October 30th, 2012 / Insight posted in

Right way to shut a branch office

RT writes: For the past four years I have been running the UK branch of an overseas company. The business has been making losses and so the decision has been made to close the branch. Can you explain what needs to happen to shut it down? Also, will there be any tax problem if the overseas company writes off the money owed by the UK branch?

Closing the UK branch is very straightforward, writes Chris Lane, a partner at Kingston Smith LLP. All that needs to be filed at Companies House is a completed form OS DS01. This has to be signed by someone in authority on behalf of the overseas company. The form simply details the date on which the branch ceased to trade, along with its registration numbers.

You will also need to submit a final corporation tax return for the branch to determine its tax position at the date of closure. As losses have been incurred, it is highly unlikely there will be any final tax liability.

In terms of the money due by the UK branch to the overseas company, this will not cause a problem for the branch if the amount is written off in the overseas accounts as long as the underlying transactions are simply the movement of funds to pay for the losses.

If the UK branch has been paying wages, it will have a PAYE scheme and this will need to be closed. Finally, if the branch is registered for VAT, it will need to deregister. This will involve completing a final VAT return to the date of closure.