Services

Setting up in the UK: the case of foreign companies trading in the UK

The UK is a jurisdiction that is friendly towards foreign entities operating on its territory. However, if you are an overseas company trading in the UK, be aware of your obligations when your activity is no longer a simple presence and becomes a permanent establishment. Joffe & Associés guides us through the different requirements to establish companies in the UK.

1. Simple presence in the UK

A company appointing a local independent agent acting in the ordinary course of his business, or directors having a residence in the UK will not be considered as having a permanent establishment and will be treated as having a simple presence in the territory, provided that they do not habitually conclude contracts in the name of the company from the UK.

2. Permanent establishment

A company will be considered as having a permanent establishment in the UK if (i) an agent acting on behalf of the company habitually exercises authority in the UK to do business on behalf of the company or (ii) the company has a physical presence on the territory (a branch or a place of business).

An established place of business is a specified or identified place at which the company regularly carries on business with some visible sign or physical indication that the company has a connection with the premises. There is no need for a lease nor to conduct its main activities from the premises.

A typical example is an office, a factory, a workshop.

3. Remote working in the UK

Overseas companies having staff working remotely from the UK may be considered as having a permanent establishment in the UK. This will depend on that employee’s missions within the company. Employees whose activities have a preparatory or auxiliary character will most likely not be regarded as creating a permanent establishment. On the contrary, employees carrying significant activities such as making strategic decisions or concluding contracts with customers will probably create a permanent establishment in the UK.

4. Key obligations of a permanent establishment

Having a permanent establishment triggers tax and registration obligations:

(i) to pay certain taxes: corporation tax on profits attributable to the permanent establishment, corporation tax on gains made on the disposal of assets located in the UK and used for the UK trade and register for VAT register for VAT; and

(ii) to be registered with Companies House, within one month of its opening. Failure to do so could result in fines.

5. Foreign entities owning properties in the UK

It is also important to note that since 1 August 2022, all foreign entities that own property in the UK (irrespective of whether they have a permanent establishment or not) are required to register with the Register of Overseas Entities at Companies Houses and identify its beneficial owners. The deadline to do so is 31 January 2023.

The information provided in this article is for information purposes only. It does not constitute any form of legal advice and should not act as a substitute or be relied on as such. Please seek tailored legal advice adapted to your specific case.

Joffe and Partners LLP is the London office of Joffe & Associés, a French law firm advising and representing clients in all areas of business law. The London office practises English law with a particular focus on commercial transactional matters, litigation and arbitration and works closely with its main office in France on cross boarder matters. Its team is bilingual and dually qualified (England and Wales and France).