Where an overseas company (meaning any company other than one incorporated in Scotland, England & Wales or Northern Ireland) has a UK "establishment" it is required to register details of both the overseas company and its UK establishment at Companies House.
The rules in relation to UK establishments are mainly set out in the Companies Act 2006 ("2006 Act") and The Overseas Companies Regulations 2009 ("Regulations").
What is a UK establishment?
The Regulations do not clearly define a "UK establishment" but refer to the overseas company having either opened a "branch" or other "place of business" that is located within the UK. Companies House guidance and case law have clarified that this means having a physical presence in the UK, for example - an office or a place that the establishment regularly conducts its business.
Whilst a UK establishment can be given a name which differs from the overseas company it is related to, and also trade under its own name in the UK, it is important to be aware that a UK establishment is not a separate legal entity from the overseas company – it will be the overseas company that enters into contracts in the course of business on behalf of the UK establishment and will also assume the liabilities under those contracts.
What must I file?
When an overseas company opens a UK establishment it must, within one month of opening, deliver a return to Companies House - a Form OS IN01 - registering particulars of the overseas company and the UK establishment. Generally, as part of the return it must include:
- a filing fee of £20;
- make a statement as to how it will comply with the accounting requirements in the Regulations; and
- file certain documents with the return, including the overseas company's constitutional documents and latest set of accounts.
An overseas company may have one or more UK establishments. Consequently, if an overseas company has already filed particulars at Companies House for a UK establishment, the return for any additional UK establishments need only state that the particulars have been filed in respect of its first UK establishment and give the registered number of that establishment.
Overseas companies should be aware that:
- documents filed at Companies House - such as accounts - are publicly accessible through the Companies House website; and
- failure to register and make filings can leave the overseas company and its officers open to fines.
Are there any disclosure requirements?
The Regulations also impose certain trading disclosure requirements that apply to all overseas companies who carry on business in the UK via an establishment, including displaying the overseas company's name and country of incorporation at any service address and certain locations at which it carries on business.
What about reporting of accounts?
The Regulations set out two provisions in relation to the delivery of accounts for overseas companies:
- Companies required to disclose their accounts under parent law: these companies must deliver copies of all accounting documents that they are required to disclose by their parent law to Companies House.
- Companies that are not required to disclose accounts under their parent law: these companies have three options as to which accounting framework they wish to follow when delivering accounting documents:
- overseas accounts in accordance with the 2006 Act;
- parent law accounts; or
- accounts prepared in line with International Accounting Standards.
What about tax and employees?
A UK establishment is subject to corporation tax on the business profits and on any gains made on the disposal of assets located in the UK and used for the purposes of the UK trade. The company may have to register and account for VAT and for PAYE income tax and National Insurance Contributions in relation to any UK employees. For more detail on employing staff in the UK and the tax, immigration, pensions and employment issues to consider please see our recent blog post here.
Are there alternatives to a UK establishment?
Depending on the type of business and extent of trading in the UK, as an alternative to registering a UK establishment, an overseas company may wish to consider:
- Incorporating a subsidiary: this may increase the regulatory burden, and if the overseas company has no other subsidiaries it may trigger the requirement to produce group accounts. The subsidiary would also have to go through the process of company incorporation.
- Entering into a partnership agreement: Like a UK establishment, an English partnership is not a separate legal entity, and any contracts must be entered into or assets must be owned by the partners on behalf of the partnership. In Scotland, however, a partnership is a separate legal entity distinct from its partners and may enter into contracts and own assets in its own name.
- Appointing an agent: this will avoid the regulatory burden of registering a UK establishment but may not meet the requirements if the overseas company wishes to establish a greater presence in the UK.
- Appointing a franchisee or distributor
- Setting up a joint venture with a local partner
At Brodies we have extensive experience working with overseas clients looking to establish a UK business. If you would like more information, please contact a member of our Corporate team (or your usual Brodies contact).
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