| VAT for businesses not established in the UK | registration from the first taxable supply, no threshold |
| Branch (permanent establishment) | corporation tax only on the UK profits |
| Setting up a limited company | £100 fee online, usually registered within 24 hours |
| Corporation tax | 19% up to £50,000 profit, 25% from £250,000, marginal relief in between |
| Staff | register as an employer before the first payday |
The four stages of market entry
Entering the UK is rarely a single decision. Usually it is a staircase: first you supply from home, then comes an agent or a warehouse, then your own office, eventually your own company. At every step what the UK asks of you changes.
The good news: the rules are clear and well documented. The bad news: many businesses only notice afterwards that they skipped a step, for example because an employee working from home in Leeds suddenly signs contracts. So look at all four stages before you start.
Stage 1: export without a presence
If you sell to UK customers from home, you need no UK company. Profits from that business are taxed in your home country as long as you have no permanent establishment in the UK.
VAT can still pull you into the UK. The £90,000 registration threshold does not apply to businesses not established in the UK: if you make taxable supplies in the UK, such as selling goods from a UK warehouse or sending consignments up to £135 to consumers, you must register from the first pound. Which cases those are is shown in VAT on goods sold into the UK. For goods you also need a GB EORI number.
Stage 2: agent, warehouse, first people on the ground
The critical stage. Under the UK's tax treaties a permanent establishment typically arises through a fixed place of business through which your business is wholly or partly carried on, or through a dependent agent who habitually concludes contracts in your name. A mere delivery warehouse or activities of a purely preparatory or auxiliary character do not, on their own, create one. Your own country's treaty with the UK has the exact wording; see the UK's tax treaties.
Payroll follows its own logic: staff in the UK alone do not make you an employer with a UK presence, but a branch or an office does. What follows is described in posting staff to the UK. And the tax question is not the visa question: if you send someone to the UK, check both separately.
Branch or limited company: the direct comparison
From stage 3 you have a choice. The main differences for a business based elsewhere in Europe.
| Branch (permanent establishment) | Own limited company | |
|---|---|---|
| Legal entity | your business at home | its own UK company |
| UK corporation tax | on the branch's profits | on the limited company's whole profit |
| Liability | your business is liable directly | limited to the company's capital |
| Profits at home | exempted or credited under your country's treaty and law | taxed at home only on distribution |
| Administration | registration at Companies House, profit allocation between head office and branch | annual accounts, confirmation statement, directors' identity verification |
| Effect on customers | neutral to reserved | a UK contracting party, often expected |
GOV.UK Corporation Tax; Companies Act 2006 s. 3
Stages 3 and 4: branch or your own company
A branch is legally part of your business. The UK then taxes only the profits attributable to the branch; a non-UK resident company pays corporation tax only on its UK activities. Your home country then exempts those profits or credits the UK tax, depending on its treaty and law. The catch lies in the allocation: which profits belong in London, which at head office? That requires arm's length pricing as between independent businesses. The details are in branch or subsidiary.
Your own limited company is the cleaner cut. It has its own assets, its own liability and its own tax bill. Formation costs £100 online and is usually registered within 24 hours; a subsidiary does not, by itself, create a permanent establishment of its parent. It pays 19 percent on profits up to £50,000 and the 25 percent main rate from £250,000. Important for mid-sized businesses: the company needs at least one director who is a natural person, and a registered office in the UK. Directors may live abroad, but then it must be clear where the company is really managed.
A UK company whose decisions are all taken at head office abroad may be treated as resident where it is managed, and under the treaties the place of management weighs heavily. For a subsidiary with real business in the UK that means local responsibility, documented decisions and board meetings with substance. The principles are in the UK's tax treaties.
What to settle before you start
The questions we ask first in every market entry.
- What do you sell, to whom and from where: goods from the EU, goods from a UK warehouse, services, digital services?
- Who acts for you in the UK, and may that person conclude contracts?
- Do you need staff in the UK, and will they come from home or from the UK labour market?
- How will profits flow back later, and should a holding sit in between?
- Which bank, which bookkeeping, which annual accounts fit the chosen form?
- Does anyone need a visa, and does the structure fit the route they want to use?
Frequently asked questions
Can I start as a branch and set up a limited company later?
Yes, that is a common route. But plan the switch, because transferring assets and contracts from the branch to the company has its own tax consequences on both sides.
Do I need a British director for the limited company?
Not legally. At least one director must be a natural person, living anywhere. In practice someone on the ground helps anchor management where the business is.
When must I register as an employer?
Before the first payday. Whether the company at home or a UK limited company runs payroll depends on where the presence is.
Is a UK limited company cheaper for tax than my company at home?
Not automatically. What matters is where the profit arises and where the company is managed. Set up a UK company only for the rate and run it from home, and you end up paying at home.
Sources: GOV.UK: Register for VAT; HMRC VAT Notice 700/1: Who should register for VAT; GOV.UK: VAT and overseas goods sold directly to customers in the UK; GOV.UK: Set up a limited company; GOV.UK: Corporation Tax rates and reliefs; GOV.UK: Corporation Tax; GOV.UK: Register as an employer; HMRC PAYE Manual PAYE81610; GOV.UK: Tell HMRC and get an EORI number; legislation.gov.uk: Companies Act 2006, ss. 3, 155; HMRC International Manual INTM120200
