UK subsidiaries for Australian companies

Australia sends 32 investment projects to the UK a year. UK and Australian company law share a vocabulary. The rules underneath it diverge in several places.

Where the two diverge

• No franking. UK corporation tax paid by the subsidiary does not attach to the dividend as a credit. The dividend leaves the UK with no withholding tax, and how it is taxed in Australia is for your Australian advisers.
• Superannuation is not the same as auto-enrolment. The UK employer minimum is 3% of qualifying earnings, not 12% of everything, and the employee contributes too. Do not budget the Australian rate.
• Employer National Insurance at 15% has no cap, unlike some Australian on-costs, and applies above £5,000 of salary.
• Payroll reports on every payday, which is closer to Single Touch Payroll than to a quarterly return, so that one is familiar.

The timezone

The practical problem for an Australian parent is that UK business hours are the middle of the Australian night. Buzz was built as a remote practice before it had an overseas client, so the UK company's finance runs on UK time with us: HMRC, the bank, suppliers and staff all deal with someone here during the UK day, and the group gets a written position rather than a phone call at 2am.

Money and people

Dividends to the Australian parent carry no UK withholding tax. Interest and royalties carry 20% UK tax at source unless the UK–Australia treaty reduces it and the claim has been made in advance; that treaty reduces rather than removes the rate, so expect a real deduction and a corresponding credit at home. The UK and Australia have a social security agreement covering posted workers.

Three things we set up differently for an Australian parent

1. The reporting rhythm. UK business hours are the middle of the Australian night, so the default of "head office will handle it" fails quietly. We run the UK company's finance on UK time: HMRC, the bank, suppliers and staff all deal with someone here during the working day, and the group receives a written position rather than a call at 2am.
2. Superannuation expectations reset. The UK workplace pension minimum is 3% of qualifying earnings from the employer, not 12% of everything. Budgeting the Australian rate materially overstates the cost of a UK hire; budgeting nothing understates it, because the pension is compulsory.
3. Franking, which does not exist here. UK corporation tax paid by the subsidiary does not attach to the dividend as a credit. The dividend leaves the UK with no withholding tax at all, and how it is taxed in Australia is for your advisers there.

Where the two diverge

Australian groups find UK company law recognisable, which is mostly an advantage. The traps are where the vocabulary matches and the rule does not. Employer National Insurance at 15% has no upper limit, unlike some Australian on-costs. There is no at-will employment. Audit is decided by the size of the whole worldwide group rather than by the UK company's own numbers, so a small UK subsidiary of a substantial Australian group will usually need one.

One genuine similarity: UK payroll reports to HMRC on every payday, which is much closer to Single Touch Payroll than to a quarterly return, so that part will feel familiar.