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UK business relocation FAQ

Here are some frequently asked questions we have received from entrepreneurs who want to start a business in the UK.

  1. Should I open a branch or set up a company?
  2. How quickly can I set up my company's UK bank account?
  3. What is UK Value Added Tax?
  4. How does UK employment differ from US employment?
  5. What about tax on employee benefits?
  6. What is National Insurance/NIC?
  7. Are we liable for VAT on goods/services we export?
  8. What is free circulation?
  9. What is a company secretary in the UK?
  10. What is an EORI number and how do I obtain one?
  11. Do I need to be a UK resident in order to setup a UK bank account?
  12. Do I need to be a UK resident to be a director of a UK Company?

 

Should I open a branch or set up a company?

There are tax advantages to operating as a foreign branch, in that branch losses can usually be offset against the parent company profits. However, this requires filing of the parent company's accounts in the UK. Setting up a company could be a better route commercially.

For a more detailed comparison read our article on this subject.

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How quickly can I set up my company's UK bank account?

A new UK company bank account can be troublesome to set up. There are certain formalities to be met from a "Know Your Client" and anti-money laundering perspective. As a chartered accountancy firm, we are also obliged to adhere to these procedures and regulations. Usually, the proofs obtained when we gather information to act on your behalf will also be acceptable to a banking provider.

We anticipate that the process of opening an account should take no more than two months from start to finish. However, we usually open a designated Client Trust Account for you to use in the meantime.

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What is UK Value Added Tax (VAT)?

UK VAT is similar to a US sales tax in that it is levied on sales (outputs). UK VAT incurred on purchases and expenses (inputs) is set off against output tax and only the net amount is paid to the government (i.e. tax on the value added). A trading entity must register for VAT if its turnover is expected to be more than £82,000 p.a.

In a start-up situation, or when trading as a branch operation and carrying out marketing activities only, there may be expenses but no sales. In this case a VAT-registered company will be able to reclaim the input tax from the government. The standard rate of VAT is currently 20% so the additional cost, if not reclaimed, can be significant.

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How does UK employment differ from US employment?

Vacation

The UK standard is four to five weeks compared to two in the US.

Salary payments

Are made monthly not bi-monthly.

Sick pay

The UK Statutory Sick Pay scheme pays a minimal amount only and can largely be ignored. Employers in the UK are expected to pay salaried staff at least one month at full pay in the first year of service. This may escalate to three to six months on half pay after one year. This contrasts with the US practice of five to ten days a year. Disability insurance is normally arranged to be effective after six months’ sickness.

Pension contributions

The company's contribution is 6 - 10%, compared to a much lower (or nil) percentage in the US.

Company cars

Despite ever-tightening tax penalties, company cars are still common in the UK. Taxable car allowances are also common.

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What about tax on employee benefits?

Individuals are taxed on employee benefits such as company cars and private medical insurance. There are traps to be avoided in connection with reimbursement of expenses to employees. All of these issues are best dealt with by an out-sourced finance function from day one rather than a payroll bureau solution.

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What is National Insurance/NIC?

Contributors to National Insurance qualify for certain benefits, including State Pension. Anyone who is aged between 16 and state pension age – currently 60 for a woman and 65 for a man - may have a liability to pay National Insurance contributions. You may be required to pay these contributions if you:

  • Work for an employer (an employed earner) and earn more than £155 a week
  • Are self-employed and make a profit of £5,965 or more a year

The class paid is dependent on your employment status, how much you earn and whether there are any gaps in your National Insurance record.

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Are we liable for VAT on goods/services we export?

If the goods are leaving the European Union, it is not necessary to include VAT on international invoices. However, it is necessary to ensure that an “audit trail” is retained, showing that the goods have left the EU for HM Revenue & Customs.

For goods sent to countries within the EU, the VAT position will depend on the client’s location. Whether it’s B2B or B2C, it is sensible to talk through your precise situation with us or HM Revenue & Customs.

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What is free circulation?

Goods must originate from the EU in order to be in “free circulation”. If the goods are imported into the EU, all import formalities have to be complied with. In addition to this, all duties, levies or equivalent charges have to be paid and will not be refunded. Goods in free circulation can move within the EU member states without customs presentation or the payment of customs duties.

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What is a company secretary in the UK?

Private limited companies are not obliged to appoint a company secretary unless the company's articles contain a reference to this position. Existing private limited companies may retain a company secretary if they wish, and newly established companies can opt to appoint one.

If you're running a public limited company you must, by law, have a company secretary.

The company secretary usually acts as the chief administrative officer of the company, leaving the directors free to concentrate on running the business.

The company secretary doesn't have to be a director but they do share some of the directors' legal responsibilities. However, ultimate responsibility for ensuring the company is properly administered remains with the directors.

One of our principals will take this role for the UK companies we act for. With our address as the registered office (legal, not trading) we combine the two roles and ensure that official documents from HMRC and Companies House, are received and dealt with in a timely and professional manner.

What is an EORI number, and how do I obtain one?

EORI is a European Union scheme that helps traders communicate with custom officials when importing and exporting.

If you are required to provide pre-arrival and pre-departure information for goods, or are involved in import, exports or movement of goods, you may require an EORI number.

Traders can register for an EORI number that will be used in any communications with customs authorities and will be valid throughout the EU community. For new traders, or traders who have not used their Traders’ Unique Reference Number in the last two years, applications can be submitted electronically to HMRC using form C220. Alternatively, a manual application can be sent in, using form C220A. 

The ‘Commission Internet Website’ can be used to check if a company already has an existing number. Details of how to do this are given on the HMRC website, along with further information on who is required to register.

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Do I need to be a UK resident in order to setup a UK bank account?

You do not have to be a UK Resident in order to set up a UK bank account. To open a bank account as a non-resident, you will need proof of identity that has been notarised. There are strict requirements involving who can, and how they can, do this.

If there are no UK-based management or directors, you may be required to have a company secretary as part of the application process. In our experience, unless there is a suitable 'business case', opening a bank account can be a difficult and lengthy procedure.

Do I need to be a UK resident to be a director of a UK Company?

It is not a requirement to have a UK-based director of a company.

Contact our business relocation team

Phone us (SA): +27 (0) 21 657 2189

Phone us (UK): +44 (0) 20 7759 7553

South Africa

Regent Square
Doncaster Road
Kenilworth 7708
Cape Town
t: +27 (0) 21 657 2120

United Kingdom

Castlewood House
77/91 New Oxford Street
London
WC1A 1DG
t: +44 (0) 20 7759 7514

Australia

Suite 8.06
9 Yarra Street
South Yarra
Melbourne VIC 3141
t: +613 (0) 86 514 500

Hong Kong

Level 1102
The Lee Gardens
33 Hysan Avenue
Causeway Bay, Hong Kong
t: +852 3959 8681

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