Doing Business And Investing In The UK
Doing Business andInvesting in the UKMarch 2009pwcDoing Business and Investing in the UK 2009
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ContentsForeword by Minister for Trade & Investment2Welcome by Chairman, PricewaterhouseCoopers3About PricewaterhouseCoopers4About this book5The United Kingdom – a profile by UK Trade & Investment71Common questions11What type of legal presence do I require?15How do I establish the entity?21What tax issues do I need to consider?29What other areas do I need to consider prior to commencing trading?43How do I deal with my employees?49What regulatory matters do I need to consider?59What other factors impact on my ‘doing business in the UK’?81How do I acquire a business in the UK?101How do I list on a UK stock exchange?115Appendix A – Checklist for purchase of a ‘new’ company140Appendix B – UK grant incentives142Appendix C – UK tax datacard 2008/09146Contacts152‘PricewaterhouseCoopers’ refers to PricewaterhouseCoopers LLP(a limited liability partnership in the United Kingdom) or, as the contextrequires, other member firms of PricewaterhouseCoopers InternationalLimited, each of which is a separate and independent legal entity.1Doing Business and Investing in the UK 20091
Foreword by Minister for Trade & InvestmentI am delighted to provide this foreword to the 2009 editionof the PricewaterhouseCoopers guide, Doing Business andInvesting in the UK.Despite these tough times, we remain confident that the UKis well placed to handle challenging business conditions. TheUK remains one of the most open markets in the world; wecontinue to welcome foreign investment and talent.Our creativity and flexibility have enabled us to adaptthe UK’s offering to changing economic and financialcircumstances – not just in terms of products and platforms,but also in structuring and articulating solutions whendecisive action is required. The principles-based UKregulatory system remains transparent and fair – there is nodistinction in the treatment of overseas companies comparedto UK-based firms – with clear lines of responsibility forregulated firms to a single regulator. The UK is an idealchoice for a European base, serving as an effective gatewayto Europe and a springboard to the rest of the world.For companies to grow, they need outstanding supportnetworks. The UK has well-established clusters of businessservices that are ranked among the best in the world. Thesenetworks offer global business leaders the opportunity tointeract with the very best of their international peers. Inshort, they plug companies into a vital international networkof connections.All this helps to ensure that the UK – and the overseascompanies that invest here – stay ahead of the game.A unique, multicultural and entrepreneurial economy, the UKis at the hub of international business, bringing the world toevery company’s door.Lord Davies of Abersoch, CBEMinister of State for Trade & Investment2PricewaterhouseCoopers
Welcome by ChairmanWelcome to the 2009 edition of our guide, Doing Businessand Investing in the UK.This book has been written for companies and individualinvestors planning to enter the UK market. The UK hasconsistently attracted considerable investment from overseasand has a long and successful history of trade with the rest ofthe world. Now, more than ever, the importance of attractingforeign investment into the UK is critical. Even in the currenteconomic climate, the UK remains attractive with its openmarket and diversified economy. It is one of Europe’s mostcompetitive locations for business and personal taxation,acting as a gateway to the European Union.This guide provides insight into the key aspects ofundertaking business and investing in the UK, fromestablishing an entity to dealing with employees. It providesanswers to the many questions facing the community ofoverseas investors and is a great starting point for anyonelooking to conduct business in the UK.PricewaterhouseCoopers has long been advising companiesand individuals on how to establish themselves in the UK.We have expert knowledge and practical experience in thefull range of business issues as well as offices across the UK,with experts ready to advise across all industries.I hope that you find this book interesting and useful. If youhave any questions or comments, please do not hesitate tocontact me or one of my fellow partners.Ian PowellChairman and Senior PartnerPricewaterhouseCoopers LLPDoing Business and Investing in the UK 20093
About PricewaterhouseCoopersPricewaterhouseCoopers provides industry-focusedassurance, tax and advisory services to build public trust andenhance value for its clients and their stakeholders. Morethan 155,000 people in 153 countries across our networkshare their thinking, experience and solutions to developfresh perspectives and practical advice.In the UK, PricewaterhouseCoopers aims to be recognisedas the country’s leading professional services firm bybringing real value to our clients, investing in our people andsupporting our local communities. We are able to draw onthe knowledge and skills of more than 16,000 partners andstaff in offices around the UK.You can discover more about PricewaterhouseCoopers UKon our website at www.pwc.co.uk.4PricewaterhouseCoopers
About this bookHow to use this bookThis guide is designed so that you, the reader, can go directlyto any section that is of interest to you. That said, we hopeyou will take the opportunity to read the guide in its entirety.Whichever way you use it, we hope that you find the guide usefulshould you choose the UK as the location for your business.The purpose of this bookThis guide does not attempt to cover every issue nor does itcover specific tax and regulatory issues relating to particularindustries/sectors that might impact on you when doingbusiness in the UK. It merely seeks to answer the questionsthat most commonly arise.Legal differencesThe UK consists of three distinct jurisdictions: England and Wales Scotland Northern Irelandeach of which has its own legal system. Although the threesystems broadly adopt the same approach to business,there are some important distinctions. Accordingly, if youare planning to set up your business in Scotland or NorthernIreland, we would recommend that you take expert advice.Please note that we will, for the purposes of this publication: focus on issues to be considered when setting up abusiness in England or Wales view the UK as a single jurisdiction in which the laws ofEngland and Wales apply throughout.Doing Business and Investing in the UK 20095
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The United Kingdom – a profileby UK Trade & InvestmentWarwick Castle, Warwickshire7
The United Kingdom – a profileby UK Trade & InvestmentThe World Bank ranks the UK as the top European countryin which to operate a business. It takes only 13 days to setup a business in the UK, compared to the European averageof 32 days. In fact, the UK is the easiest location in whichto establish and run a business in Europe. It has an open,transparent and business-friendly system to encourage theformation of new businesses.There are already more than 2.6 million registered companiesin the UK. Over 350,000 new companies are registeredeach year. No permission is required to establish a businesspresence.The UK is one of the easiest countries in which to register aproperty. Cushman & Wakefield rates the UK above France,Germany, Ireland and Italy for ease of registering property.Numerous globally ambitious companies have alreadychosen to set up in the UK because of its record of success,confidence, ambition and know-how. A climate of creativitymakes for innovation in science, finance, design and thearts. The UK has a well-established legal and regulatoryframework and a flexible labour force. Its multiculturalpopulation stimulates diversity of thought and talent.Geography and history have always brought the UK aninternational outlook. It has a global business culture thatplugs companies into an international network. The UK offersease of access to many overseas markets. In particular, asthe business gateway to the European Union, the UK is avery attractive place to set up and do business and serves asa springboard for global growth.The UK is a magnet for foreign investment. In 2007 UNCTAD(United Nations Conference on Trade and Development)revealed that the UK attracted and retained over US 1 trillionof investment, the highest level in Europe and the secondlargest in the world. UK government figures show that in theyear 2007-08 there were over 650 new inward investmentprojects, a strong endorsement of the UK’s attractiveness asa business location.8 8PricewaterhouseCoopers
In late 2008 the UK government took a leading positionin international efforts to tackle the global economicdownturn. It has also introduced measures to stimulate theUK economy. The reduction in VAT and increases in publicspending are intended to help maintain levels of demand andconsumption.The UK has an excellent record for recovery. Prior to thecurrent downturn, it had bounced back from the slump of1990-92 better than any other G8 country.UK Trade & Investment (UKTI) is the UK Government’sinward investment agency. Its comprehensive range ofservices can not only help businesses coming to the UK getup and running in Europe’s top inward investment locationbut do so with speed and confidence. It can help companieswith research, building contacts, choosing a location, settingup an office and growing a business.UKTI works in partnership with Development Agencies inthe English regions and in the devolved administrations ofWales, Scotland and Northern Ireland to provide coverageof opportunities throughout the UK. It holds details ofcommercial property and a range of premises available tobusinesses, including such options as science parks andbusiness incubator facilities.Doing Business and Investing in the UK 20099
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Common questionsAngel of The North, Gateshead, Tyne and Wear11
What type of legal presence do Irequire?How do I establish the entity?What tax issues do I need to consider?What other areas do I need to considerprior to commencing trading?How do I deal with my employees?12 12PricewaterhouseCoopers
What regulatory matters do I need toconsider?What other factors impact my ‘doingbusiness in the UK’?How do I acquire a business in the UK?How do I list on a UK stock exchange?Doing Business and Investing in the UK 200913
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What type of legal presencedo I require? Choice of entity Place of business Branch SubsidiaryLondon Eye, London15
Choosing your entityThere are three principal ways for a foreign investor orcompany to carry on business in the UK. You may: register a place of business register a branch of your company in the UK incorporate a private limited company.Before making your choice, you should consider thefollowing questions:16 How substantial will your business activity in the UK be? What risks do you anticipate during the initial set-up? How long do you expect to do business in the UK? What are the associated regulatory costs? What are the disclosure requirements? What are the tax implications? What are the commercial considerations?PricewaterhouseCoopers
1. A place of businessRegistering a place of business is only appropriate to nontrading entities. There must be no selling activity in the UK andany employees should not receive a commission on sales.A place of business is: a contact point to your company a non-taxable branch of your company.Every entity with a non-trading office in England and Walesmust establish a place of business. Within a month, youmust submit the following documents to the UK Registrar ofCompanies: a completed form (Form 691) that provides suchinformation as: the official name of your company the country of incorporation the address of the place of business in the UK details of the directors and secretaries details for the person authorised to accept service ofprocess on behalf of the company a certified copy of your company’s constitutionaldocuments a certified translation of those documents (if they are notin English) the registration fee ( 20 for the standard service; 50 forsame day registration).Doing Business and Investing in the UK 200917
2. A branchA branch is: a part of your company (and thus does not have aseparate legal existence in the UK) subject to tax in the UK.It provides: a more substantial presence than a place of business the opportunity to engage in trading activity withcustomer and/or post-sales support.Within a month of opening a branch, you must submit thefollowing documents to Companies House: a completed form (Form BR1) that provides suchinformation as: the official name of your company the country of incorporation details of the directors and secretaries, including theextent of their authority to represent your company details of a person authorised to represent yourcompany in respect of the business of the branch andthe extent of their authority to represent the company details of a person authorised to accept service ofprocess on behalf of your company. a certified copy of the company’s constitutionaldocuments a copy of the company’s latest set of audited accounts(if the company is required to file accounts publicly in itscountry of incorporation) a certified translation of those accounts and thecompany’s constitutional documents (if they are not inEnglish) the registration fee ( 20 for the standard service; 50 forsame day registration).You have the option of establishing the branch through a newsubsidiary of your company. This has two benefits:18 18 you would not have to register your company’s accounts,merely the subsidiary’s your company’s liability would be limited.PricewaterhouseCoopers
3. Private limited companyA private limited company is: a separate legal entity with its own limited liabilities.If you choose to set up a private limited company as a UKsubsidiary, your company will not be liable for the debtsand other liabilities of the subsidiary beyond the amountof the subsidiary’s share capital, unless your company hasprovided an express guarantee in respect of the subsidiary’sliabilities.On the one hand, a private limited company: is much more substantial than a place of businessor a branch and thus offers far greater assurance forcustomers and others who come into contact with thebusiness offers flexibility of ownership (it can have one or moreshareholders).On the other hand, it must comply with accounting, audit andregulatory requirements. The main compliance obligations fora private limited company are: filing an annual return with the Registrar of Companies.This contains information about the company as at theanniversary of incorporation, such as share capital andofficers filing statutory accounts for the company for eachfinancial year/period and circulating those accounts to itsmembers notifying the Registrar of Companies of any event-drivenchanges to the company (for example, resignation andappointment of directors, a change in the share capitaland a change of registered office address) maintaining statutory registers for the company.Other optionsIt is also possible to form: limited partnerships limited liability partnerships in the UK or in a Europeancountry.Doing Business and Investing in the UK 200919
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How do I establish the entity? Legal registrationrequirements Corporate nameavailability Directors’ duties Companies Act 2006Edinburgh Castle, Scotland21
Legal requirementsRegistration requirementsA business seeking incorporation as a private limitedcompany must file the following with Companies House: signed Memorandum of Association – the Company’sname and business activities (objects) signed Articles of Association – the rules under which thecompany will be run completed Form 10 – details of the Registered Office,director(s) and secretary if you wish to appoint one(appointment of a secretary is optional for a privatelimited company) completed Form 12 – a statutory declaration confirmingcompliance with the various requirements the registration fee ( 20 for the standard service; 50 forsame day registration).When satisfied that all formalities have been followed, theCompanies Registrar issues a certificate of incorporation.This is conclusive evidence that the company is dulyincorporated and established, so the company maycommence trading immediately.For the information you must provide when commencing theformation process, please refer to Appendix A.22PricewaterhouseCoopers
Additional requirementsEvery company must: have at least one natural director (ie, an actual personrather than a corporation) appoint auditors, unless its turnover and balance sheettotal are below specified thresholds keep a register of its shareholders (known as members),including their names and addresses, the number andclass of shares they hold and the date when they becamemembers of the company keep a register of charges (mortgages and other securedinterests) keep a register of its directors and secretary – if itchooses to have a secretary (see below) deliver to the Register of Companies (on Form 363a) anannual return (accounts), no later than the filing deadline,which is 28 days from the made-up date of the annualreturn deliver to the Register of Companies statutory accountsfor each financial year/period, no later than the filingdeadline for delivery of the accounts, which is ninemonths from the end of the accounting reference date.There are penalties for not meeting these obligations.With effect from 6 April 2008, there is no longer arequirement to appoint a company secretary. However, acompany may still appoint a secretary if it so wishes.Doing Business and Investing in the UK 200923
Is my corporate name available?You may not choose a name for your private limited companythat has already been registered on the UK companiesregister.If you choose a name that: is identical to similar to or incorporates the registered trade mark of a third partyyou may be in danger of infringing that trade mark.If you choose a company or trading name that is identical toor similar to that of another company, you also risk becomingthe target of a ‘passing off’ action by that other company.Trade mark infringement and passing off is usually limited tosituations where the two businesses are in a similar trade.However, it can occur even where the businesses are not in asimilar trade.To avoid these problems, you should conduct a series ofsearches, including searches at Companies House and theUK Intellectual Property Office, as well as wider searchesfor businesses using the relevant name. It is recommendedthat you employ the services of a professional firm thatspecialises in this area of the law.Your company’s name may not include such words as‘International’, ‘British’, ‘Holdings’ or ‘Group’ without theprior approval of the Registrar of Companies. Certain otherwords, such as ‘Pharmaceutical’, require third party consent.24PricewaterhouseCoopers
What are my duties as a director?As a director, you are responsible for the day-to-daymanagement of the company and you are subject to variousstatutory duties that, if breached, can result in personalliability. The duties, which are set out in the Companies Act2006, include the requirement to:(a) act in accordance with the company’s constitution andonly exercise your powers for the purpose for which theywere conferred and(b) act in a manner that you consider, in good faith, to be themost likely to promote the success of the company forthe benefit of its members as a whole. When exercisingthis duty, you must have regard to a number of issues,including: the likely consequences of any decision in the long term the interests of the company’s employees the impact of the company’s business on the communityand the environment the need to foster the company’s business relationshipswith suppliers, customers and others the desirability of the company maintaini
Doing Business and Investing in the UK 2009 Welcome by Chairman Welcome to the 2009 edition of our guide, Doing Business and Investing in the UK. This book has been written for companies and individual investors planning to enter the UK market. The UK has con
Additional copies of Doing Business 2010: Reforming through Difficult Times, Doing Business 2009, Doing Business 2008, Doing Business 2007: How to Reform, Doing Business in 2006: Creating Jobs, Doing Business in 2005: Removing Obstacles to Growth and Doing Business in 2004: Understanding Regulations may be purchased at www.doingbusiness.org.
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