As your business becomes more successful, you should consider expanding into the global market, says Scott Brown, director SME, Sable International.
Brown discusses the reasons why you should look to establish a business in the UK and why it’s still a good idea post-Brexit.
The UK has appeared on many impressive lists recently, including coming eighth in the World Bank’s ease of doing business list in 2020, fourth in the Global Innovation Index 2021 rankings and topping Forbes’ ranking of best countries for business in 2019. With the country’s reputation for having business-friendly infrastructure and the proximity to Europe and its customer bases, it’s easy to see why the UK ranks so highly.
The UK provides you with numerous opportunities, business-friendly markets and superior tax rates, said Brown. “The UK’s corporation tax rate sits at 19%, the lowest of all G20 countries, including Canada (26.5%), Germany (30%) and Australia (30%). From 2023, there will be a tax increase but corporate tax will remain at 19% for businesses with profits of £50,000 or less.”
The corporate tax rate is set to increase to 25% for businesses with profits of £250,000 or more, but this tax rate remains below or on par with the G20 countries’ current rates, he said. Furthermore, businesses with profits £50,000 and £250,000 “will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate”, as stated by the UK government.
The strength of the Pound
The Pound has always been one of the strongest global currencies and expanding into the UK allows you to earn revenue in Pounds. Should you come from an emerging market, not only do you invest in a larger market, you also hedge against the risks that come with other, more volatile currencies.
“Our investment philosophy has always stressed the importance of regional diversity. Investing in local markets can be easier but it does not provide protection should your local market face setbacks. Expansion into the UK has benefits including diversifying your investments and a safety measure should your other businesses experience a rough patch.
Setting up a business can lead to British citizenship
There are two main steps to this process: Establishing the business and then the business sponsoring
you on a UK Skilled Worker visa.
Starting a business in the UK
When a foreign national expresses interest in setting up in the UK, they need to prove their business
is legitimate. This process includes:
- Incorporating the UK entity
- Creating a UK bank account
- Registering for the relevant tax such as PAYE, VAT, and corporation tax
- Registering for auto-enrollment (the UK’s compulsory pension scheme) for qualifying employees
Once your business is established, you are ready to hire your first staff member. You must have a staff member already in place before you can apply for the company’s sponsor licence, as this staff member will need to fill “key personnel” roles as part of the licence application process.
Which business structure should I choose —a subsidiary or a branch?
“This is a common question raised before setting up in the UK. This is because subsidiaries and branches are both popular methods of business expansion into the UK. There are other methods, which we have outlined in previous blogs regarding the best company structure for your UK business and the benefits of each structure.
Hiring foreign workers as a UK business
To hire foreign nationals to work in the UK, your business needs to register as a licensed sponsor, said Brown. From here, you can issue a Certificate of Sponsorship which allows the employee in question to apply for a Skilled Worker visa or an Intra-Company Transfer (ICT) visa.
“You can be hired by your UK company through one of these visas. After living in the UK for five years on a Skilled Worker visa, you may be eligible for indefinite leave to remain (ILR). You may then apply for British citizenship by naturalisation one year after obtaining ILR or immediately after ILR should you be married to a UK citizen.”
Which UK visas do you need to start a new business in the UK?
Alternatively, you have the option to start a new business in the UK. The three visas for this are the Start-up visa, the UK Innovator visa and the Sole Representative visa.
The UK Start-up visa
The Start-up visa is for those looking to set up their first UK business and lasts two years. This visa does not have education or financial requirements but your business will need to be approved by an endorsing body that will need to confirm that the business idea is new, innovative and viable. After the initial two years, it is not possible to extend this visa, although it is possible to switch to the Innovator visa category if you have started a business while on their Start-up visa.
The UK Innovator visa
The UK’s Innovator visa allows businesspeople to relocate to the UK provided they have an idea unlike anything in the UK market. An Innovator visa is valid for three years and there is no limit to the number of times you can extend the visa. After three years on this visa, you may apply for ILR, should you meet all the requirements.
Sole Representative visa
You can apply for a Sole Representative visa if you are an employee of a non-UK business. This visa is valid for three years and allows you to establish a UK branch or wholly-owned subsidiary of an overseas business. The Home Office must be satisfied, amongst other criteria, that you will:
- Be recruited and employed outside the UK by an active and trading business (whose headquarters and principal place of business are, and will remain, outside the UK)
- Have the skills, experience and knowledge to do the role
- Hold a senior position within the business (but do not own or control the majority of it) and have full authority to make decisions on the company’s behalf
- Intend to establish the overseas business’s first commercial presence in the UK, either as a registered branch or a wholly-owned subsidiary
After three years, you may be able to extend the visa by another two years if you still qualify. After five years, you may be eligible for ILR. Should you no longer meet the criteria for the Sole Representative visa, you may be able to switch to another category of visa, such as a Skilled Worker visa, if you qualify. Depending on the category of visa you switch to, your time already spent in the UK on the Sole Representative visa may or may not count towards the five years required for ILR.
Therefore, it’s best to consult with a qualified immigration adviser before making the switch.
It is proposed that there will be changes to the ICT and Sole Representative visas with the introduction of the Global Mobility visa route in the first half of 2022.