Double benefit: how to open a branch abroad and obtain British citizenship?

Successful entrepreneurs consider opening a branch in the UK as an effective way to enter the international market. The laws of the United Kingdom do not prohibit foreign corporations from operating directly. At the same time, in order to carry out its activities in the country, a foreign business can register a representative office, branch or subsidiary. Vasily Kluev, Client Relations Director at Imperial & Legal, will explain the differences and advantages of opening British a branch, including the possibility of obtaining British citizenship.

Why is it beneficial for a foreign company to have a physical presence in England?

Serious British, European or American companies, especially in the IT or construction sectors, often avoid entering into contractual relationships with business structures registered in the post-Soviet space and conducting business from their own countries. However, the situation takes a completely different turn if such a corporation has a representative office, branch or subsidiary in the UK. In this case, as if by magic, previously unavailable opportunities to work with the whole world without any problems open up before it.

Additional advantages of registering a branch or subsidiary in England (for commercial operations) include:

• significant simplification of currency transactions and no currency controls;
• lower interest rates on commercial loans;
• the ability to work with any international payment systems;
• reliable legal protection for your business;
• unlimited access to a large solvent sales market;
• the opportunity to work in one of the world’s largest financial centres;
• the prestige of the UK as a jurisdiction for business registration. 

Representative office, branch or subsidiary in the UK – what is the difference?

If a foreign business needs to be physically present in the United Kingdom in order to operate, an entrepreneur can register a representative office, branch or subsidiary.

Representative Office

A representative office is opened so that a foreign enterprise can carry out the following activities in the UK:

1. Market research and preparation of a feasibility study for future commercial activities.
2. Establish business relationships.
3. Promoting the goods and services of the parent company (without sales).
4. Liaison between the head office and branches/subsidiaries in the United Kingdom.

An observant reader will have noticed that commercial activities are not included in the tasks of a British representative office of a foreign business. A representative office cannot trade in England, conclude supply contracts or issue invoices for payment to British contractors. A representative office cannot generate any income in the UK and is not a separate legal entity from the parent company.

Advantages of a representative office:

• This form of foreign company presence in England is ideal for testing a new market and gently launching a business.
• Opening a representative office is easier and cheaper than registering a branch or subsidiary.
• A representative office does not need to be registered with Companies House.
• Since a representative office is not engaged in trade, it is not subject to corporation tax.
• If necessary, a representative office in the United Kingdom can be converted into a full-fledged company.

Branch

A branch is essentially the British extension of a parent company located abroad. Therefore, a branch is not a separate legal entity and is subject to the laws of the jurisdiction where the head office is registered.

The portion of the parent company’s profits attributable to its British branch is subject to corporation tax in the United Kingdom.

Advantages of a branch:

• A branch is easier to register and close than a subsidiary.
• The head office can support its UK branch and offset its losses from profits earned outside the United Kingdom.
• If necessary, a branch can be converted into a subsidiary.

Disadvantages of a branch:

• The advantage of a branch is also its disadvantage. Since a branch is not a separate legal entity, the parent company is fully liable for the debts and obligations arising from its activities.
• Since commercial activities are carried out through the branch, the foreign business has financial and tax reporting obligations in the UK. Consolidated financial statements for the entire parent company must be submitted to the UK Companies House in English.

Subsidiary

A more popular way of doing foreign business in England than a branch is a subsidiary. A subsidiary is subordinate to the head office abroad but is a separate legal entity. As a rule, it is an LTD – a private limited company.

Advantages of a subsidiary:

• A subsidiary is a more stable structure and inspires greater confidence among stakeholders, such as trading partners and employees.
• It is easier for a subsidiary to open a bank account in the UK.
• A subsidiary is independently liable for its debts and financial obligations. The head office is not financially liable for the results of its subsidiary’s activities.
• A subsidiary company submits only its own financial statements to Companies House, without the parent company’s statements.
• If the subsidiary’s turnover is less than £10.5 million, its balance sheet value is less than £5.1 million, and the number of employees in the company is less than 51, it is permitted to submit abridged reports.
• A subsidiary pays corporation tax only in the UK and cannot offset losses against future profits anywhere else except the UK.

In short, if independence and flexibility are your top priorities for your new business structures, you should register a subsidiary in the UK!

Comparative characteristics of different forms of foreign business presence in the UK

Opening a branch in the UK

If a company operating abroad intends to establish a physical presence in the UK in the form of a branch, it will need to register with Companies House.

A foreign enterprise cannot register its branch in the United Kingdom if it is: a partnership, a limited partnership, a public body or any other unincorporated organisation.

The procedure for registering a branch in England is somewhat similar to the usual registration of a corporate structure:

1. You need to decide what name the British branch will operate under – the same as the parent company or its own. If you choose an original name, you need to check its suitability (absence of “sensitive” and legally protected words, offensive expressions, etc.).
2. The registration of a British branch of a foreign company can be done online after the applicant or their corporate lawyer fills out the standard OS IN01 application form and pays the registration fee of £71. If you are sending your branch registration application by post, you will need to enclose a bank receipt for payment of the registration fee with your letter.
3.  Copies of the parent company’s documents must be sent together with the application for registration of a branch: the articles of association and memorandum of association, the latest financial statements and financial report for the last year. All documents not in English must be accompanied by a certified translation.

A subsidiary in the UK is registered as a normal corporate structure, for example, as a limited liability company.

The staff at Imperial & Legal will be your reliable assistants at every stage of registering a British branch or subsidiary.

Our company does not limit itself to business registration issues. Imperial & Legal specialists provide a full cycle of services for your branch or subsidiary, from registration to the preparation and submission of the first annual report. Our lawyers offer comprehensive business service packages: “Basic”, “Basic Plus” and “Imperial”, as well as individual services: accounting support, opening bank accounts, visa support, tax advice, organising the relocation of employees, searching for commercial and residential real estate, and urgent legal assistance.

How can opening a branch in England help you obtain British citizenship?

A branch of your company in the United Kingdom is not only an opportunity to take your business to an international level. By opening a British branch, an entrepreneur has the opportunity to move to the UK or send their employees and directors there. Of course, not all immigration routes lead to obtaining a British passport. Successful foreign companies establish themselves in the competitive British market for many years and give their employees the opportunity to naturalise in England.

How to transfer specialists from the parent company to the branch?

The Expansion Worker visa is available for transferring an employee or manager from the head office to England to open a branch and continue working. This visa category is part of the Global Business Mobility immigration route. It allows up to 5 employees to be transferred to the UK.

Like many other work visas in the United Kingdom, the Expansion Worker visa can only be issued to the holder of a sponsorship certificate. Therefore, before opening a branch in the UK, your foreign company must contact the immigration authorities of that country and obtain a sponsorship licence. To obtain a sponsorship licence, the parent company must:

• not have previously operated in the UK, nor have any active branches or representative offices there;
• have at least 3 years of experience working abroad;
• commit to opening a UK branch;
• submit a plan for the development of the branch in the United Kingdom, as well as proof of resources to support its operations for the next two years.

Unfortunately, the Global Business Mobility immigration route does not lead to permanent residency. The maximum validity period of the first Expansion Worker visa is 1 year, after which it can be extended once for the same period. After 2 years of residence in the British Isles, foreign specialists must switch to another visa category or return to their home country.

For ambitious foreign entrepreneurs, less than two years after registration, the branch format becomes too small. They transform the branch into a subsidiary, achieve new operating targets and obtain a Skilled Worker Sponsor Licence.

With the new sponsorship licence, the company transfers its foreign employees to a Skilled Worker visa. After five years of residence in the United Kingdom, the holder of a Skilled Worker visa can apply for a permanent residence card, and after another year, they can apply for British citizenship.

What visa does a foreign employee need to transfer to an existing branch?

To transfer an employee to an existing branch or subsidiary in England, a Skilled Worker visa is required. As with the Expansion Worker visa, the employer must have the appropriate sponsorship licence.

A Skilled Worker visa to the UK allows you to move to the country with your family and enjoy all the benefits of British education and healthcare. This is an excellent option for employees and managers of foreign companies who want to find a comfortable place to live and gain unique work experience in the United Kingdom.

You can find out more about how to obtain a Skilled Worker visa in the article on our website or by consulting an Imperial & Legal specialist.

What difficulties do entrepreneurs in England face when opening a branch or subsidiary?

Any entrepreneur, regardless of their tax or national affiliation, has the right to register a subsidiary in the UK. However, we would like to emphasise once again that registering a branch in the UK is not available to non-corporate organisations such as partnerships, sole traders or government agencies from other jurisdictions.

To conduct financial transactions, which is, in fact, the priority, it is important to open a bank account in the UK, which allows you to conduct currency transactions on favourable terms. And this can only be done by a person who has British citizenship or permanent resident status.

There is another way to resolve the issue of a bank account: open one at a financial institution in one of the EU countries, where the requirements are much more lenient than in England, and even a person who does not have citizenship of the country can do this.

To successfully overcome this and many other obstacles, as well as to speed up the process of opening a branch in the British Isles, foreign businessmen turn to Imperial & Legal. With us, you can purchase a comprehensive package of services for Imperial businesses. With its help, you can solve a wide range of tasks: business registration in the United Kingdom, corporate secretary services, visa support for employee transfers, opening an account with an English bank, VAT registration, a business address, and business consultations with Imperial & Legal specialists. The cost of this service package is £4,500 for the first year and £3,000 for renewal from the second year onwards.

Why should you contact Imperial & Legal to open a branch in the UK?

Imperial & Legal’s calling card, which sets our company apart from our numerous competitors, is our comprehensive business support. This involves the maximum range of capabilities of our employees and a fundamental refusal to specialise narrowly in just one area.

By contacting our lawyers, you will receive:

1. Assistance in registering a branch or subsidiary in the United Kingdom.
2. Qualified legal and accounting support. Imperial & Legal specialists do not simply prepare financial and tax reports for entrepreneurs — we focus on training and developing the relevant skills of our clients’ employees.
3. Tax advice.
4. Assistance with obtaining a sponsorship licence and processing visas for transferring employees to England.
5. Organisation of a comfortable relocation of employees, directors and founders to the UK.

Imperial & Legal has extensive experience in providing turnkey legal support for foreign businesses entering the UK market. Our staff take care of all tasks related to your branch or subsidiary’s interaction with the British authorities.

We are pleased to offer qualified legal, administrative and accounting assistance to foreign businesses both as part of our package deals (Basic, Basic Plus and Imperial packages) and on an individual basis.

If you are planning to enter the international market through the UK but have not yet decided how exactly you will sell your goods or services, please contact our consultants!