A Guide to Establishing a
Business in the UK
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Contents
01 Introduction 02 Possible formats 04 Taxation considerations 06 Value Added Tax 07 Registration and administration requirements 11 Employment considerations 13 Government and regional assistance 14 Contacts 16 Our officesIntroduction
01 INTRODUCTION There are a number of formats which may be adopted by non‑UK resident individuals or companies wishing to establish a business in the UK. This guide considers the following forms: UK company or subsidiary; UK establishment (being a UK branch or UK place of business); UK agency; and UK partnership (including limited partnerships and limited liability partnerships). The law described in this guide is that applicable to England and Wales as at 1 April 2014. It should be noted that the position may vary in some respects under the laws applicable in Scotland and Northern Ireland. This guide is not intended as a substitute for detailed legal advice which will differ according to the requirements of each particular business to be established. For more detailed information or advice on these issues, please speak with your regular contact at Watson, Farley & Williams, or a member of our London Corporate, Tax or Employment teams or our Singapore Corporate team listed on pages 14 and 15 and they will be pleased to assist you. This guide places particular emphasis on the legal and taxation considerations which are relevant in deciding on the preferred form, although general commercial considerations will also need to be addressed. Relevant formation and administration requirements are also outlined, as are employment and other matters which are likely to require consideration. This guide does not deal with European Economic Interest Groupings or the European Company (Societas Europaea) but further information can be provided on these entities if required. Watson, Farley & WilliamsA Guide to Establishing a Business in the UK > > > >02 POSSIBLE FORMATS
Possible formats
UK Subsidiary A UK subsidiary is a company incorporated in the UK which will normally be wholly owned by a company incorporated outside the UK (an overseas company). In certain cases, the UK company may be a joint venture company owned by two or more companies or individuals some of whom are not resident in the UK and some of whom are resident in the UK. In such cases, the arrangements between the various shareholders will need to be considered carefully to ensure that they meet the commercial requirements of all parties and that, as in all other cases, potential UK and overseas tax liabilities are managed effectively. UK Establishment An overseas company that wishes to establish a presence in the UK may prefer to do so in a form which does not involve the formation of a separate legal entity. Under English law, a company wishing to trade in the UK may register an establishment as an alternative to creating a UK subsidiary. An ʺestablishmentʺ is defined broadly as a branch (as regulated by European Union (ʺEUʺ) law) or any place of business which is not a branch. Whether an overseas company has established a branch or a place of business is a question of fact determined by the degree of activity which takes place. A ʺbranchʺ is essentially a part of a company organised to conduct business on its behalf in the UK, allowing a person to deal directly with the branch in the UK instead of with the company in its home jurisdiction (i.e. the head office). The essential features of a ʺbranchʺ which may distinguish it from a ʺplace of businessʺ are: the appearance of permanency; the presence of managers on the branch premises; and the apparent capacity of the branch personnel to conduct business with third parties on behalf of the company. A UK branch will usually conduct some or all of the trading activities of the non‑resident company in the UK. For commercial reasons, limits may be placed on the extent of those activities to ensure that the branch is permitted to conduct only some of the non‑resident company’s trading activities. A ʺplace of businessʺ is a UK office of an overseas company which carries on activities which are only ancillary, or incidental, to the business or activities of the overseas company as a whole, such as: performing local representative functions; providing a UK point of contact or introduction for customers or suppliers wishing to deal with the overseas company; distributing information; and other similar activities. It should not be given the power to negotiate potential deals nor to conclude or enter into binding obligations in the name of the overseas company, if it is intended that the place of business should not be treated as a trading establishment in the UK. The UK establishment regime applies only to companies incorporated outside the UK. Other types of commercial enterprises (for example, partnerships and limited liability partnerships) cannot register a UK establishment. UK Agent When an overseas company does not operate through a UK establishment it may conduct taxable trading activities in the UK through an appointed UK agent. > > > > > > >UK Partnership There are three main types of UK partnership: a general partnership, a limited partnership and a limited liability partnership. General Partnership A general partnership is defined as the relationship which subsists between persons carrying on business in common with a view to making a profit. It does not include incorporated companies nor certain other entities. However, it can include a partnership between individuals and companies, or even between two or more companies. An important feature of an ordinary partnership (rather than a limited partnership or limited liability partnership) is that all of the partners have unlimited liability for the partnershipʹs debts and obligations. This contrasts with the position of a shareholder in a limited company, whose liability is limited to the amount unpaid (if any) in respect of the nominal value of shares held by him. 03 POSSIBLE FORMATS Limited Partnership A limited partnership must consist of one or more general partners (who have unlimited liability for debts and obligations of the limited partnership) and one or more limited partners who, provided they take no part in management, have their liability limited to the amount of capital they contribute to the limited partnership. Limited Liability Partnership (LLP) A limited liability partnership (or LLP) is a body corporate with its own legal personality. A LLP is liable for its own debts and obligations, rather than its partners being liable. Watson, Farley & WilliamsA Guide to Establishing a Business in the UK
04 TAXATION CONSIDERATIONS
Taxation considerations
Introduction The choice of how to structure a UK business may vary according to taxation implications as well as commercial considerations and objectives. An overview of the basic principles of UK corporation tax and a summary of the taxation consequences of different business formats are outlined in this section. UK Corporation Tax From 1 April 2014, the main rate of UK corporation tax is set at 21%. The Government has announced its intention to reduce the main rate of corporation tax further to 20% from April 2015. There is also a small profits rate (broadly, for companies or groups with less than £1.5m of profit or gains in a tax year) of 20%. UK Tax Resident Companies Broadly, a UK tax resident company is liable to UK corporation tax on its worldwide income and gains. Subject to very limited exceptions, a company incorporated in the UK is automatically resident in the UK for UK tax purposes. A company that is not incorporated in the UK may still be tax resident if it is centrally managed and controlled in the UK. This concept has been developed by case law and involves considering the location where the top level of decision‑making in a company takes place. Ordinarily, the place where a company is centrally managed and controlled will be the location where the final decisions that bind the company are made. A company incorporated outside of the UK may find itself treated as being tax resident in the UK and another jurisdiction under the domestic rules of that jurisdiction. Such a company would, therefore, be at risk of incurring tax in both jurisdictions. In such circumstances, relief from double taxation may be provided by the tie‑breaker provisions of an applicable double taxation treaty. If the tie‑breaker provisions treat the company as resident in the other jurisdiction and not in the UK (that is, it is not dual resident), then that company would be treated for UK tax purposes as resident outside the UK. Permanent Establishment A non‑UK tax resident company which carries on a trade in the UK through a ʺpermanent establishmentʺ, such as a branch or agency, would normally be liable to UK tax on the worldwide income and gains related to that permanent establishment. Broadly, a company has a permanent establishment in the UK if: it has a fixed place of business in the UK through which the business of the company is wholly or partly carried on; or an agent acting on behalf of the company has, and habitually exercises in the UK, authority to do business on behalf of the company. If it is intended that a business presence in the UK should not give rise to any UK tax liability, care must be taken to ensure that the non‑UK enterprise does not become resident in the UK by virtue of being managed and controlled from the UK, and does not create a UK permanent establishment (which can usually be avoided by ensuring UK activities are limited to representative functions only). Generally, a non‑UK tax resident company that is not trading in the UK through a permanent establishment is liable to UK income tax at the basic rate (20% for the tax year 2014/15) on some UK source income, including rental income. Most other UK income is taxable only to the extent that UK tax is withheld at source, e.g. on interest payments. UK Subsidiary Subject to the application of any relevant double taxation treaty, a UK subsidiary will be tax resident in the UK by virtue of being incorporated in the UK. In reviewing a UK subsidiaryʹs profits and losses, the UKʹs tax authority, HM Revenue & Customs (ʺHMRCʺ) can use its transfer pricing powers to substitute a fair value for goods and services provided to or received from connected parties. Consequently, it is usually necessary for contracts entered into by a UK company to be on terms which are similar to those that would have been agreed between unconnected parties. HMRC is not entitled to require disclosure of accounts from any non‑UK parent company when reviewing the tax position of a UK subsidiary (this is in contrast to the position of a UK establishment). > >Should a UK subsidiary be profit making, the UK does not impose any withholding taxes on the repatriation of profit in the form of dividends. UK Establishment Subject to the application of a relevant double taxation treaty, if a UK establishment constitutes a taxable permanent establishment, the profits attributable to the activities of that UK permanent establishment should be liable to corporation tax. In determining how much of a non‑resident companyʹs profits should be deemed to emanate from its UK permanent establishment, the principle adopted is generally that the profits and gains attributable to the permanent establishment will be those which would have accrued to it had its activities been carried out independently and on terms which are similar to those that would have been agreed between unconnected parties. HMRC can call for the accounts of a non‑resident company to decide whether the proportion of its profits and losses attributed to its UK permanent establishment is correct. In some instances, the means of calculating the profits attributable to the UK establishment may be agreed with HMRC in advance. This is usually undertaken on a ʺcosts plusʺ basis; i.e. the profit margin is calculated to be a percentage mark‑up on costs and expenses actually incurred. If the activities of any UK establishment are appropriately restricted, and are limited to a representative function (so that, for example, contracts are not extensively negotiated in the UK and are not signed in the UK), a non‑UK resident company should not suffer any charge to UK tax as a result of its UK establishment. UK Agent Subject to the terms of a relevant double taxation treaty, where a non‑resident company is carrying on a trading activity in the UK through an agent, generally, UK tax will be charged on all profits and gains arising directly or indirectly through the agent. Consequently, the agent is likely to constitute a UK permanent establishment of the non‑resident company. However, double taxation treaties will generally provide that an overseas company cannot be charged to tax in the name of an independent agent in the UK who is carrying on the business of a general agent and is remunerated on normal commercial terms. 05 TAXATION CONSIDERATIONS Therefore, particular care should be taken with the terms of appointment of any such agent. UK Partnership Generally, for the purposes of UK taxation on income or chargeable gains, a UK partnership is not a separate taxable entity. Consequently, each partner will be liable for any UK tax on income or chargeable gains arising out of its share of the partnershipʹs profits or gains. The rules for calculating and assessing the liability of partners to UK taxation on partnership profits are complicated and such liability will depend upon: whether the partnership is managed and controlled in the UK; whether its trade is undertaken wholly or partly in the UK; the nature of the profit; whether the partners are individuals or corporations or a mixture of both; and whether or not the partners are UK tax resident. Where the partnership includes one or more companies, the profits of the partnership are, broadly, calculated on the basis that the partnership is a company, and those profits are then apportioned amongst the partners according to their profit‑sharing entitlements. It should be noted that with effect from 5 December 2013, the UK Government has introduced new rules to combat tax avoidance by partnerships when allocating profits and losses between individual and corporate partners. Where the partnershipʹs trade is carried on wholly or partly in the UK, the partnershipʹs trading profits, apportioned amongst the partners, will be chargeable to tax in the UK. However, where the partnership is managed and controlled outside the UK, a non‑resident partner will only be liable to UK tax on its share of the profits arising from that part of the trade carried on in the UK and not on any profits arising from that part of the trade carried on outside the UK. UK resident partners will, however, be liable to UK tax on their respective shares of the whole of the profits whether arising from UK or non‑UK activities. Non‑UK resident partners should not be taxable in the UK on any investment income derived by the partnership. In most cases, the above principles of taxation should apply to both limited partnerships and limited liability partnerships. Watson, Farley & WilliamsA Guide to Establishing a Business in the UK > > > > >
06 VALUE ADDED TAX
Value Added Tax
UK Value Added Tax (VAT) is a tax on consumer expenditure, which is collected by businesses on behalf of the Government in relation to the supply of certain goods and services in the UK or on the importation of goods and services into the UK. Broadly, a transaction falls within the scope of UK VAT if the following four conditions are satisfied: it is a supply of goods or services (something is provided or done for a consideration); it takes place in the UK; it is made by a taxable person; and it is made in the course or furtherance of any business carried on by that person. Generally, a business must register for VAT with HMRC if its turnover exceeds (currently) £81,000 per annum. The business must account for VAT and make returns to HMRC no later than 30 days after the end of each accounting month/quarter. In some cases, payments of VAT on account are required. The liability to register for VAT must not be ignored as HMRC can impose penalties for not doing so. VAT payable by businesses (input tax) can be set off against VAT charged on sales (output tax) with the balance then being payable to HMRC every month/quarter. Provided that certain conditions are satisfied, an excess of input tax over output tax should result in a repayment to the business from HMRC. VAT is charged at one of three rates, currently 20%; 5%; or zero. Examples of taxable supplies chargeable at the zero rate include supplies of most foods, passenger transport, books and newspapers. Certain supplies are exempt from VAT including supplies of health care, certain educational and training supplies, sales of certain property, transfers of money and stocks and securities, and insurance payments. VAT is chargeable at 5% only in relation to a very restricted range of goods and services (such as domestic power and fuel). It is possible, subject to certain conditions, for related companies to obtain a group registration for VAT purposes. There are many advantages of this, one of which is that intra‑group transactions are treated as being outside the scope of VAT. > > > >Registration and
administration requirements
Introduction Business enterprises in the UK must comply with UK company law requirements, which vary depending on format. UK Subsidiary A company may be incorporated either as a private or a public company and liability may be limited or unlimited. When establishing a company in the UK, it is most usual to set up a private limited company. Consequently, the requirements for a new private limited company are considered in this section. In order to incorporate a private limited company, certain information and documents will need to be delivered to the Registrar of Companies together with a fee. Commonly, a formation agent is used to assist with this process as this is quicker and cheaper. Company name Subject to certain restrictions, a UK company can have any name which is not the same as an existing registered company and the name may be changed from time to time by the shareholders in general meetings. A fee has to be paid for the name change service to the Registrar of Companies who will issue a Certificate of Incorporation on Change of Name. Articles of Association The constitution of a company is laid out in its Articles of Association. The Articles of Association set out the detailed administrative provisions for the operation of a company, as well as the regulation of its internal management. A standard form of Articles of Association prescribed by statute will apply insofar as it is not excluded or modified by the companyʹs own Articles of Association. The objects and powers of a company are unrestricted unless the company chooses to specifically restrict them in its Articles of Association. The company will also require a Memorandum of Association which is in a prescribed statutory form. Registered office The Registrar of Companies must be notified of the registered office of the company which has to be an address in England or Wales. Share capital The capital of a company is divided into shares of a nominal monetary amount. References to a companyʹs ʺissued share capitalʺ will be to the amount of shares actually allotted and issued. A companyʹs share capital may be denominated in any one or a combination of currencies. However, the share capital of a UK company is normally denominated in sterling. The liability of each shareholder is limited to the amount, if any, remaining unpaid on his shares. A single person may form any sort of company, including a public company. Single shareholder companies The same rules and regulations apply to single shareholder companies as to companies with more than one shareholder with certain limited exceptions. Further details can be provided if required. Annual general meeting Only public limited companies are required to hold an annual general meeting. Private limited companies do not have to do so unless their Articles of Association expressly require it. Other general meetings may be convened as required to deal with specific matters, although, in most circumstances, private limited companies can deal with these matters by written resolutions of the shareholders. 07 REGISTRATION AND ADMINISTRATION REQUIREMENTS Watson, Farley & WilliamsA Guide to Establishing a Business in the UK08 REGISTRATION AND ADMINISTRATION REQUIREMENTS Directors and secretary The directors are responsible for the day to day running of the company to whom they also owe certain duties. These duties historically evolved through case law, but most have now been codified under the Companies Act 2006 (CA 2006). In addition, there are statutory limitations placed on the powers which may be exercised by the directors in relation to the company and certain matters require shareholder consent. The day to day administration of the company is often dealt with by the secretary of the company who may also be a director. However, a private limited company is not required to have a company secretary (unless its Articles of Association require this), although it may still choose to do so. Where it does not have one, the tasks typically done by a secretary will need to be done by someone else, either a director or a person generally or specifically authorised by the directors. There is no restriction on the nationality of directors but details of their identity must be notified to the Registrar of Companies. Private companies require only one director, whilst public companies must have at least two. All companies must have at least one director who is a natural person. Accounts and Annual Return Every company must prepare a profit and loss account and balance sheet for each financial year which must be delivered to the Registrar of Companies within a prescribed time limit. However, in some cases, only abbreviated accounts need to be prepared and filed. Public companies are required to lay their annual accounts before their shareholders in a general meeting but private limited companies are not obliged to do so. However, the CA 2006 does require that a copy of the annual accounts of a private limited company be circulated to the shareholders at the same time as a copy of the annual accounts is delivered to the Registrar of Companies. Every company must also deliver to the Registrar of Companies an Annual Return in the prescribed form, together with a fee. The form sets out: the details of the registered office of the company; the share capital of the company; the names and addresses of those who are or who have in the past year been shareholders of the company; the current directors and secretary (if one has been appointed) of the company; and the location of the register of members and register of debenture holders. Other filing obligations Changes to certain of the particulars filed at Companies House also need to be filed with the Registrar of Companies within specified time limits (e.g. change of director or particulars of director, change to share capital or constitutional documents, etc). Most mortgages and charges created by a company are also subject to registration with the Registrar of Companies within a prescribed period in accordance with statute. Disclosure obligations A company must display its registered name at its registered office, any inspection place and other places of business, on all forms of business correspondence and documentation (such as business letters, notices and emails, order forms, cheques, orders for goods or services, invoices and receipts) and on its websites. Certain additional information also needs to be included on all business letters, order forms and websites, such as the > > > > >
part of the UK in which the company is registered, the registration number and registered office address. UK Establishment An overseas company should, within one month of setting up the establishment, deliver to the Registrar of Companies certain information in relation to the company and the establishment, together with a fee. The required details of the overseas company are: the overseas companyʹs corporate name; the overseas companyʹs legal form; if the overseas company is registered, the company must identify the register in which it is registered and its registration number; a list of the directors and secretary of the overseas company; the powers of the directors or secretary to represent the overseas company together with a statement as to whether they may act alone or must act jointly; whether the overseas company is a credit or financial institution; and if the overseas company is a non‑EEA company, the law under which the overseas company is incorporated. The required details of the UK establishment are: the address of the UK establishment; the date it was opened; the business carried on at the establishment; the name of the establishment if this is different from the name of the overseas company; the name and service address of every person resident in the UK authorised to accept service of documents on behalf of the overseas company in respect of the UK establishment or a statement that there is no such person; and a list of every person authorised to represent the overseas company as a permanent representative in respect of the establishment. The form must be accompanied with a certified copy of the overseas company constitution and (where the overseas company is incorporated in the EEA or is required by its parent law to disclose accounts) copies of the latest accounting documents. 09 REGISTRATION AND ADMINISTRATION REQUIREMENTS Watson, Farley & WilliamsA Guide to Establishing a Business in the UK Filing and disclosure obligations Any changes to the overseas constitution, the particulars of the overseas company or the particulars of the establishment should be notified to the Registrar of Companies. The form must include the date and details of the alterations and must be filed within 21 days of the date of the alteration if it affects the UK establishment or, if a change affecting the overseas company, within 21 days after the date on which notice of the alteration could have been received in the UK. In most cases, there are also filing obligations on overseas companies with an establishment in the UK relating to accounting documents. If a company is required to prepare and disclose its accounts under its parent law, the company must also deliver copies of these accounts to the Registrar of Companies. However, for a company incorporated in an EEA state which is required by its parent law to prepare and disclose (but not deliver) accounting documents, there is no requirement to file any documents with the Registrar of Companies. An overseas company with a UK establishment, which is not required to prepare and disclose accounting documents under its parent law, will nevertheless have to prepare accounts in prescribed form and file these with the Registrar of Companies. Prescribed time limits apply in each case. Further details can be provided if required. Certain information must be disclosed during the UK establishment’s course of business. The name of the overseas company and its country of incorporation must be displayed at every location in the UK at which it carries on business, as well as the address of every person authorised to accept service of documents on behalf of the company. The overseas company must also include the company’s name on documents such as business letters and emails, notices and other official publications, applications for licences, order forms, invoices and receipts and on its websites, etc. In addition, the overseas company must include a note of where the establishment is registered and its registration number on all business letters, order forms and websites. Additional information is required if the company is not incorporated in an EEA state. Further details can be provided if required. There is no requirement to register mortgages or charges created by an overseas company over property of the > > > > > > > > > > > > >
10 REGISTRATION AND ADMINISTRATION REQUIREMENTS company situated in the UK with the Registrar of Companies. However, any charges created by the overseas company over land in the UK or over ships, aircraft or intellectual property registered in the UK and floating charges created over any of its property in the UK must be entered on a register of charges that the company must keep, within 21 days of the charge having been created, and copies of the charges and the register must be made available for inspection. UK Partnerships General Partnerships General partnerships are not required to be registered with the Registrar of Companies. The Partnership Act 1890, which applies to general partnerships, only requires disclosure of partnership information to the partners themselves and there are no specific accounting, auditing or disclosure rules regarding partnerships. All business letters, invoices, receipts and similar documents must show the true names of all the partners of the firm and an effective business address. However, there is an exception to the names requirement for partnerships of more than 20 persons. All business premises of the firm must contain a notice setting out this information, which must be prominently displayed. Limited Partnerships In order to register a limited partnership, the following information will need to be delivered to the Registrar of Companies, together with a fee: details of the firmʹs name, the general nature of the business, the address of the principal place of business, the full name of each partner, the term (if any) for which the partnership is entered into, the date of its commencement and the sum contributed by each limited partner and whether it is paid in cash or otherwise; and a statement that the partnership is limited and the description of every partner as such. The requirements for displaying name requirements on premises and documentation are the same as for general partnerships (see above). It should be noted that in relation to certain qualifying partnerships and limited partnerships, there may be a requirement to prepare accounts for the partnership and for each corporate partner that is a limited company and to file the latter with the Registrar of Companies together with the partnershipʹs annual accounts. Limited Liability Partnerships In order to register a limited liability partnership, the following information will need to be delivered to the Registrar of Companies, together with a fee: details of the name, where the registered office is situated and its address, the name, full address and date of birth of each member and which of these are to be designated members or that all members are designated members; and a statement of compliance signed by a solicitor or a proposed member. Every limited liability partnership must have at least two, formally appointed, designated members at all times. Designated members have particular responsibilities and functions within the limited liability partnership. Both limited partnerships and limited liability partnerships must notify the Registrar of Companies of the particulars of any change in the information provided within prescribed periods. In each case, the names that may be used are regulated. Limited liability partnerships must deliver accounts within a prescribed time limit and also an Annual Return containing certain specified information. They must also register most mortgages and charges with the Registrar of Companies as prescribed by statute. All business letters and emails, notices, order forms, invoices, receipts and similar documents and websites must state the limited liability partnershipʹs name. All its business letters, order forms and websites must show the part of the UK in which it is registered, its registration number, the fact that it is a limited liability partnership and the address of its registered office. Limited liability partnerships must display their registered name at their registered office, at any inspection place and at any location where they carry on business. > > > >
Employment considerations
11 EMPLOYMENT CONSIDERATIONS Introduction Whatever the size or nature of the UK operation, it will need to be staffed and as a consequence there are important tax, immigration and employment considerations. Taxation of Employment in the UK Generally, a UK resident employee should be liable to UK income tax on the full amount of his ʺemployment incomeʺ after taking account of any personal allowances and other forms of tax relief. ʺEmployment incomeʺ includes wages, fees, salaries, commissions, bonuses, a large number of benefits in kind, certain social security benefits and round sum allowances such as cost of living, foreign service and accommodation allowances. For the 2014/15 tax year (6 April to 5 April) most people will benefit from a personal tax‑free allowance of £10,000. Above the personal allowance, income tax will be charged at a basic rate of 20% on employment income between £0 ‑ £31,865, at a higher rate of 40% where employment income is between £31,866 to £150,000 and at an additional rate of 45% for income above £150,000. The precise tax treatment of employees will depend upon their particular UK tax residence status. There are no restrictions on the number of foreign employees on a payroll. Pay As You Earn Income tax due from employees is collected by the employer at source through a deduction system known as Pay As You Earn (PAYE). National Insurance Contributions Employers and employees are both required to pay National Insurance Contributions, which are calculated as a percentage of an employeeʹs weekly employment income. Employees on temporary assignments to the UK who are employed by an employer whose place of business is outside the UK are normally exempt from National Insurance Contributions for the first 52 weeks. There are modified arrangements where the employee belongs to another member state of the EU or is covered by a reciprocal social security agreement between the UK and his country of origin. Immigration Nationals of the EU, Iceland, Liechtenstein, Norway and Switzerland do not require permission to work in the UK. Since 1 July 2013, as EU nationals, Croatians have been able to move and reside freely in the UK. They will not require leave to enter or remain to reside legally in the UK. However, Croatian nationals wanting to work in the UK will still need to obtain authorisation to work before starting any employment, unless they are exempt from doing so. This authorisation will normally take the form of an Accession Worker card which generally requires the UK employer to first apply for approval of the employment under the UK work permit arrangements. Iceland, Liechtenstein and Norway are not members of the EU. However, the European Economic Area Agreement gave nationals of these countries the same rights to enter, live in and work in the UK as EU citizens. Swiss nationals have had the same rights as EU nationals within the UK since 1 June 2002 and can work without a work permit. Non‑EEA family members wishing to accompany or join an EEA national working or coming to work in the UK must obtain an EEA family permit which is a form of entry clearance (like a visa) so that they can travel to the UK. EEA nationals who wish to be issued with confirmation of their right of residence in the UK can apply to the Home Office Watson, Farley & WilliamsA Guide to Establishing a Business in the UK12 EMPLOYMENT CONSIDERATIONS for a Registration Certificate. Whilst there is no requirement for EEA nationals living in the UK to apply for a Registration Certificate, EEA nationals are recommended to apply in any event if they are going to work in the UK for longer than six months. Non‑EEA national family members can apply for a Residence Card which confirms that they have a right to live with the EEA national in the UK. Non‑EEA nationals will normally require a Certificate of Sponsorship under Tier 2 of the points based system (PBS). The employer has to be registered with the UK Border Agency as a Licensed Sponsor in order to issue a Certificate of Sponsorship. Applications under the Certificate of Sponsorship scheme need to show that there is no UK or EEA national who could fill the post. In most cases, the employer will be expected to advertise the position. However, advertising is not required for an intra‑company transfer (subject to certain service qualifications), a post where the salary is over £153,500, a sponsored researcher, or in respect of one of the shortage occupations designated by the UK Border Agency. The employee will then be required to make an application for Entry Clearance at the British Diplomatic Post in their country of residence if they are abroad or the Home Office for Leave to Remain if they are already residing in the UK. In addition, there are various other categories under the Immigration Rules that may be applicable to someone coming to the UK to establish a business. These could include applying for leave as the sole representative of a non–UK resident company or leave as an entrepreneur or Investor. Entrepreneurs who have £200,000 solely or jointly available to invest into a new or existing business in the UK which they will join and be actively involved in running can apply under the Tier 1 (Entrepreneur) category. Certain sub categories of entrepreneurs allow entry where the investment is as little as £50,000 for graduates who have a business idea endorsed by their university or who receive funding from a Financial Conduct Authority Regulated Venture Capitalist Firm or UKTI endorsed Seed Funding Competition. All of these applications would normally be submitted prior to entry to the UK at the individualʹs nearest British Diplomatic Post in the country of their nationality or permanent legal residence. Recent legislation also shifts the burden on to employers in relation to ensuring their employees have the right to reside and work in the UK. Employers are required to perform checks prior to employing an individual and, where appropriate, on an annual basis. Where they have failed to do this and are found to be employing someone who does not have the right to reside and work in the UK the employer can face fines of up to £20,000. Employment Legislation Employees in the UK have various employment rights through contract, common law and statute. There is a whole host of different statutory provisions that govern employment rights in the United Kingdom. These include comprehensive legislation prohibiting discrimination on grounds of either sex, race, age, religion or belief, sexual orientation, disability, gender reassignment, marriage and civil partnership or pregnancy and maternity. In addition, there is also specific legislation dealing with the right to equal pay for equal work and family friendly rights in relation to maternity leave, parental leave, paternity leave and adoption leave. Both employees and employers have the right to minimum periods of notice when employment is to be terminated. Legislation also specifies certain statutory particulars that must be included in an employment contract within a specified period of time. In addition, subject to various qualifying periods (which depend upon the claim) employees have the right not to be unfairly dismissed and to only be dismissed for one of the potentially fair reasons set out in statute, which includes redundancy, conduct and capability. There is other applicable legislation in relation to different types of working arrangements, working time, national minimum wages and collective employment rights relating to consultation and trade unions. Information on pension schemes is not included within the scope of this guide, although further information can be provided if required. Compulsory Liability Insurance & Health and Safety at Work All employers must insure for a minimum liability for bodily injury or disease sustained by their employees in the course of employment. Such insurance must be with an insurance company authorised to operate in the UK. The rates are usually modest, but they can be relatively expensive for high risk occupations. The Health and Safety at Work Act 1974 imposes on employers, in consultation with their employees, the responsibility for providing suitable health and safety arrangements at the place of work. Watson, Farley & WilliamsA Guide to Establishing a Business in the UK
Government and regional
assistance
13 GOVERNMENT AND REGIONAL ASSISTANCE Overseas investment in the UK is officially encouraged. The relatively low tax rates in the UK and the extensive network of double taxation treaties to which the UK is a party make the UK attractive as a location for both UK and foreign–owned enterprises. There are also a number of specific incentives available to support project investment in the UK. The most important of these concern certain designated ʺAssisted Areasʺ and ʺEnterprise Zonesʺ. The full range of incentives available and the individual characteristics of each are too numerous and complex to set out here. Detailed advice should be sought with regard to each particular project. Applications for grants should be made at an early stage since a number of the grants require the applicant to show that the project would not proceed if grants were not available. Watson, Farley & WilliamsA Guide to Establishing a Business in the UK14 CONTACTS
Contacts
Charles Walford Partner Corporate London +44 20 7814 8013 [email protected] Felicity Jones Partner Corporate London +44 20 7814 8944 [email protected] Jan Mellmann Partner Corporate London +44 20 7814 8060 [email protected] Mark Tooke Partner Corporate London +44 20 7814 80774 [email protected] Nicholas Fothergill Partner Corporate London +44 207 814 8075 [email protected] Christina Howard Partner Corporate London +44 20 7814 8189 [email protected]Watson, Farley & WilliamsA Guide to Establishing a Business in the UK 15 CONTACTS Chris Kilburn Partner Corporate Singapore +65 6551 9124 [email protected] Liz Buchan Partner Employment London +44 207 814 8065 [email protected] Asha Kumar Partner Employment London +44 207 814 8182 [email protected] Anharad Harris Partner Immigration London +44 207 814 8095 [email protected] Michael LʹEstrange Partner Tax London +44 207 814 8046 [email protected] Richard Stephens Partner Tax London +44 207 814 8239 [email protected]
