – so a company registered in Scotland must have a business address in Scotland, for example.
  • Decide on a company name and check on its availability.
  • Appoint a company secretary.
  • Prepare the appropriate registration documents.
  • Open a local business bank account in the UK and deposit the appropriate share capital.
  • Notarize registration documents at a notary’s office.
  • Register your company at the Companies House.
  • Register with the UK’s HM Revenue & Customs.
  • Register for a VAT Number.
  • Receive Certificate of Incorporation.
  • Register with National Insurance to pay social security contributions from employers and employees.
  • Acquire a trading certificate before commencing business (depending on the company type you choose)

Expanding Business into the UK

Foreign entities wishing to expand into the UK will be met with a thriving economy that benefits from low corporate tax rates and attractive tax reliefs, highly-qualified talent pool and attractive labor and administrative costs – which is provided to all entities that enter the market.

The UK has the largest air transport system in Europe, and its location benefits from its proximity to all of Europe’s leading technology markets, which can be reached in under 2 hours from any of South England’s international airports.

The country’s position also offers easy trade between continents, with the help of its strong infrastructure. Expanding one’s business into the UK creates a lot of opportunity for expansion both nationally – particularly to popular district capitals such as London, Edinburgh, Bristol, Glasgow, Cardiff, and Belfast, which are popular tourist and commercial destinations – and internationally.

UK Business Facts

  • Capital City – London
  • Population – 67.88 million
  • Cities – Aberdeen, Edinburgh, Bristol, Cambridge, Canterbury, Cardiff, Birmingham, Coventry, Glasgow, Manchester, Liverpool, Belfast, Perth
  • Official language(s) – English
  • Economy/GDP (2020) – 1.96 trillion
  • World Ranking (Ease of Doing Business) – 8th
  • 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
  • Main trading partners – European Union, USA, Germany, Netherlands, France, China, Ireland, Spain, Belgium, Italy
  • Government – Unitary parliamentary constitutional monarchy
  • Currency – GBP, British Pounds

Advantages and Challenges of the UK Market

The Benefits:

  • The UK is the eighth easiest country in the world to carry out business, according to the World Bank’s report on the Ease of Doing Business Report.
  • UK Corporation Tax is 19%, which is the lowest in the G20.
  • 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/research talent and highly skilled workers.
  • Overall labor 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 Organization for Economic Co-operation and Development ranks the UK with the fewest barriers to entrepreneurship and the third fewest barriers to trade and investment.
  • The UK boasts a range of ‘business clusters’ nationwide including advanced engineering and medical technologies, life sciences and renewable energy.

The Disadvantages:

  • 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.
  • 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.

Limited Company/Subsidiary or Branch in the UK

In the UK, a subsidiary entity is considered a legally separate entity from the parent company, with independent administration and management, which provides freedom to explore the local market and create international credibility.

A branch, however, does not have any independence from the parent company – but it is taxed and reported similarly to resident entities, and is limited in its commercial activities.

The main characteristics of a subsidiary:

  • A subsidiary in the UK is a separate legal entity with its own legal personality.
  • The parent company of a subsidiary is not liable for the subsidiary’s operation, debts, and liabilities – these, however, may fall on the directors.
  • Subsidiaries require the appointment of a resident company secretary.
  • A subsidiary requires the mandatory filing of an annual financial statement to the Companies House.
  • Subsidiaries are subject to the same taxation principles as resident companies and are taxed on their worldwide profits.
  • A subsidiary requires a registered address and local bank account to operate in the UK.
  • For incorporation, the subsidiary requires at least 1 director and 1 shareholder, who can be of any nationality.

Main characteristics of a branch:

  • The parent company has full control over the actions and decisions of the branch office and is fully responsible for the liabilities of the branch.
  • Branches in the UK must have a resident representative (who can be an individual or company) to represent the company in its dealings with the tax authorities.
  • The branch may have the same name as the parent company or choose a different name for its UK establishment.
  • Branches are incorporated under the parent company’s constitutional documents.
  • Branches in the UK also require a minimum of 1 director and 1 shareholder for incorporation.
  • The financial statements of the parent company must be filed with the Companies House.
  • The branch’s activities are also subject to the UK’s taxation laws.

Assessing the comparative advantages and disadvantages between a subsidiary and a branch and choosing the right option for your expansion is best done with expert guidance.

A practical approach to have your business up-and-running in no time is to use a Professional Employer Organization (PEO) and global recruitment authority such as Bradford Jacobs to source your staff. What is more – before your staff even set foot in your office, our Employer of Record (EOR) specialists will have dealt with all the complexities of compliance with the relevant authorities. Your company can have a presence in the UK within days rather than months.

Legal Structures for UK Market Entry

Depending on the company structure you choose to set up, establishing a subsidiary or branch requires meeting certain legal requirements. A subsidiary is incorporated under British law, whereas a branch operates under certain local laws (taxation, social security etc.), but are incorporated under the procedures of the parent company and uses the parent company’s Articles of Association.

The legal requirements of a private limited liability company:

  • For incorporation, the minimum number of people required is 1 director and 1 shareholder, who can be of any nationality.
  • A resident company secretary is also required for this company type, but this is not obligatory unless the company’s articles of association require it.
  • The minimum share capital required is £1.
  • This company type is obligated to follow taxation laws for resident companies, which applies to a corporate taxation law of 19% on their worldwide profits.
  • In the case of accounting obligations, limited liability companies must file annual financial statements to the Companies House.
  • They are also obliged to file annual tax returns and VAT returns with HM Revenue and Customs.
  • Regarding management, directors must hold an Annual General Meeting, which must be called in each period of nine months beginning on the date following the accounting reference date.
  • All directors and shareholders must also be publicly registered with the Companies House.

The legal requirements for a public limited company:

  • For incorporation of a public limited company, the minimum number of founders required are 2 shareholders and 2 directors (who can be of any nationality).
  • Public companies must also appoint a qualified company secretary.
  • The minimum share capital required is £50,000, of which at least 25% must be paid upon registration.
  • All companies of this type must have a business/trading license before proceeding to conduct business in the country, as well as register with the Companies House.
  • Regarding the entity’s accounting requirements, public limited companies are required to appoint an auditor, who must oversee the filing of annual financial statements and annual statutory audits. These documents must be submitted to both the tax authorities and The Companies House.
  • They are also obliged to file annual tax returns and VAT returns with HM Revenue and Customs.
  • Public limited entities are also required to hold annual shareholders’ meetings, as well as an annual general meeting for its directors, which must be called within six months of the entity’s accounting reference date.

The legal requirements for a branch:

  • In the UK, a branch must have a registered office, a resident manager, 1 director, 1 shareholder, and no minimum share capital.
  • A branch office in the UK must be incorporated under the parent company’s documentation, such as certified copies of the company’s constitutional documents, as well as copies of the company’s latest set of accounts.
  • Branches must comply with the local accounting laws, which requires the filing of an annual financial statement as well as the parent company’s annual audited financial statement for the Companies House.
  • Annual tax returns and VAT returns are also required for filing to HM Revenue and Customs.

Open a Business Bank Account in the UK

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. It is also important to know what documents may be required for the registration of a business or corporate account in the UK.

  • Documents Concerning Founders - Passport or identification documents of directors and/or ultimate beneficial owners who own more than 10% of the business; identification of the company’s resident representative, a reference from their bank in their home country; and a UK business plan, showing why you need the account.
  • Company Registration Documents - Legalized/notarized corporate documents, including the articles of association; all documentation of the company’s shareholders; a Certificate of Good Standing of the foreign/parent company;  and proof of the registered office.

Depending on the bank chosen for account registration, opening a bank account can take any time between a few and few months, so it is best to go start the process prepared.

Company Formation in the UK

There are 6 major company forms in the UK:

  • The Limited Liability Company
  • The Public Limited Company
  • Company Limited by Guarantee
  • The Limited Liability Partnership
  • Branch Office
  • Representative Office

The company formation process varies according to the company type, but the standard registration procedure is as follows:

  • Obtain a business address in the UK, in the same country that the company is being registered in.
  • Decide on a company name and check on its availability.
  • Appoint a company secretary.
  • Prepare the appropriate registration documents.
  • Open a local business bank account in the UK and deposit the appropriate share capital.
  • Register your company at the Companies House.
  • Register with the UK’s HM Revenue & Customs.
  • Register for a VAT Number.
  • Register with National Insurance to pay social security contributions from employers and employees.

Find an office in the UK

In the UK, the real estate market is a formidable contributor to the economy, contributing over 68 billion in turnover in 2020. It also boasts the biggest commercial real estate market in Europe, which encompasses multiple property types – such as industrial, office, and retail spaces.

The UK also has thriving and rapidly-developing ‘business clusters’ where employers can draw on world-class academic and research talent and highly skilled employees.

Locating to the relevant business cluster can help companies to access a larger pool of labor with the appropriate skills, improve supply chains, maximize 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

Acquiring an office in the UK involves engagement of a local real estate office – but finding the right agency and agent may take time and involves certain barriers, such as language and business customs.

This is where Bradford Jacobs can step in and act as an office broker for companies wishing to expand into the UK. With our experience in international expansion, we can find the right space for you in no time and prevent the stresses and complications that can accompany a property search.

Finding a UK Manufacturer

The UK possesses a strong manufacturing industry, with a focus on the engineering sector, which specializes in transport, electronics, audio, and optical equipment. Other popular sectors include food, drink, tobacco, paper, printing, publishing, and textiles.

With high employment rates, a global ranking for innovation (5th in the Global Innovation Index 2019), and a variety of suppliers to choose from, the manufacturing sector in the UK is swiftly progressing into a formidable influence on the economy. Any business seeking to partner with a local manufacturer need only select the most beneficial choice for their interests.

The country has a variety of large-scale and medium-scale manufacturing companies and research and development centers to choose from, such as Diaego, Ford, Nokia, Pfizer, Unilever, Cadbury, Imperial Tobacco, and HarperCollins. Finding the right fit, then, should not be too difficult. As a business owner, it is important to ask potential manufacturers about their capabilities, target dates and delivery times.

Working with the right manufacturer will have a significant effect on the success of your expansion into the British market, and beyond. It is a long-term commitment and relationship, which must be treated with significance and care. Ask your local business associates or contacts about which companies to consider as you begin your search – the business community in the UK values trust and relationships, so your contacts can help point you in the right direction.

Using websites like the World of Manufacturers is another good way to go about your search.

Finding a UK Distributor

Successful integration into the UK’s market is not complete without a local distributor. The distributor you choose will have a great impact on your business and its objectives.

The UK has a variety of options for product distribution, due to its excellent infrastructure – it includes an extensive railway network, a number of international airports, and the second largest ports industry in all of Europe.

Most exporters sell their products to the UK via distributors, who purchase their goods from manufacturers with the intent of reselling them to third parties. Sales agents are less commonly used in the UK, but they are recommended for products or services that require specific technical expertise.

Britain also possesses a mix of well-developed sales and distribution channels, which range from wholly owned subsidiaries of foreign manufacturers to independent trading companies. The most popular forms of distribution are independent resellers, sales agents, and stocking distributors, who all have contractual relationships with their suppliers.

When it comes to product distribution of sales, there are a number of options to choose from – such as department stores, supermarkets, hypermarkets, convenience stores, and drug stores. The growth of e-commerce also has a significant effect on the reach of consumers. However, traditional commerce is still going strong.

To find the right distributor, you must work with the local business customs and understand the local culture. Business culture in the UK values trust and close relationships between business associates, and an understanding of English can also go a long way. Treat distribution partnerships as long-term relationships.

It is best to start with seeing what options are out there for your product’s distribution and using websites such as GlobalTrade.net are a great place to start. You can also use word-of-mouth from local business contacts.

Enter New Markets with Bradford Jacobs

Bradford Jacobs opens the door for companies like yours seeking to explore new markets in your new territory. Britain offers expansion into a variety of markets around the world, as well as business growth and innovation.

Part of this exploration includes recruiting the right staff to assist with your expansion plans. Our Professional Employer Organization (PEO) specialist teams have in-depth global knowledge of how to expand into and recruit in new territories – and our Employer of Record (EOR) services will guarantee your company complies with local registration and recruitment law, taxation, and payroll. 

Work with us to expand your company and ensure the best people are on your team.