I have a potential new client, who is a French events company wanting to set-up a branch office in the UK.
The branch will be doing essentially the same thing as the French side of things, but for events in UK. I have spoken to the client about registering the branch as a PE with HMRC, CoHse, having a PAYE & VAT scheme, CT600s etc albeit all in the French co's name.
Am I overshooting - is their an easier way to do things?
Thanks
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Depends on the expected scale of activity - a legal entity might actually be easier/simpler than a branch. They may be unware of the relative speed/simplicity of incorporating an entity compared with France.
If they're employing people, making VATable supplies, all of the same registrations apply. A company could give some protection in the event of No Deal and if the venture fails, they can potentially walk away from some liabilities.
Thanks Paul.
Depends on the expected scale of activity - a legal entity might actually be easier/simpler than a branch.
Could you explain the above? The quantity of work is similar, are you just thinking that they wouldn't have to get the French co to translate incorp docs & accounts for CoHo?
Also, may be an issue for employment contracts. London will have mostly new employees, but the manager is a pre-existing French employee, who will manage both teams from the UK.
Also, may be an issue for employment contracts. London will have mostly new employees, but the manager is a pre-existing French employee, who will manage both teams from the UK.
S'pose Franceco could second the mgr to UKco.
It wasn’t a fully considered response, but here’s some of my thoughts that may influence the decision
- The branch/company will transact in GBP. How/where/what systems will the parent use for accounting?
- Banking – it *might* be less difficult to open a UK/GBP account as a UK entity than as a foreign entity.
- VAT accounting. I don’t the choice of entity affects the VAT treatement but it may help to prompt that internal transactions between UK and France create some VAT obligations. It may also be easier to recover
- Employment law is much more restrictive in France. If UK workers are employees of the French entity, it may create complications in France (eg by triggering a headcount threshold). Having UK workers in a UK entity creates a fire-break.
- Tax planning/transfer pricing- possibly some opportunities to shift profit from France to UK.
I’m sure there’s more but it’s difficult to be more specific without an idea of the scale of activity in both countries and the growth projections. Broadly I would say that he bigger the UK activity is likely to be, the more I would lean towards a company structure.
Digging a little deeper, the business income is subscriptions paid to the French company. Subscription allow free entry to some events and free access to online resources.
The UK 'branch' will be organising some events in the UK which will be attended for free by some subscribers (who paid their subs to FrenchCo) and some paying attendees, who will be buying the tickets from FrenchCo. The UK will also be creating content that adds to the online resources.
Would UK need to invoice FrenchCo for a) its resource content supplied, and b) subscriber attendance for events? Would b) have to be at the same rate as non-subscribers were charged?
As described, I’m not sure that the business activity necessarily amounts to a PE. It sounds like there are no UK premises where the French company is conducting business and no stock in the UK.
I think I might structure this as a UK company whose role is to provide services such as content production, event arrangement to the French company. The UK company employs staff and recharges its costs – with a suitable mark-up - to France.
The French company sells subscriptions and organises subscriber events in various countries. Holding events that online service subscribers can attend without further charge probably doesn’t create a UK tax liability. On the assumption that the cost of marginal attendees is negligible, I would give the UK entity the right sell paid-for tickets.
