14 August 2025
Subsidiary vs branch office in the UK: which is right for your business?
The UK remains a top choice for international expansion, offering a robust economy, access to global markets, and a skilled workforce. But before you hire employees or sign contracts, you’ll need to decide how to establish your presence.
There are three main options for international companies entering the UK:
- Setting up a subsidiary (usually a private limited company)
- Registering a branch office
- Partnering with British Employer of Record (EOR)
In this guide, we’ll compare these routes in terms of legal, tax, and operational impact to help you choose the right structure for your expansion.
Clarifying terminology: subsidiary vs legal entity
The term “subsidiary” typically refers to a UK private limited company (Ltd) that is owned by a foreign parent. It’s one form of a broader category: legal entities, which includes Ltds, LLPs, and other incorporated structures.
We’ll use “subsidiary” when discussing the Ltd setup specifically, and “legal entity” when referring to incorporation options in general.
What is a UK subsidiary?
A subsidiary in the UK is a separate legal entity, usually set up as a private limited company (Ltd), and registered with Companies House and HMRC. It operates independently from the parent company and is responsible for its own taxes, liabilities, and contracts.
Pros
- Strong local presence
- Greater autonomy and credibility
- Suitable for long-term investment
Cons
- More time-consuming and costly to establish
- Heavier administrative and compliance burden
- Requires UK tax registration and corporate governance
What is a branch office in the UK?
A branch office is not a separate legal entity. Instead, it’s an extension of the foreign parent company and is registered with Companies House as an overseas company.
The parent company remains liable for all UK operations. Branches must also register with HMRC if engaging in taxable activity.
Pros
- Faster and cheaper to set up than a subsidiary
- Fewer tax obligations and local governance requirements
Cons
- Limited operational independence
- Public disclosure of parent company financials
- Less flexibility for hiring and contracting
Subsidiary vs branch: key differences for employers
What about Employer of Record (EOR)?
An Employer of Record (EOR) is a third-party provider that hires employees on your behalf in the UK. You retain day-to-day management, while the EOR handles payroll, compliance, contracts, and tax filings.
Importantly, there’s no need to set up a subsidiary or branch.
EOR is ideal for:
- Testing the UK market before full investment
- Hiring UK talent quickly
- Avoiding the costs and delays of incorporation
- Complying with local labour laws without legal risk
Comparison table
When should you choose each model?
Subsidiary
Best if you:
- Want full control over UK operations
- Plan long-term investment and local partnerships
- Need to build brand credibility with clients, regulators, or banks
Branch office
Best if you:
- Want to maintain a low-profile presence
- Don’t need a separate legal identity
- Prefer minimal admin and cost
EOR
Best if you:
- Need to hire UK employees quickly
- Want to test the market before committing
- Lack resources to manage UK compliance
- Prefer to avoid long-term legal obligations
How British Employer of Record simplifies UK expansion
Working with a British EOR gives you:
- Full legal compliance with UK employment laws and HMRC
- End-to-end management of payroll, benefits, and tax reporting
- Legally sound employment contracts and protection from misclassification
- Fast hiring—onboarding UK staff in a matter of days
- Risk mitigation without setting up a branch or subsidiary
Whether you’re hiring one remote employee or building a small UK team, an EOR lets you expand in the UK without the legal headaches.
Choosing the right model for your UK strategy
Choosing between a subsidiary, branch, or EOR depends on your goals, budget, and timeline. Each model has its place:
- Subsidiaries suit long-term strategic investment
- Branch offices fit companies needing a simple presence
- EOR is ideal for fast, flexible hiring with minimal overhead
Need help deciding? Speak with our experts to explore how you can start hiring compliantly—without setting up a legal entity.
