UK subsidiaries for American companies

The United States sends more investment projects to the UK than any other country, by a wide margin. The Department for Business and Trade counted 239 American projects landing here in 2025 to 2026, creating 15,796 jobs. Second place was 93.

The structural questions are rarely the difficulty. The UK's smaller obligations carry short deadlines and penalties applied automatically, without a reminder.

What is different from home

• There is no state layer. One tax authority, one company registry, one set of employment rules across England, Wales and Scotland, with minor variations in Northern Ireland. No franchise tax, no state registrations, no registered agent in fifty places.
• VAT is not sales tax. It is charged at 20% at every stage and reclaimed by every business in the chain, so it is a cashflow item for the subsidiary rather than a cost, but it must be charged correctly from the first invoice and reported quarterly. It applies to services as well as goods, which sales tax largely does not.
• Payroll reports to the government on every payday, not quarterly. Employer National Insurance is 15% above £5,000 of salary and there is no wage cap on it.
• A workplace pension is compulsory. Staff are enrolled automatically and the employer must contribute at least 3% of qualifying earnings. It is not a benefit you choose to offer.
• Employment is harder to end. Notice periods are contractual and statutory, dismissal needs a fair reason and a process, and there is no at-will employment. Budget for that when you plan the UK team.
• The company's accounts go on the public register every year, and anyone can read them. Groups used to private US financials find this uncomfortable and it is not optional.

The three things we set up differently for a US parent

1. The accounting standard. A group reporting under US GAAP has a choice for the UK statutory accounts. FRS 102 is the default and is simplest. Where the group also reports under IFRS, FRS 101 keeps the recognition and measurement aligned so the UK numbers do not need a second set of adjustments at consolidation. We pick this at set-up, not at the first year end.
2. The shareholder entity. Where the parent is an LLC rather than a corporation, the two countries can treat it differently: the US may look through it to its members while the UK treats it as a company. That mismatch affects treaty claims and, occasionally, whether relief is available at all. It is worth ten minutes at set-up and can be expensive to unpick later. Where the group's US tax advisers have a view, we work to it.
3. Share awards. Stock options and restricted stock units granted by the US parent to UK employees are taxed through the UK subsidiary's payroll when they vest or are exercised, and every plan must be reported to HMRC by 6 July each year. Both obligations sit with the UK company even where the plan is administered in the US. Missing them produces a UK PAYE underpayment and an annual penalty for a return no one knew existed.

Money moving between the two

Dividends from the UK subsidiary to the US parent carry no UK withholding tax at all. Interest and royalties are different: UK tax is deducted at 20% from payments to an overseas company unless the treaty reduces it and the reduction has been claimed in advance. The UK and the United States have a comprehensive treaty. The rate on a specific payment depends on the article that applies and on the treaty's limitation on benefits provisions, so we confirm it in writing for the payment concerned and make the claim before the first payment rather than reclaiming afterwards.

People moving between the two

The UK and the United States have a social security agreement. An employee posted to the UK by the US parent can normally stay in US Social Security and Medicare for a defined period, with a certificate of coverage obtained in the US, rather than paying UK National Insurance. Income tax is a separate question and generally follows where the work is done. An executive who becomes a director of the UK company is taxable here on the pay attributable to UK duties from the first board meeting, which is covered on the overseas directors page.

When an employer of record stops making sense

Most American groups hire their first one or two UK people through an employer of record, and that is usually the right call: it needs no entity and works in weeks. The published rates are per employee per month, and one large provider lists $599 for its UK employer of record service. At three or four people the arithmetic turns, because a subsidiary's payroll and compliance are a fixed fee that barely moves as the team grows, while an employer of record charges per person every month. The other reasons to move are that customers and public-sector buyers often want to contract with a UK company, that UK research and development relief only reaches the company doing the work, and that the employment relationship sits with the group rather than a third party. We will tell you which side of that line you are on.