Setting Up a UK Subsidiary of an Indian Company

An Indian company sets up a UK subsidiary by reporting the investment under India's overseas direct investment (ODI) rules through its bank, incorporating a private limited company at Companies House with identity-verified directors, then registering with HMRC for corporation tax, VAT and payroll as needed. Incorporation takes days; ODI, banking and tax design take longer.

This guide applies to any sector: manufacturers, traders, services firms and technology businesses. It is the UK chapter of our guide to India, UAE and UK expansion.

Key points

• The Indian parent must obtain a Unique Identification Number (UIN) and report the financial commitment through its authorised dealer (AD) bank, generally before or when money first leaves India.

• The Companies House online incorporation fee is £100 from 1 February 2026, and every director must have verified their identity before the company is registered.

• UK corporation tax is 25% on profits above £250,000 and 19% up to £50,000, but those limits are divided across associated companies, including the Indian parent.

• Intercompany pricing, contracts and people decide where profit is taxed. Design them before the first invoice, not after the first audit.

• A UK registration on its own changes very little. Value comes from what genuinely sits in Britain: customers, contracts, people and decisions.

Why do Indian companies set up a UK subsidiary rather than sell from India?

Most Indian companies open a UK subsidiary because UK customers or procurement teams want a local contracting party, local accountability and local people. Typical triggers are a large customer asking for a UK-incorporated supplier, the first UK hire, stock held in the UK, or a UK acquisition target.

The commercial case has also shifted: the UK–India Comprehensive Economic and Trade Agreement (CETA) entered into force on 15 July 2026, and the UK government puts bilateral trade at £48bn in 2025. Our business guide to the India–UK free trade agreement (CETA) explains what actually changed for goods, services and business travel.

Consider a ₹120 Cr Pune engineering exporter supplying three UK manufacturers. One now wants delivery from UK stock and a UK counterparty for warranty claims: a sound reason for a UK entity.

Should an Indian company choose a UK subsidiary, a UK branch or a UK holding structure?

For most Indian companies, a subsidiary (a UK private limited company owned by the Indian parent) is the default, because it separates liability, is familiar to UK customers and banks, and gives a clean base for hiring and contracting.

We compare the first two routes in detail in UK subsidiary vs UK branch for an Indian company. A UK holding structure should follow only from a real plan for investors, acquisitions or multiple markets.

How do you set up a UK subsidiary from India, step by step?

You set up a UK subsidiary in six steps: ODI reporting in India, Companies House incorporation, a UK bank account, HMRC tax and VAT registration, payroll, and transfer pricing. The order matters, because money cannot lawfully leave India for the subsidiary before the ODI steps are in place.

Step 1: ODI, Form ODI and the UIN

An Indian company investing in a foreign subsidiary does so under the Foreign Exchange Management (Overseas Investment) Rules 2022, the Overseas Investment Regulations 2022 and the RBI Master Direction on Overseas Investment. In practice:

• Board approval and AD bank. The board approves the investment and its form (equity, debt or guarantee), and all transactions are routed through one designated AD bank.

• Financial commitment limit. Under the automatic route, total financial commitment to foreign entities is generally capped at 400% of the Indian entity's net worth as per its last audited balance sheet. Larger commitments need RBI approval.

• UIN. A UIN must be obtained from the RBI for the foreign entity before the outward remittance is sent.

• Form ODI reporting. The financial commitment is reported through the AD bank at the time of sending the remittance or making the commitment, whichever is earlier.

• Ongoing reporting. An Annual Performance Report (APR) is due by 31 December each year, and disinvestments must be reported within 30 days. Late filings attract a late submission fee.

The UK company usually exists before money is sent, so many groups incorporate first with nominal share capital and then remit funds once the UIN is issued. Our explainer on ODI rules for Indian companies investing abroad covers debt funding, guarantees and round-tripping restrictions.

Step 2: Incorporate at Companies House, with identity verification and PSC details

You incorporate a private company limited by shares online at Companies House. The Companies House fee is £100 online (£124 on paper) from 1 February 2026. You need:

• a UK registered office and an appropriate email address;

• at least one individual director (who can live in India);

• the Indian parent as shareholder, share capital, articles and a SIC code;

• details of every person with significant control (PSC). An Indian parent owning more than 25% is generally a registrable relevant legal entity.

From 18 November 2025, identity verification is mandatory under the Economic Crime and Corporate Transparency Act 2023. Directors must verify before incorporation and supply their Companies House personal code; individual PSCs have 14 days to provide theirs.

Verification is free through GOV.UK One Login, or available through an authorised corporate service provider (ACSP).

Online incorporation is usually completed within about 24 hours of a correct application. For the detailed filing walk-through, see how to register a company in the UK from India.

Step 3: Open a UK business bank account

The bank account is often the slowest step, because banks run anti-money-laundering checks on the parent, its owners and the planned business. Expect to provide the parent's constitutional documents, audited accounts, an ownership chart down to individuals and a clear description of expected flows.

Some banks prefer a UK-resident director. We cover the options in opening a UK business bank account for an Indian-owned company.

Step 4: Register with HMRC for corporation tax and VAT

A new UK company must register for corporation tax within three months of starting business activity. Rates follow GOV.UK's corporation tax rates: 25% main rate on profits above £250,000, 19% small profits rate up to £50,000, and marginal relief in between.

Those limits are divided by the number of associated companies, and the Indian parent and its other subsidiaries count. In a four-company group, the limits fall to £12,500 and £62,500. Tax is generally payable 9 months and one day after the period ends, and the return is due within 12 months.

For VAT, a UK-incorporated subsidiary is UK-established, so the standard £90,000 VAT registration threshold applies to its taxable turnover over a rolling 12 months or the next 30 days. Many register voluntarily earlier to recover VAT on costs; importers also need an EORI number. See our guides to UK VAT registration for Indian and non-resident companies and UK corporation tax for Indian-owned companies.

Step 5: Payroll, pensions and people

Before paying anyone, including a director, the subsidiary must register as an employer with HMRC and run PAYE in real time. For 2026 to 2027, employer National Insurance is 15% above a secondary threshold of £5,000 a year, and the Employment Allowance is £10,500 for eligible employers. Pension automatic enrolment duties start with the first employee, with at least 3% employer contributions.

Staff moving from India need a visa: compare the Global Business Mobility and Skilled Worker routes. The UK–India Double Contributions Convention, in force from 15 July 2026, can generally keep temporarily posted employees in Indian social security for a limited period.

Step 6: Intercompany agreements and transfer pricing

Every transaction between parent and subsidiary, whether goods for resale, services, management fees, loans or royalties, should be priced at arm's length under a written agreement.

In India, international transactions with an associated enterprise are covered by transfer pricing rules, now under the Income-tax Act 2025, which came into force on 1 April 2026. In the UK, small and medium-sized enterprises are generally exempt from transfer pricing rules, but size is tested across the whole group, so an Indian group with 250 or more staff will usually be in scope.

HMRC has also confirmed a new International Controlled Transactions Schedule for accounting periods beginning on or after 1 January 2027. We cover the methods in transfer pricing between an Indian parent and its UK subsidiary.

What does it cost and how long does it take?

Official fees are modest; the real cost lies in advice, banking, people and ongoing compliance.

How is a UK subsidiary of an Indian company taxed in India and the UK?

The UK subsidiary pays UK corporation tax on its profits, and the Indian parent generally pays Indian tax on dividends it receives, with the India–UK double taxation agreement (DTAA) limiting withholding and providing credit for tax paid. In practice:

• Dividends from the UK. The UK generally levies no withholding tax on dividends; India taxes them in the parent's hands.

• Payments from the UK to India. UK withholding tax on royalties and interest paid to India is generally reduced by the DTAA, subject to conditions.

• Permanent establishment. If Indian staff habitually conclude UK contracts for the Indian company, it may create a UK taxable presence even with a subsidiary in place.

Our India–UK DTAA explainer covers dividends, capital gains, royalties and fees for technical services in detail.

Does it change by sector?

The legal steps are the same, but the design differs. A manufacturer or trader usually sells goods to the UK subsidiary for resale, so customs, import VAT and the distribution margin come first.

A services firm usually has the UK company contract with clients and buy delivery from India, so the service fee and PE risk matter most. Tech, SaaS and digital companies face further questions on IP, data and investors, covered in our guide on how Indian IT, SaaS and digital companies expand to the UK.

The Greenwolf view

A £100 Companies House registration does nothing on its own. The question that matters is what genuinely needs to sit in Britain for UK customers to experience your company as a local, accountable supplier rather than an Indian exporter with a UK address.

Our approach is commercial design first, with tax following functions, risks and substance. We start with the role the UK should play: a customer market served from closer by, a sales and distribution front end on Indian manufacturing or delivery, or, for fewer companies, an international commercial headquarters, a fundraising base, or a market in which to acquire customers rather than build them over five years.

Each role produces a different structure, so we ask the stage questions before drafting a single form:

• Which customers are you actually trying to win, and do they buy from local suppliers?

• Who will sign contracts, hold stock, carry warranty risk and manage key accounts: India or the UK?

• What will the UK company do, and what margin does that function justify?

• Will senior people move to the UK, and could founders' presence affect where decisions are made?

• Is outside capital or a UK acquisition likely in the next three years?

• How will cash come back to India, and what happens to the structure on exit?

Not every company needs this. A ₹30 Cr firm with two £50k UK clients probably needs a contract review, not a new entity. A ₹150 Cr company earning 30% of revenue in the UK and making its first UK hires is in a different position, and design mistakes compound with every year of trading.

Planning a UK subsidiary?

If you are weighing a UK subsidiary, branch or holding structure, Greenwolf Advisors can help you decide what should sit in the UK, then handle ODI, incorporation, tax registrations and intercompany design as one plan. Speak to Team Greenwolf before the first remittance leaves India.

This article is general information, not advice for a specific case.