1

SUPPORT PACKAGE

investinmanchester.com

1

ContentsHELLO Manchester 2

Key benefits 3

Legalities

Setting up in the UK: the business vehicle 5

Tax in the UK: the essentials 8

Acquisitions: the considerations 12

Using the intellectual property to build balance sheet value 14

Legal and professional services 16

Practicalities

Finding the right property 18

Finding the right people 20

UK employment law 21

Making the best connections 24

32

HELLO ManchesterHELLO Manchester is a service that offers free and discounted office space to overseas investors along with a full range of business support.

The ‘soft landing’ initiative provides businesses with the opportunity to establish a foothold in Europe’s top city for business competitiveness with minimal risk and cost.

Companies taking advantage of this service benefit from unrivalled access to market and networks, plus the chance to internationalise their company and build a customer base before making significant capital investment.

All of this is underpinned by a first-class property portfolio, a vibrant quality of life and free business support from MIDAS, Manchester’s award-winning inward investment agency.

This guide will provide you with an overview of what’s included in the HELLO Manchester package, as well as some expert insights into setting up business operations in the UK.

Key benefitsBusinesses that utilise the HELLO Manchester service can benefit from free or heavily discounted office space, as well as a range of discounted professional services to receive a full range of business support.

Manchester is a leading business location and the HELLO Manchester package provides companies with easy access to one of Europe’s largest markets.

Companies can take advantage of up to six months free desk space for one person in fully serviced accommodation in key locations across Greater Manchester.

The rent-free desk space is supported by a full package of business services from some of the city’s leading providers, which includes:

• Legal and IP advice• Consultancy and accounting• Membership, marketing and PR

4 5

Legalities

Setting up in the UK: the business vehicle By Giles Chesher, Partner at Squire Patton Boggs

You may be setting up business in Manchester by means of the acquisition of an existing UK business. If you are not setting up business in the UK by means of an acquisition, you will need to consider what vehicle is most appropriate for your purpose.

The most common form of business vehicle used by overseas companies is a private company limited by shares, a “subsidiary”. The second most popular vehicle is a “branch” or other place of business. Other types of legal entities are available (e.g. limited liability partnerships), which are more appropriate if you are setting up business with a partner.

The main differences between a subsidiary and a branch

A subsidiary is a UK-registered company owned by another company. It is a separate legal entity distinct from the person who owns it (the overseas company) and the people who manage it (the directors). The liability of the owner of a subsidiary for the acts of the subsidiary is generally limited to the nominal value of the shares the owner has agreed to acquire within it. A branch, by contrast, is not a separate legal entity: it is an extension of the overseas company, i.e. a local division or operating unit of the overseas company, which remains directly liable for any losses or liabilities sustained, or wrong-doings committed, by the branch.

UK-registered company owned by another company

Subsidiary

An extension of the overseas company

Branch

6 7

The key features of a subsidiary

The setting up of a branch is essentially an administrative procedure that involves filing certain documents with the companies registry (known as Companies House). Forming a subsidiary will, however, create a new legal entity so it is important to highlight the key features of a subsidiary company.

Choosing between a branch and subsidiary

The choice between the two vehicles is likely to be based on a mixture of commercial, legal and tax considerations, including the exact nature of the operations to be conducted in Manchester/the UK and the other matters outlined below:

• whether it is desirable and/or feasible to limit the overseas company’s exposure of/to the Manchester operations. In this case, the Manchester/UK operations should be established through a subsidiary.

• whether the Manchester operation is expected to incur high levels of capital expenditure or start-up losses. If so, a UK branch of an overseas company may allow earlier use of that capital expenditure or those losses as a set-off against current profit.

• whether there is, or will be, more than one UK business. In this case, the UK structure should enable UK profits and losses to be aggregated. This will require either all the businesses to be carried on through the same legal entity or the establishment of a UK tax group structure.

The incorporation of a private company in the UK is both simple and quick; it can be done in one day. There is no minimum share capital requirement and no nationality or residence requirements for directors or shareholders. There is also no requirement to obtain a trading certificate.

Incorporation

Ownership of a company is attained by the acquisition of shares in its share capital and the registration of the name and details of the shareholder in the company’s share register. Shares may be denominated in units of any currency, including currencies other than pounds sterling. Shares may be divided into different classes, with each class carrying different rights (e.g. voting, dividends and return of capital).

Share capital

Management/directors

The management of a company is vested in its directors who are initially appointed by the shareholders. Subject to the minimum requirement of one director for a private company (two for a public company), there are no other requirements as to the number of directors. Provided one of the directors is a person, all remaining directors may be corporate entities and there are no nationality or residence requirements. A person appointed as “managing director” will usually have extensive implied powers to supervise the day-to-day business of the company.

Role of the shareholder/s

The shareholders (who there may be one or more of) exercise control over a company by making decisions (“passing resolutions”), generally on a majority basis. However, there are some decisions, such as an alteration to the company’s constitution, that require the consent of 75% or more of the shareholders. The identity of individuals and legal entities with significant control or influence over a private limited company must be made available to the public on a register.

Accounts

In general, all UK companies must produce annual accounts audited by a firm of accountants practising in the UK. One set of accounts must be filed at Companies House, thereby becoming publicly available information. There are, however, exemptions from the requirement to prepare and file accounts for dormant companies and for those companies with a low turnover and balance sheet total.

Registered office

An English company must have a so-called “registered office” in England and Wales. This may be the company’s principal place of business or the office of its accountants or lawyers. The company must keep its statutory records either at the registered office or at an alternative location in the UK and notify Companies House.

Incorporation

Share capital

Accounts

Management/ directors

Role of the shareholder/s

Registered office

8 9

Tax in the UK: the essentials By Deloitte

Income tax and National Insurance

Individuals who are resident and domiciled in the UK are subject to tax on their worldwide income and gains. Income tax is charged at progressive rates and depends on the type of income a person has. The first £12,500 of income earned (2019/20) is a tax free ‘personal allowance’, but any income earned above this amount will be charged at the rates of:

Tax Rate Taxable income

Basic rate (20%) £12,501 to £50,000

Higher rate (40%) £50,001 to £150,000

Additional rate (45%) Over £150,000

Both employers and employees make contributions to the UK’s social security system, National Insurance, to qualify for certain benefits and the State Pension. It is paid as a percentage of the gross salary paid to an employee, but various rates and thresholds apply dependent on individual circumstances.

The UK has long been an attractive location for overseas business and it is now the leading destination for foreign direct investment in Europe.

Its geographical location, economy, and business-friendly legal system have encouraged companies from across the world to seek investment opportunities in the UK, which also serves as a springboard to doing business in other European countries.

Government tax reforms have made the UK a very competitive and attractive place to do business, however there are a number of taxes international companies looking to operate in the UK should consider before investing, to avoid any potential pitfalls.

Corporation tax

Corporation tax is chargeable on a company’s tax adjusted profits. UK resident companies are subject to paying it in on their worldwide taxable profits (subject to exemptions), whereas an overseas entity trading in the UK through a branch or ‘permanent establishment’ is subject to paying corporation tax on profits relating to UK activities.

The rate of corporation tax in the UK is 19% as of April 2017 but is scheduled to reduce to 18% from April 2020. Special rates can apply to companies in certain industries including oil and gas, financial services and real estate.

Different rules apply for when a company pays their tax, e.g. quarterly, dependent on the size of the business, but corporate tax returns must be filed within 12 months of the accounting period end.

Current rate of UK corporation tax

19%

UK rate of corporation tax from April 2020

18%

Available for certain industries

Special rates

Tax free ‘personal allowance’

£11,850

10 11

Tax Incentives

The range of innovation incentives, including research and development credits as well as the patent box regime) available in the UK make it an even more desirable location to do business, making it an attractive choice for intellectual property rich businesses.

The UK has become a popular location for businesses to establish research and development (R&D) operations, as tax incentives are available to companies undertaking innovative scientific or technological research work.

They are most attractive to small to medium-sized companies, which benefit from an enhanced tax deduction of 230% and those with tax losses can claim back around a third of every £100 spent on R&D from HMRC.

There are also creative industry tax reliefs and incentives of up to an additional 100% that may benefit overseas companies setting up in the UK, such as those involved in:

• Film production and animation• Video gaming• High-end television broadcasts (including

children’s television programmes)• Orchestral concerts • Theatrical productions

The UK Patent Box also allows companies to elect to apply a 10% corporation tax rate to all profits attributable to qualifying patents. It covers a broad range of sectors and incentivises companies to retain and commercialise existing patents and to develop new, innovative patented products.

Value Added Tax (VAT)

VAT is chargeable by a taxable person on most supplies of goods and services made in the UK in the course of a business, regardless of whether the sale is made by a UK or EU supplier. It is also chargeable on the importation of goods and some services imported from countries outside the EU.

Businesses act as VAT collectors, paying the UK tax authorities the tax paid by their customers and receiving a credit for the tax they pay to suppliers. VAT is offset at each stage until the goods or services reach the final consumer or an exempt business.

Registration is compulsory for businesses if their taxable turnover exceeds £85,000 in the previous 12 months or in a 30 day period.

The standard rate in the UK is 20% and is applied to most goods and services; however there is a reduced rate of 5% for certain items as well as some specific zero-rated reliefs and exemptions. Rates are dependent on the type of goods or service a company provides and there are some exemptions from VAT that therefore do not count towards the threshold amount.

Turnover at which businesses must become VAT registered

£85,000

Standard UK tax rate

20%

1312

Acquisitions: the considerations By Alistair Cree, Corporate Partner at Eversheds Sutherland

Investors are often drawn to the UK by instant access to the world’s fifth largest economy and a highly skilled workforce but when considering expansion into the UK, foreign companies may look to incorporate a subsidiary or branch of their existing company within the UK and grow this establishment organically. However, a quicker route often involves the acquisition of the business of an existing UK company.

The benefits of doing this include obtaining immediate access to market and sector knowledge, existing staff and skills, committed funding and a ready-made customer base; however, acquisitions are not without risk and foreign investors should ask themselves the following questions when contemplating any corporate acquisition:

Structure

Will the acquisition be structured as an acquisition of shares (where the target company is purchased inclusive of all assets and liabilities from its shareholders) or as an acquisition of assets (where specific assets and liabilities of the target company are purchased from the target company itself)?

1

4 Consent

Are there any consents required to the completion of the acquisition (e.g. anti-trust or financial regulatory consents)? If so, there may be a need for the acquisition to have a separate “exchange” and “completion” to allow time to obtain the required consent(s) following the parties contractually committing to each other.

2 Funding

How will the consideration of the acquisition be funded? Will this be in cash or in some other form (i.e. stock in the foreign company)? Will all of the consideration be payable on completion of the acquisition, or will some be deferred or made subject to the performance of the target company following completion?

5 Warranties

Will any warranties be given by the selling shareholders or selling company? Will the sellers provide tax indemnity in respect of non-ordinary course tax?

3 Testing

If there is an acquisition of shares, will various financial metrics of the target company (such as Net Assets, Net Debt or Working Capital) be tested at completion by reference to accounts drawn up specifically for the purpose (with a post completion true-up following completion)?

6 Employees

How are employees to be treated? With an acquisition of assets, the TUPE Regulations are likely to apply, preventing the acquirer from “cherry-picking” employees from the selling company (and protecting in law the employment terms of the employees following completion.

14 15

Using intellectual property to build balance sheet valueBy Andrew Allan-Jones, Head of Intellectual Property, and Andrew Rankin, Legal Director, at DAC Beachcroft LLP

How to create value from a brilliant idea

Confidentiality is the starting point for all intellectual property protection. Once you’ve had an idea and identified that it’s worth building into a product or service, it’s essential that you keep it confidential before you start engaging potential investors, collaborators or advisers. As you start to involve other people, you must make sure that you have a confidentiality or non-disclosure agreement (NDA) in place with them. This gives you time to make the next decision: how to protect your IP.

NDASometimes the best approach is simply to maintain your confidentiality by keeping information secret and only disclosing it under an NDA. This works well for manufacturing processes and secret recipes (like the Coca-Cola recipe) where your customers don’t get to see the inner workings of your business.

PatentsFor technical inventions, patents provide strong protection for 20 years but will cost several thousand pounds to secure and maintain. Patents can protect everything from pharmaceuticals and software to plumbing products.

International law firm DAC Beachcroft advises on all aspects of business law. Its intellectual property (IP) Team helps businesses in Manchester and beyond get the most from their intellectual creations.

Non-disclosure agreement

NDA

Protection for technical inventions

Patents

Product protection for software/creative work

Copyright

Protection for brands

Trademarks

CopyrightSoftware and creative businesses will be able to make the most of copyright protection in their products. This arises automatically if you or your employees create it, just make sure you keep records of the original documents or files. If you get work done by contractors make sure your contract with them transfers the IP rights to you.

TrademarksFinally, trademarks protect your brand. This can often be the most important piece of IP, with brands like Apple being valued at $170Bn and Google at $102Bn in 2017. Picking a brand that is not descriptive of your product and is not too similar to a competitor’s gives you the best chance of getting trademark protection. Once you start marketing and selling products or services you get some automatic protection, but it is a good idea to get trademark registration. This makes it easier to protect your brand later.

16 17

Legal and professional services

We can help companies connect to Manchester’s vast network of legal and professional support services to ensure their efficient establishment in the city region.

There is a lot to consider when setting up a business in the UK, but MIDAS’ range of partners can provide practical advice on anything from establishing a company in the UK and VAT to tax incentives and intellectual property; to ensure businesses have the best chance of success.

Get in touch with the MIDAS team to find out more about what discounts and benefits some of our partners offer.

Practicalities

1918

When setting up a business in the UK, we understand the importance of finding a property that meets your needs.

Whether you require co-working or incubator space, a state-of-the-art lab, large scale manufacturing space or Grade A offices, MIDAS can help. It’s all about location, location, location – so we work closely with local property agents as well as the local authorities to explore real estate options to meet your requirements.

Get in touch with the MIDAS team to find out more about what discounts and benefits some of our partners offer.

Finding the right property Office developments

• Anvic• Bruntwood Neo• Orega

Specialist hubs and communities

• The Landing• Manchester Science

Partnerships• Stockport Business and

Innovation Centre

Co-working spaces

• Headspace• WeWork• Workplace

Conduct searches of commercial property

databases to find suitable potential

properties

Give access to free or discounted desk space

for up to six months

Offer in-depth location insights and advice

Work with our contacts and partners to secure the best possible deal

Provide practical support including property viewings

How MIDAS can help

20 21

Finding the right people

With more than 7.2 million people within a one-hour commute as well as 100,000 students across the city’s five universities, Manchester provides companies with access to a skilled and sustainable workforce.

We know that putting the right team in place is the cornerstone to a successful expansion or relocation, so MIDAS works closely with its network of partners to help foreign-owned companies tap into this deep talent pool and attract the right staff.

How MIDAS can help

Get in touch with the MIDAS team to find out more about what discounts and benefits some of our partners offer.

UK employment law By Alison Treliving, Head of Labour & Employment at Squire Patton Boggs

Compared with many countries, the UK has a relatively flexible labour market. However, increased domestic and EU regulation in this area, together with a wealth of case law, means that those setting up operations in Manchester/the UK should seek specialist assistance - to ensure their relationship with their employees is harmonious and legally compliant.

Certain sectors are also heavily unionised, which has the potential to add an additional layer of complexity in securing successful employee relations.

Recruitment

Care must be taken when recruiting employees to staff an operation in the UK. For example, antidiscrimination legislation (which includes protection against discrimination on grounds of race, gender, marital and civil partnership status, gender reassignment, disability, religion or belief, sexual orientation, pregnancy and maternity, and age) must be complied with. Furthermore, employers must satisfy themselves (in accordance with statutory procedures) that any new recruits have the right to work in Manchester/the UK.

“

”

Compared with many countries, the UK has a relatively flexible labour market.

Identify and access training services and funding streams

Support recruitment strategy development by sharing insights on market conditions, average salaries, skills and talent availability

Provide a single point of contact to target the student population locally and regionally – helping you save around £1,500 per student recruited

Produce a bespoke recruitment and training package encompassing apprenticeships, sector-specific training programmes and targeted recruitment campaigns

22 23

Statutory rights

Legislation gives employees a number of rights, and employers clearly need to be aware of these. These rights include (subject to fulfilling relevant statutory criteria):• the right to statutory sick pay• certain rights for new parents• the right to a minimum wage/compulsory national living

wage• rights regarding working hours, including rest breaks• the right to paid holidays• the right to minimum notice periods• the right to be enrolled in a pension plan satisfying

certain quality standards and to which the employer must contribute

Contracts of employment

Compared with many other countries, UK employers and their employees still have a considerable degree of freedom to agree terms of employment. Most employees will be given contracts upon commencing employment, with more senior employees often entering into more detailed contracts, which are often referred to as service agreements.

Whilst a comprehensive written contract of employment is advisable, it is not a legal requirement. However, all employees are entitled to receive, within two months of starting employment, a statement setting out certain prescribed particulars concerning their employment.

Those particulars include the employee’s role and salary as well as benefits agreed between the parties. In addition to terms agreed between employer and employee, certain terms will be implied into the employment relationship, such as an employer’s duty to take care of the health and safety of its employees.

Furthermore, employers need to be aware that not all terms agreed with employees will necessarily be enforceable. For example, any agreement to restrain an employee from conducting competitive activities after the employment relationship has ended will be unenforceable, unless the restrictions are no more than reasonably required to protect a legitimate business interest of the employer.

24 25

Making the best connections

MIDAS’ team of specialists can introduce you to some of the region’s most established professional networks.

Each industry sector has a wealth of associations and networking groups where business people can meet others to share business practice, address industry-related issues and explore opportunities for innovation, collaboration, research and development.

How MIDAS can help

Get in touch with the MIDAS team to find out more about what discounts and benefits some of our partners offer.

Identify relevant networks for businesses to join and make introductions

Help issue press releases and suggest relevant guests to invite to launch events

Provide advice on PR plans to support the promotion of your arrival in Manchester

Make introductions to key regional media channels and marketing agencies

4686

B2

MIDASTel: +44 (0)161 237 4470Email: info@midas.org.ukWebsite: www.investinmanchester.comTwitter: @MIDAS_MCR