United Kingdom - Country Commercial Guide
Distribution and Sales Channels

Discusses distribution network from how products enter to final destination, including reliability of distribution systems, distribution centers, ports, etc.

Last published date: 2021-09-22

Overview 

The UK has well-developed sales and distribution channels, ranging from wholly owned subsidiaries of foreign manufacturers to independent trading companies that buy and sell on their own account.  Between these two extremes are independent resellers, sales agents, and stocking distributors, who have contractual relationships with their suppliers. The selection of an appropriate marketing organization depends largely on the nature of the goods and services involved.  Also, increasing international e-commerce has contributed the growth of local fulfillment and delivery/return services. 

Using an Agent to Sell U.S. Products and Services 

Most U.S. exporters to the UK sell their products via distributors, who purchase goods directly from the manufacturer with the intent of reselling them to third parties. Distributors position products and brands in the market through advertising and promotion and assist with after-sales service, which is increasingly important for UK customers and contributes to a positive image of U.S. firms doing business in the UK.  In many sectors, one distributor can cover the entire UK market, although in certain cases U.S. companies may wish to appoint separate distributors to cover selected regions as well as to cover Scotland, Wales and Northern Ireland.  Depending upon the distributor’s market coverage, U.S. exporters may also benefit from access to territories beyond the UK.  Sales agents are less commonly used in the UK as they tend to be small, one- person operations and may offer only limited geographic sales coverage.  Sales agents might be appropriate for equipment or services that require specific technical expertise. Note that the law covering agents is different from the United States.  When deciding upon the optimal form of representation, U.S. exporters should consider pricing, distribution network, operational expenses, and after-sales service. 

Dispute Resolution 

Although there are few instances that specifically require the use of a local lawyer, contracts and agreements should be vetted by a competent attorney or firm conversant with UK Law.  While contract coverage is often similar, specific clauses and language can be considerably different from that in the United States.  Standard American contracts should not be used, as they are mostly unenforceable under UK law.  Many U.S. law firms have either established their own UK offices or have links with local practices and are often the most convenient and practical sources of legal advice for American companies. The U.S. Embassy in London can provide lists of local law firms, including those with U.S. links. 

Establishing an Office 

There are several steps to consider when establishing a local office in the United Kingdom.  The process is generally straightforward and can be achieved in a relatively short space of time.  The steps to consider are: 

Decide on legal structure 

  • Why: Your commercial aims will determine the type of operation that you need to establish and help define your legal and tax status. 
  • How: There are two options:  a UK private limited company, known as a subsidiary (separate legal entity), or a UK branch of your overseas company, known as a UK establishment (no legal identity distinct from the parent company). 
  • Timescale: n/a. 

Register at Companies House 

  • Why: Under the Companies Act, an overseas business in the UK must register a UK establishment when it has some degree of physical presence in the UK (such as a place of business or branch).  You can only make immigration applications for inter-group transfers (Tier 2) if you’ve set up your UK entity as either an establishment or subsidiary. 
  • How: You can register online, by post, by an agent or third-party software. You will need at least 3 pieces of personal information about yourself and your shareholders or guarantors.  The cost is £12 ($16).  A professional advisor may also undertake this for you. 
  • Timescale: 1 day. 

Apply for visas 

  • Why: If you plan to transfer a non-European employee from an overseas office to set-up and run your new UK operation, that person should apply for a sole representative visa before you start trading in the UK.  Sole representative visas are usually granted for an initial period of three years. 
  • How: You must apply online for a Representative of an Overseas Business visa.  A Representative of an Overseas Business visa costs £610 ($785).   You’ll need to have your fingerprints and photograph taken at a visa application center as part of your application.  You may be able to get your visa faster or other services depending on what country you’re in – check with your visa application center. 
  • Timescale: 3 weeks. 

Set up business bank accounts 

  • Why: If you are intending to trade in the UK, then a UK bank account will be needed.  Not only does it give your business credibility in the UK, but if you have numerous transactions it will be cheaper to handle these locally, rather than through overseas bank transfer which are invariably costly.  In addition, (should you need to be VAT registered), having a UK bank account accelerates the process. 
  • How: When setting up the business bank account you will need to bring along the following: Business customer application form, Mandate for companies registered under the Companies Act, Registration of the company, identification and verification of address, company structure chart, bank statements and audited accounts. No matter where you intend to locate your business, you should contact the central inward investment banking team, usually located in London. Do not apply through a local branch, online or a call center. Tell the bank that you have foreign shareholders and/or directors of your business and that you need a UK business bank account. 
  • Timescale: 3 weeks – 3 months. 

Register for tax 

  • Why: VAT – You must register for VAT with HM Revenue and Customs (HMRC) if your business’ VAT taxable turnover is more than £85,000 (about $110,000).   
  • Corporation Tax – Any company with a UK branch or office must pay UK Corporation Tax on company profits. You must give HMRC specific information about your company within three months of starting up in business.   
  • How: VAT – Most businesses can register online. By doing this you’ll register for VAT and create a VAT online account.  You need this to submit your VAT Returns to HMRC.  Corporation Tax – You can do this online once you’ve got your company’s Unique Taxpayer Reference (UTR) – sent within 14 days of the company being registered. 
  • Timescale: two weeks – two months. 

Register for payroll and pension 

  • Why: As an employer, you are responsible for paying your employees’ tax and you normally must operate pay-as-you-earn (PAYE) as part of your payroll.  PAYE is an HMRC system to collect Income Tax and National Insurance from employment.  Employers must provide a workplace pension scheme for eligible staff as soon as their first member of staff starts working.  
  • How: Register as an employer with HMRC and get a login for PAYE Online.  You must register before the first payday.  Register as an employer with The Pensions Regulator online. 
  • Timescale: two weeks. 

Search for property 

  • Why: For companies setting up in the UK, the key property decision is whether to rent premises (known as “leasehold”) or to buy premises (known as “freehold”). 
  • How: The British Government inward investment agency, Department of International Trade (DIT) will be able to assist with a detailed property search – finding the right option that works for you. 
  • Timescale: Dependent on property option taken (>1 week) Signing the lease/buying the property (one-four months). 

Recruit staff 

  • Why: To be successful in the UK, you need to recruit and develop the best staff. 
  • How: Several options exist for recruiting staff in the UK.   DIT can help with introductions to recruitment agencies that can assist with the recruitment process. 
  • Timescale: six-16 weeks (dependent on position). 

Get business insurance 

  • Why: In the UK, insurance protection is compulsory to cover you against a number of risks.  You must arrange insurance as soon as your new company employs staff. UK law requires that you hold Employers’ liability insurance and commercial motor insurance.  Other insurance to consider includes assets, income, liabilities, people and other risks. 
  • How: Insurance can be provided from a number of operators in the UK.  DIT can help with introductions to commercial partners who can process these requests. 
  • Timescale: two weeks – one month. 

Additional information for overseas companies looking to set up in the UK should contact DIT.  

Franchising 

U.S. businesses looking to franchise within the UK will likely find that the market is quite robust and friendly to franchise systems in general. There are several laws that govern the operation of franchises within the UK, but these laws are broad and generally do not constrain the competitive position of U.S. businesses.

The British Franchise Association (BFA) operates a voluntary code of practice for franchisors.  

Direct Marketing 

There is a wide range of UK legislation that impacts the direct marketing sector. Compliance requirements are stiffest for marketing and sales to private consumers. Companies need to focus on the clarity and completeness of the information they provide to consumers prior to purchase and on their approaches to collecting and using customer data. The following gives a brief overview of the most important provisions flowing from UK rules on distance-selling and on-line commerce. 

Processing Customer Data 

The UK has strict laws governing the protection of personal data, including the use of such data for direct marketing activities.  In January 2021, the UK General Data Protection Regulation (GDPR) became enforceable, replacing the Data Protection Directive of 1995.  The UK GDPR is the UK’s framework for data protection laws and includes significant changes for businesses and bodies that handle personal information.  Individuals, organizations, and companies that are controllers or processors of personal data are impacted by GDPR.   

Detailed information on GDPR for the EU is also available on the Trade.gov GDPR webpage

Distance Selling Rules 

Consumer protection law is a distinct body of law that regulates the contractual relationships formed between businesses and consumers. It aims to ensure fairness and transparency. In the UK, the development of consumer law has been largely driven by the EU through a series of directives and regulations. Most EU law applicable in the UK as of December 31, 2020, remains in effect within the UK indefinitely as “retained EU law”. In 2011, the EU overhauled its consumer protection legislation and merged several existing rules into a single rulebook - “The Directive on Consumer Rights”.  The provisions of this Directive have been in force since June 13, 2014, replacing EU rules on distance selling to consumers and doorstep selling along with unfair contract terms and consumer goods and associated guarantees.  The Directive contains provisions on core information to be provided by traders prior to the conclusion of consumer contracts.  It also regulates the right of withdrawal, includes rules on the costs for the use of means of payment and bans pre-ticked boxes.  Companies are advised to consult the relevant sections of EU Member States’ Country Commercial Guides and to contact the Commercial Service at the U.S. Mission to the European Union for more specific guidance. 

In May 2013, the EU adopted rules on Alternative Dispute Resolution (ADR) and Online Dispute Resolution (ODR) which provide consumers the right to turn to quality alternative dispute resolution entities for all types of contractual disputes including purchases made online or offline, domestically or across borders.  Only disputes regarding health and higher education are excluded.  ADR and ODR legislation allow consumers and traders to resolve their disputes without going to court in an easy, fast, and inexpensive way.  Under the ODR Regulation, the European Commission established an EU-wide online platform to handle consumer disputes that arise from online transactions.  

Financial services are the subject of a separate directive that came into force in June 2002 (2002/65/EC). This piece of legislation amended three prior existing Directives and is designed to ensure that consumers are appropriately protected with respect to financial transactions taking place where the consumer and the provider are not face-to-face.  In addition to prohibiting certain abusive marketing practices, the Directive establishes criteria for the presentation of contract information. Given the special nature of financial markets, specifics are also laid out for contractual withdrawal. 

Direct Marketing over the Internet 

Promotional offers must not mislead customers and the terms that must be met to qualify for them have to be easily accessible and clear. Marketing communications must be identified as such to the recipient and requires that companies targeting customers on-line must regularly consult national opt-out registers where they exist. When an order is placed, the service provider must acknowledge receipt quickly and by electronic means, although the regulation does not attribute any legal effect to the placing of an order or its acknowledgment.  Vendors of electronically supplied services must also collect value added tax (see Electronic Commerce section). 

Joint Ventures/Licensing 

Joint ventures may be formed as limited liability companies or as equal or unequal partnerships.  Consortia of companies formed to bid or manage specific projects usually use a British-registered limited liability company as the vehicle to more easily rent or purchase local premises and assets and to hire and manage a local workforce and support staff.  No ownership or control restrictions apply to joint ventures in the United Kingdom. 

Express Delivery 

There are more than 4,000 express delivery firms in the UK.  Service differentiation is reducing, with the lines dividing the courier, express, and parcel sectors becoming blurred.  Traditionally, couriers serviced the same-day market, express carriers serviced the premium (for example, next-day guaranteed) market, and parcel carriers serviced the non-premium (for example, non-guaranteed, three-day service) market.  Express carriers provide premium, time-sensitive services primarily for B2B clients, although increasingly now for B2C clients, particularly as online retailers require premium delivery services to consumers.  Many non-premium providers are including guaranteed delivery times, track and trace, and other ‘premium’ features in their services.  The leading players in the industry are the four global players DHL, FedEx, TNT, and UPS.   

Delivery times from the U.S. to the UK vary depending on the type of delivery service used, i.e., priority or economy, and size and amount of product being sent, but can range from a couple of days to a week.  

Express delivery companies can advise of the exact customs forms required for products.  When products enter the UK, duty (if applicable) is added to the value stated on the customs declaration, plus cost, insurance and freight.  Value Added Tax of 20% is then added to that total.   

Duty rates can be found on the UK government’s Trade Tariff website. 

The standard rate of Value Added Tax in the UK is 20%, which is for most goods and services.  However, there is a reduced rate of 5% for some goods and services, including children’s car seats and home energy and a 0% rate for other goods and services such as children’s clothes and most food.  Exempt from Value Added Tax are items including postage stamps, financial and property transactions.  

Due Diligence 

Banks, accounting firms, credit agencies, and risk management companies provide a full range of reporting services that U.S. companies can use as part of their due diligence before signing a local partner. Service providers include the UK subsidiaries of the American-owned Dun & Bradstreet, Equifax and Infocheck.  All limited companies in England, Wales, Scotland and Northern Ireland are registered with Companies House.  The WebCheck service offered by Companies House enables U.S. companies to search information on UK companies free of charge including viewing a company’s filing history. Copies of document images as well as a selection of company reports are available for a small fee.   

The U.S. Commercial Service provides International Company Profile (ICP) background checks on UK companies that can be a valuable part of a U.S. company’s wider due diligence process. The ICP is a useful tool for American companies seeking to enter international business relationships and provides a background check on UK limited liability firms.