Choosing a structure · 6 min read

Branch vs Subsidiary

A side-by-side of the two most common UK structures for overseas businesses — legal personality, tax, filing, exit and ongoing administration.

When an overseas company decides to formalise a UK presence it almost always chooses between a UK branch (a registered "establishment" of the overseas company) and a UK subsidiary (a separately incorporated Private Limited Company). They look similar from the outside; they are very different in law.

At a glance

Subsidiary (Ltd)

Separate legal entity, incorporated in the UK.
Limited liability — parent's exposure capped at paid-up share capital.
Subject to UK corporation tax on worldwide profits.
Files its own UK statutory accounts; may require a UK audit.
Profits taxed in the parent only when distributed as dividends.

Branch (UK establishment)

Not a separate legal entity — an extension of the overseas company.
The overseas parent is fully liable for the branch's debts and obligations.
Subject to UK corporation tax on the activities carried on by the branch.
Must file the parent's audited financial statements (translated into English) at Companies House.
No UK audit of the branch itself; no stamp duty on capital contributions.

Key trade-offs

Disclosure: a branch exposes the parent's full accounts publicly in the UK. A subsidiary discloses only its own.
Tax: a subsidiary ring-fences UK profits; a branch's profits sit inside the overseas company's worldwide tax position.
Set-up time: a subsidiary can be incorporated in hours; a branch registration typically takes 4–6 weeks.
Exit: a branch closes automatically on cessation of trade; a subsidiary requires a formal wind-up or strike-off (minimum 3 months).

Which should you choose?

If you are testing the market with a small team and limited commitment, a branch can be lighter. If you intend to hire, raise local investment, sign enterprise contracts, or protect the parent from UK liabilities, a subsidiary is almost always the right answer.

"Setting up a branch is often less ongoing administration; a subsidiary is a longer-term, more secure structure that adds credibility and commercial respectability."

Other structures

Limited Partnership (LP) — flexible, but at least one general partner carries unlimited liability.
Limited Liability Partnership (LLP) — separate legal personality, members' liability limited to capital.
Private company limited by guarantee — used by not-for-profits and member organisations.

Frequently asked

What is the main legal difference between a UK branch and a UK subsidiary?

A subsidiary is a separately incorporated UK company — its own legal person, with limited liability for the parent. A branch (a UK 'establishment') is not a separate legal entity; it is an extension of the overseas parent, which remains fully liable for the branch's debts and obligations.

Which is cheaper to run year on year?

A branch usually carries lighter UK admin (no separate UK accounts in most cases, no UK audit of the branch itself) but exposes the parent's full accounts publicly in the UK. A subsidiary brings UK statutory accounts and possibly a UK audit, but ring-fences UK disclosure and tax. The right answer depends on the parent's appetite for public disclosure and on local hiring plans.

Which structure is faster to set up?

A UK subsidiary can be incorporated electronically in 24 hours. A UK branch registration ('overseas company' filing at Companies House) typically takes four to six weeks because it requires translated and certified versions of the parent's constitutional documents.

Which is easier to close down?

A branch can be closed by filing a single OS DS01 form once UK activity ceases. A subsidiary requires either a strike-off (minimum three months, only if dormant and solvent) or a formal members' voluntary liquidation if there are assets to distribute. Plan exit at the same time you plan entry.

Disclaimer

This guide is general guidance, current at the time of publication, and is not a substitute for tailored legal, tax or accounting advice. Setupinuk works alongside specialist counsel and accountants on every engagement.