Setting Up a Subsidiary in the UK – 2024 Guide

Expanding operations to new markets is always the key element to growing as a business, regardless of the niche your company belongs to. According to a survey, almost 97% of businesses are planning to move into international markets by the end of 2023. 

For many business owners, establishing a subsidiary in the UK is an attractive option mainly because it provides the parent company with an opportunity to enter a thriving market. The UK was ranked 8th According to World Bank Doing Business 2020 Report for the ease of doing business there.

Additionally, establishing a subsidiary in the UK means you gain access to a world-class workforce and a favorable business environment, which can be a game-changer for companies that are looking to compete on an international scale.

However, one of the challenges that many businesses fail is setting up a subsidiary in the UK, mainly because the process is complex and time-consuming. This is why it is crucial to have an understanding of the laws and processes for setting up a subsidiary in the UK.

If you are thinking of launching a new product or want to explore other markets, then starting a subsidiary in the UK is going to be a smart choice.

UK Subsidiary Setup

A subsidiary refers to a separate entity that remains under the umbrella of the “parent” or “holding” company. In the UK, one of the most common types of subsidiaries formed is the private limited company (Ltd.), mainly because of its limited liability and potential tax advantages.

Setting up a private limited company. also referred to as an Ltd. company, involves following the standard UK company registration procedures. If you are thinking of setting up a UK subsidiary, then the following steps will show you how to do it the right way.

Choose a Name for Your Subsidiary

You’re going to start with the name of the subsidiary you wish to create. It is important to note that the name that you choose for your subsidiary must be unique and cannot be the same as any other company that is registered in the UK. To make your job easier, you can research a potential name and then look up available names on the Companies House website, which is a great resource for business owners that are looking to establish a subsidiary in the UK.

Choose a Registered Office Address

As the name implies, this is going to be the address where your subsidiary will be legally domiciled in the UK. You can use your business address or rent a virtual office as well. Be sure to get familiar with all of the pros and cons when choosing this option.

Appoint a Director and Secretary

The director you appoint is going to be responsible for the management of the entire company, while the secretary in your name is going to be responsible for maintaining the company’s records. You can appoint yourself or someone else to these roles as well.

Register Your Company with Companies House

This is the official government body that registers businesses in the UK. 

Obtain a Company Registration Number

The company registration number is also called the Companies House Registration number, ‘CRN’, or company number. This is a unique number that identifies your company. You will be given a company registration number once you have registered with the Companies House, and you will need it for all future correspondence with Companies House. But, to obtain the registration number, you will have to correctly fill and submit several documents stating the UK address and name of your chosen subsidiary.

Open a Bank Account

You will need a local bank account in the name of your subsidiary. This allows you to make and receive payments on behalf of the company. Under the UK anti-money laundering (AML) rules, all key shareholders in the company, along with those named on the bank account mandate, will need to prove their home address and identity by submitting documents such as;

• Passport
• UK photo driving license
• National ID card
• Recent bank statement
• Recent utility bill
• Council tax statement

It should be noted that if you will be applying for a bank account from abroad, then the bank is going to require notarized translations of your documentation which will be used as proof of your ID and address. Also, if any of these documents are not in the English language, they will have to be translated. Opening up a bank account in the UK for your subsidiary can take between two to six months from start to finish.

Obtain Tax Identification Numbers

Your subsidiary will need to obtain tax identification numbers from HM Revenue & Customs (HMRC). These numbers will be used to identify your company for tax purposes.

Set Up Payroll and Benefits

If you plan to employ staff, you will need to set up a payroll system and provide benefits such as health insurance and pensions.

Obtain Insurance

Your subsidiary will need to obtain insurance to protect itself against financial losses. This could include insurance for property damage, employee theft, and professional liability.

Comply with Regulations 

Your subsidiary will be subject to several regulations, including those relating to employment, health and safety, and data protection. You should ensure that you are aware of these regulations and that you comply with them.

Hiring Merchant Services

A merchant account is a sort of commercial bank account that enables your company to safely take credit, debit, and other electronic payments. It functions as a go-between for your company and the banks that provide the credit and debit cards that your consumers use to make transactions.

It should be noted that this is not going to be your traditional bank account where you can send and take out money from, but instead a business account/relationship with an acquiring bank that “loans” the merchant the proceeds from the transactions (minus fees). Because purchasing banks are paid significantly later than issuing banks, this reduces delays and allows you to get paid sooner.

Most consumers use credit or debit cards, which eliminates the need to carry cash. The typical cash transaction costs $22, but the typical non-cash transaction costs $112. The ability to accept and process a variety of popular credit and debit cards can help your business grow sales since clients are more inclined to use their credit cards for large or impulse purchases—or any transaction, for that matter.

Authorizations for credit and debit cards happen instantly, and financing occurs in only a few business days. If you only invoice your clients and wait to get paid by cheque, this isn’t always the case. Taking into account the roundtrip travel time, the procedure might take more than 30 days.

As more and more people turn to the Internet for shopping, bill payment, and account management, your business must become online. You can accept credit, debit, and eCheck payments online, send out invoices, and set up regular billing with the help of a trustworthy merchant processing provider.

At the end of the day, consumers of today value flexibility. Giving your clients a variety of payment alternatives, such as cheques, credit, and debit cards, provides them with total control over their financial decisions.

How Long Does it Take?

Contrary to popular belief, setting up a subsidiary in the UK does not take long. You can establish a subsidiary in the UK within 15 minutes (provided you have all of the necessary documentation) and receive proof of the subsidiary’s creation within five hours.

What About Audits?

An audit is usually required if the company exceeds any two of the thresholds given below;

• If the company has an average number of 50 employees during the period
• Has a net total assets of £5.1million / gross total assets of £6.1million
• Has a net turnover of £10.2million / gross turnover £12.2million

Ending Note

Setting up a subsidiary in the UK can be a complex process, which is why it is important to seek professional advice from a company formation expert, accountant, or merchant services solutions provider to ensure that you are doing everything correctly. Setting up a subsidiary can be a great way to grow and expand one’s business. By using the aforementioned tips, you can rest assured that you are going to be setting up your subsidiary in the UK the right way. For more valuable information on UK subsidiary setup and merchant services, you can visit Start Company Formations.