Branch or subsidiary

A common question many international clients ask us is whether to form a UK branch of their overseas company or incorporate a subsidiary in the UK?

It must be remembered that a branch is not a separate legal entity whereas a subsidiary is and therefore the latter can offer a somewhat higher degree of protection in case of litigation arising in the UK. From an accounting perspective a branch office does not need to undergo a statutory annual audit whereas a subsidiary does above a prescribed level of turnover, which is fairly high. The subsidiary must file its full UK accounts (abbreviated accounts facilities are available for small companies) with the Registrar of Companies, whereas a branch office needs to file the audited accounts of its overseas parent annually.

Tax-wise under the India-UK double tax treaty a branch suffers the main rate of UK corporation tax whereas a subsidiary might benefit from the small companies’ rate unless there are a number of companies in the group which bring the threshold down to attract the main rate.

Commercially a subsidiary indicates a more permanent presence in the UK and sometimes this is an advantage when dealing with prospective customers or authorities in the UK. Overall, the answer will depend upon the particular circumstances of the client and their existing corporate and tax structure. RKG Consulting will be pleased to advise on these aspects as the issues can be complex.