For EU based businesses there has never been a better time to think about expanding your business into the UK. Admittedly it is a big step to take but one that could prove financially rewarding as you could end up with a base in close proximity to the EU but without being tied to trading with all the EU regulations. Some EU business owners see the UK as the ‘best of both worlds’.
In this article we look at the legal requirements for EU businesses looking to expand their business into the UK.
Topics we discuss:
- Opening an office in the UK
- Staffing your UK office
- Business immigration and setting up a UK office
- Providing services to the UK
- Data protection
- Exporting from the EU to the UK
- Importing from the UK to the EU
- Intellectual property and UK business expansion
- Contracts and setting up a UK office
- Tips on expanding your business into the UK
Opening an office in the UK
If you are an EU business owner you may think that once the business pros and cons and the costs have been calculated it is a straightforward exercise to buy or rent commercial premises or office space in the UK, especially as in the UK there are no foreign ownership restrictions or limits on foreign investment into the UK. However, whilst commercial property solicitors can help your company buy or rent the right UK office or business premises, you first need to think about the company structure of your UK base and how you plan to staff the offices.
Initially, you will need some expert accountancy and corporate law advice on your company structure options. From a legal or financial perspective, it may be best for your EU based company to set up a UK branch or a wholly owned subsidiary company of your EU parent company. Either option is feasible in the UK, but the best option will largely depend on the company and tax laws in the EU country where your parent company is based and your long-term business plans. For example, if you see the UK as a springboard to opening up trading with non-EU countries because of existing or planned trade deals negotiated by the UK government as part of its post Brexit business strategy.
Once you know what type of company or partnership structure best meets your short-term and long-term business expansion goals the next practical consideration is where you should base your offices in the UK. That decision may come down to the nature of your business and any geographic or transport needs, or the importance of being located or clustered near other digital or tech companies so you can feed off their success and the ready availability of skilled workers or component parts.
Financial incentives may also be a key consideration. In some areas of the UK there are grants available to overseas companies looking to invest in the UK. The availability of financial incentives may depend on the nature of your business, the proposed office location in the UK and the number of planned job opportunities. One example of financial incentive programmes for UK offices is the Innovate UK scheme.
For government advice on expanding your business into the UK take a look at the Department of International Trade website.
Staffing your UK office
When you know roughly where to open an office in the UK and its corporate structure then comes the tricky questions of how to and who should open and operate the office. Prior to Brexit and the end of free movement for EU nationals your decision would have been relatively easy as any of your existing EU based directors or senior executives could have travelled to the UK, free of immigration control, to head up the UK office. Things aren’t that simple now unless the person you want to head up and run your UK office is:
- A British citizen or a person who is settled in the UK. For example, the person has indefinite leave to remain in the UK
- An EU national with settled status or pre-settled status under the EU Settlement Scheme. Full details of the EU Settlement Scheme can be found in the immigration rules appendix EU
- An EU citizen or non-EEA national who qualifies for a UK business visa or work visa
For any initial trips to the UK by you, or EU nationals in your employment, to scope out and report on the opportunities to set up an office in the UK you probably won’t need a UK visa. This is because EU nationals are able to come to the UK for up to six months without requiring a visa if they aren’t working and are only carrying out what are referred to as ‘permissible business activities’ whilst either in the UK without a visa or in the UK on a standard visitor visa. Full details of permissible business activities are contained in the immigration rules appendix visitor and can be found on the government website.
Business immigration and setting up a UK office
If you decide to set up a UK branch or subsidiary of your EU parent company the likelihood is that you will want someone to head up the UK office who knows and understands your business and how best to operate it from the UK, rather than recruit someone in the UK who may know about how businesses operate in the UK but who doesn’t have the knowledge and experience of your particular business. Unless the person or staff selected to head up and work in the UK office are British citizens or have settled status, through indefinite leave to remain or under the EU Settlement Scheme, they will require a business visa or work visa under the UK points-based immigration system operated by the Home Office (also referred to as UK Visas and Immigration or UKVI).
The most appropriate form of business visa may be the sole representative visa, as this business visa is specifically designed for employees of overseas companies looking to send a senior employee to the UK to set up a UK office through the establishment of a branch office or subsidiary company.
The main company requirements for the sole representative visa are:
- The business is active and trading overseas with its headquarters and centre of operations based outside the UK with the plan that the company will remain headquartered outside the UK
- The business has no active branch, subsidiary or representative in the UK to represent the business
- The company genuinely intends to establish the company’s first registered branch office or a wholly owned subsidiary in the UK that will trade in the same type of business as the overseas parent company
- The setting up of the UK office isn’t designed to facilitate the entry of the Sole Representative
For more information on the sole representative visa read our article on Sole Representative Visa Guidance.
If you elect to employ a British citizen, or a person with settled status, to run your office you may still want to ensure that your business practices are adopted by the UK branch or subsidiary. This can be difficult without an ‘on ground’ physical presence, but it can be achieved through the UK branch of your EU based company applying to the Home Office for a sponsor licence. That way, as a sponsoring employer, the UK office can sponsor an EU based employee from the EU based parent company on an intra company transfer visa. This transfer visa enables an employee to transfer their employment from an overseas based company to the UK branch or subsidiary, provided the applicant meets the visa eligibility criteria. For more information on the intra company transfer visa read our article on the intra company transfer visa.
As your UK office expands your business may require additional employees. One anxiety may be over whether your company will be able to recruit suitable candidates because of the UK skills shortage. If the UK branch of your company applies to the Home Office for a sponsor licence, the UK office will be able to recruit job applicants from EU and non-EEA countries who are subject to immigration controls. That can be achieved by the UK office sponsoring skilled migrant workers to work for the company on skilled worker visas.
It is best to understand the sponsorship process from the outset of setting up a UK office so your business is geared up to being able to recruit the employees you need in the UK with the requisite skills and experience. For additional information on sponsor licences read our articles:
- Sponsor licence: Guidance for employers
- A guide to employing overseas workers
In addition to potential visa requirements all employees, regardless of nationality or immigration status, need to pass a right to work check prior to commencement of employment in the UK. Read our Guide on right to work checks and preventing illegal working to learn more.
Providing services to the UK
If your EU based business is in the services sector and you are planning to set up an office, branch or subsidiary company in the UK then you will need expert legal advice on UK regulations relevant to your industry sector. For example, if your business is providing financial or insurance related services you will need to comply with the Financial Conduct Authority or other regulatory body.
If your business is in the personal services industry then, as well as checking the UK regulations for the provision of the particular service you will be offering, your commercial solicitors will also need to ascertain if you will need a licence from the local authority to set up a UK based business, or if you will require change of use planning permission to operate your service-based business from specific commercial premises.
If you are setting up an office in the UK then EU businesses need to be aware of The Data Protection Act 2018 and the interplay with the EU General Data Protection Regulation (GDPR).Regulation (EU) 679/2016 on the processing of personal data and on the free movement of data came into force in May 2018 in the EU. The Data Protection Act 2018 (DPA) was brought into force in the UK for those areas of data protection to be dealt with under UK national law.
Until the end of the Brexit transition period on the 31 December 2020, all EU data protection laws applied in the UK together with all UK specific data protection legislation, such as the UK Data Protection Act 2018. On the 1 January 2021, the EU GDPR ceased to directly apply to the UK. However, it became part of UK domestic law subject to amendments to make GDPR UK specific. This is referred to as the UK GDPR.
If your business is based in the EU but has an office in the UK you may need to comply with both EU GDPR and UK GDPR. That is because the regulations have extra-territorial effect. Therefore, if you are setting up an office in the UK, it is crucial that you consider GDPR compliance with both regimes and with the regulations on both employee data and business data. Whilst this may sound complex, the EU has said that the UK GDPR provisions pass their adequacy test. So, this does simplify matters to a certain extent, however, it is still important to ensure that the EU base and your new UK office are complying with the right GDPR provisions or, where necessary, both sets of regulations.
Complying with both sets of GDPR regulations may not be as complicated as it sounds provided you get the right professional support and your business is organised. The first step is to map the data flow anticipated between the EU and UK offices to ensure compliance with the relevant GDPR and to assess how best to record data activities to remain GDPR compliant. In addition, commercial contracts may need to be written with up-to-date GDPR provisions given the EU centre of operations for the business and its UK base.
Finally, with data protection, it is important to keep up to date. The UK government has announced the appointment of a new information commissioner and its intention to overhaul privacy rules and to move away from European data protection regulations. However, with an eye to trade, the UK government announcement was tempered by an indication that any changes to UK GDPR would be limited by the need for the UK GDPR system to be deemed adequate by the EU to avoid data transfers between the UK and EU being frozen.
For more information on UK GDPR read our articles:
- Your business guide to GDPR compliance
- Data Protection FAQs
- Data transfers from the EU: standard contractual clauses (SCCs) explained
Exporting from the EU to the UK
The rules on exporting from the EU to the UK changed with the end of the Brexit transition period on the 31 December 2020 and the end of the free movement of goods. The rules on exporting goods into the UK depend on the nature of the item coming into the UK. The UK government has produced detailed guidance at EU business: exporting into the UK. There is also guidance on EU businesses: taxes and tariffs.
Importing from the UK to the EU
If you are importing from the UK to the EU, as part of your setting up an office or base in the UK, then your business needs to understand the post Brexit custom rules that apply to the importation and exportation of goods into and out of the UK.
Firstly, to import goods from the EU into England, Wales or Scotland your business will need an Economic Operators Registration and Identification number (EORI number) that starts with GB. Different rules apply if you are importing from the EU to Northern Ireland. For guidance on the steps your business will need to take check out the government guidance on exporting goods to the UK.
Intellectual property and UK business expansion
Intellectual property (IP) is often forgotten in the rush to set up a new office, despite many business owners understanding just how valuable IP is in the modern age. Without a strong IP strategy and adequate IP protection your company brand and reputation is at risk and that just isn’t acceptable for any international company.
If you are opening up an office in the UK you need to think about whether any existing patents and IP rights already apply to your business in the UK. If they don’t apply then you need expert IP legal advice on how to best protect your assets. Even if your IP is protected in the UK, you also need to think about your long-term business goals and market expansion plans. If the UK office is to be used as the non-EU base to focus international expansion on then it is crucial that your IP in the UK is capable of protection from any international threats.
Contracts and setting up a UK office
When setting up a UK office of your EU based company it is tempting to assume that you can get your existing commercial contracts translated into English and used as a template by your UK office. It isn’t as simple as that as any UK commercial contract will need to comply with UK law and, where there is a choice of law and jurisdiction, you will need to choose wisely on jurisdiction, with the help of an English commercial solicitor.
Tips on expanding your business into the UK
Any business, large or small, can feel overwhelmed by the task of setting up an office or branch in another country. Although the UK’s departure from the EU leads to business opportunities for the ambitious, it also means that there is more red tape involved in setting up an office in the UK as post Brexit UK and EU regulations are no longer near identical. However, that divergence really opens up markets for EU companies willing to tackle the initial hassle of setting up an office in the UK.
Our tips on expanding your business into the UK are:
- Do your research – so you know the UK market and how a base in the UK might better open up global trade opportunities.
- Get professional help – that doesn’t just mean UK based commercial lawyers who can provide seamless expert legal advice on topics such as commercial property, contracts, employment and business immigration, but also advice from UK based business consultants and accountants. Working as a team, professional advisors can ensure your business gets the comprehensive professional advice you need that will not only make the opening of a new UK office easier, but it could also save your business money.
- Be patient – whilst it is tempting to rush setting up a new UK office it is best to be patient and accept that things are done differently in the UK than say in Germany, Italy or France. Some things are relatively efficient and speedy but other aspects of setting up a UK branch of your EU business can take time, such as securing any necessary local authority planning consents or licensing grants.
- Have a long-term strategy – so you don’t cut corners in your UK office set up and instead focus on getting things right for the future. For example, by recruiting the right staff to manage the UK office so they can action your company long term expansion plans across the UK or even beyond the UK.