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Although a UK company can do a reasonable amount of business in another country without a taxable presence in that country, eventually the company may need to consider whether to establish a more formal presence in such a country. This is generally done by way of a branch (also called a permanent establishment or PE) or subsidiary. For a a discussion of when this decision should be considered and a general introduction to the tax issues that can arise when a UK company decides to expand overseas, see the Setting up overseas ― companies guidance note.

The decision will often usually depend on commercial factors, particularly where there are regulatory requirements. For example, a branch rather than a subsidiary may be greatly preferred where regulatory requirements demand a particular level of capital as this may be more easily satisfied through a branch structure where the parent company capital is taken into account.

Where there is no particular commercial pressure for one legal form over another, tax issues may influence the decision.

Note