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Why SA entrepreneurs should choose the UK for business

Jul 5, 2018
Why SA entrepreneurs should choose the UK for business

The ease of doing business, skilled workforce, extremely low corporation tax rates and potentially high return on investment are compelling reasons South African entrepreneurs are looking to the UK to set up businesses. Scott Brown, managing director at Sable International, says that while the idea may initially seem daunting for those not born and raised in the UK, the process can be smooth sailing and hugely rewarding if you are willing to wade through the intricacies of British bureaucracy.

The UK is perfect for business

South Africans who have aspirations of expanding their company overseas or starting a new one in a foreign land, the UK is an excellent choice. Its business-friendly laws and regulations plus its proximity to Europe make it a favourite for international businesses. It also has one of the lowest corporate tax rates in the developed world.

“If you are planning to expand your business to the UK, then having a good understanding of the UK market is vital. You’ll also need to know how best to take advantage of all the benefits offered to entrepreneurs in the UK. You should always take the time to do some proper market research and seek locally-based expert advice to make sure that when you start up a business in the UK, you start up right,” comments Brown.

First things first…

When deciding to expand into, or set up a business in, the UK, one of the first decisions to make is whether to open up a subsidiary or a branch. These structures are very different, so deciding on which one to go with requires careful consideration. Let’s take a look at both options in more detail.

Setting up a subsidiary in the UK

A subsidiary operates as a separate legal entity from its parent company. To set up a subsidiary, South Africans will effectively need to create a new UK company. Setting up a subsidiary can involve some red tape, but the autonomy from the parent company definitely outweighs the initial administrative hassle.

Since subsidiaries are wholly governed by UK law, UK companies will be far more willing to enter into contracts with your company. Furthermore, the parent company won’t be held accountable for the decisions or actions of the company based in the UK.

It’s important to note that the type of business structure you choose will impact how you file for your taxes, whether you qualify for any tax benefits and the amount of paperwork that will be required by HM Revenue & Customs (HMRC). It’s wise to seek the advice of a specialist SME accountant before making your decision. 

Setting up a branch in the UK

A UK branch functions as an extension of the parent company’s operations. The branch is dependent on the parent company. The advantage of opening up a branch is that it may defer its legal liability to its parent company; or, it might share the liability with its parent. A subsidiary cannot do this, as it is a separate entity in its own right.

“Another benefit is that, should your business in the UK be unsuccessful, you can close the branch without formal notice,” says Brown.

There are some disadvantages too. A UK branch of a non-UK company is not recognised as a UK legal entity. This means that the overseas-based parent company can be held directly liable for any claims or liabilities arising from the actions of that branch. In addition to this, other UK companies (like suppliers) could be less enthusiastic about entering into contracts with branches of foreign-based businesses because branches of overseas companies are subject to non-UK laws, which can complicate matters very easily.

What about tax?

The difference between a branch and a subsidiary from a tax perspective is that a subsidiary will be subject to UK Corporation Tax on all is profits from the UK and abroad, whereas with a branch, you will only pay Corporation Tax on the profits made in the UK.

It’s a good idea to consult a tax expert to discuss the pros and cons of each business entity. They will also be able to ensure that you fully comply with not only Corporation Tax but all other company taxes that might apply. Your UK operation will need reliable accountancy services to ensure that you always remain on the right side of the law.

The unique Tier 1 (Entrepreneur) visa solution

Not only is it relatively easy to do business in the UK, but they’ve also created a special visa for entrepreneurs. If a South African would like to set up a new business or invest in an existing business in the UK, one way they can do so is by applying for a Tier 1 (Entrepreneur) visa. This visa offers foreign nationals the chance to obtain UK residency through a £200,000 investment into a UK business. The initial visa is valid for three years and four months.

South Africans can still qualify for the Tier 1 (Entrepreneur) visa even if they are not setting up their own business in the UK or haven’t identified one in which to invest.

“Our UK Tier 1 Entrepreneur Investment Programme is a bespoke UK citizenship by investment programme that is based on the Tier 1 (Entrepreneur) visa. With this innovative programme, we match the investors’ skills and experience with a range of pre-qualified investment opportunities. We have access to a list of over 200 pre-approved investee businesses and can ensure that your investment is made in an operation that you can positively contribute to,” says Brown.

The qualifying criteria needed to meet in order to be eligible for this visa include, but are not limited to:

  • Access to £200,000 investment funds and be able to prove that the money is free to spend on a business in the UK
  • Meet the English language requirement
  • Be an active director in that business
  • Score 95 points on the immigration points-based system

Sable’s specialist immigration advisers can help with visa application. They can also assist with other business-related services, including corporate legal and accounting services, monitoring and mentoring of the business and wealth management.

“Another great thing about this visa is that if your application is successful, you can bring your partner and children (under 18 years) with you to the UK. They will be able to stay with you for the duration of your Tier 1 (Entrepreneur) visa,” adds Brown

Make the UK your permanent home

“The Tier 1 (Entrepreneur) visa can be extended for a further two years. If you eventually decide that you love living in the UK and want to live there permanently, this visa also counts towards qualifying for residency in the UK, leading to indefinite leave to remain (ILR). Any dependants that you’ve brought with you to the UK would also be able to extend their stay and obtain ILR. This makes our UK Tier 1 Entrepreneur Investment Programme perfect for you if you’re thinking about selling up and permanently immigrating to the UK,” concludes Brown.