The latest data from the Office for National Statistics (ONS) shows that the UK surpassed £2 trillion in foreign investment for the first time in 2021, resulting in a record-breaking 85,000 jobs created.
In this article, we explain why the UK is attracting such high volumes of overseas investment projects.
Registering is fast, easy and inexpensive
Like every industrial country, the UK has formal rules of procedure and a long-established body of corporate law established over centuries. Unlike many countries, however, the UK is relatively free of red tape and bureaucracy.
The timescale required to register a new business and begin trading is shorter than anywhere else in Europe. This is one of the reasons why overseas corporations find the UK so attractive. Foreign investment in the UK is the greatest in Europe and the lead is growing.
If an Australian company intends to operate from a fixed base in the UK, employing people here and entering contracts in the UK, it will have a ‘permanent establishment’ in this country and therefore will be liable to UK tax. However, its tax circumstances will depend upon the way the business is constituted.
The company can either establish a branch operation in the UK or set up a subsidiary company here. From a UK tax perspective, the main difference between the two would be the way that the repatriation of profits would be treated, and the treatment of any losses for Australian tax purposes. However, there is a significant difference in relation to the public disclosure of the business’s financial results.
The rules affecting individuals can be rather complex. However, there are a number of valuable concessions for foreign nationals, and it is very important to take professional advice – ideally before arriving in the UK.
The two basic ways of trading in the UK
An overseas business can operate either directly (as a branch, in other words) or by setting up a UK subsidiary. The difference may seem technical, but it can have several important consequences.
If an Australian company decides to trade here as a branch of its Australian operation, it will still have a set place of business in the UK. This means that it will normally be required to register under the Companies Act 2006 – the major piece of UK legislation governing the operation of companies. The registration must take place within 30 days of establishing the operation.
Certain basic documentation will have to be produced at this point – principally the Bylaws of the corporation concerned, duly notarised within the jurisdiction of the State of incorporation.
In addition, the business will have to report changes in its constitution, officers, and accounts.
The timing for the filing of accounts in the UK will depend upon the requirements of the law relating to the auditing and publication of accounts in Australia.
Additionally, it should be noted that the Australian company’s financial statements will need to be filed and available for public inspection. This is a significant difference compared to a subsidiary and often influences the decision as to whether to incorporate a subsidiary rather than trading through a branch.
Creating a subsidiary
If a decision is taken to set up a UK subsidiary, the process, as noted earlier, is simple and cheap compared to other countries within Europe. The UK Government has repeatedly declared its intention to make this country entrepreneur-friendly, and recent changes to corporate law are notable steps in that direction.
The simplest (and most popular) entity for business is the private limited company. It can be set up with a minimum share capital of £1 or $1 and offers the investor limited liability. There is a current requirement for a minimum of one director. There is no shareholding, residential or nationality restrictions.
The incorporation of a company is also simple. Our company secretarial department can deal with all the formalities quickly and at modest cost.
The annual obligations following incorporation are relatively straightforward. Companies must file a Confirmation Statement each year. This now includes details of ’Persons of Significant Control,’ and the company must produce accounts, which may need to be audited.
As well as these basic requirements, certain changes will have to be reported. These include, for example, changes to the capital structure as well as any charges on the company.
In addition to the private company, there are other vehicles through which businesses can be operated. Each has its pros and cons, and it will be necessary to take expert advice before making a decision.
Of course, UK company law, like the law of most countries, is not static but continually evolves in the light of changing circumstances. It is therefore very important to take nothing for granted, but to seek professional advice.