How to set up your business in the UK post-Brexit

Those companies wishing to employ EU nationals are also concerned by new legislation that could impact the speed and cost of HR processes. That said, the post-Brexit dust has yet to settle and it remains to be seen what changes will be made, and how quickly they will come into effect.

It’s easy to be absorbed by all the negative sentiment but it’s not particularly constructive. There are many important benefits for overseas businesses setting up shop in the UK. It’s a large global market with a variety of financial services to assist companies of any size. Corporate tax is levied at 20% – 5% lower than the global average – and is set to drop even further.

Wherever you are in the world, setting up a business can be a complicated matter. The process is made more so when trying to navigate foreign bureaucracy, legal red-tape and political power shifts. It’s tricky to deal with any obstacles head on when you don’t know what to look out for. If you’re a foreign business planning to expand into the British market, here are a few of the main challenges you could face – with some guidance on how best to overcome them.

Opening a bank account

Opening a business bank account can be time consuming – even for domestic citizens. Foreign nationals have to jump through many more hoops to be approved and while it is possible to operate without a local bank account, it can cause more hassles in the long-run.  UK customers are wary of paying invoices with foreign banking details which means your resources may have to spend vital time on debt collection rather than business development. You’ll also have to factor in currency exchange rates and transaction fees which could impact your prices in your competitors’ favour.

Even if you have a good relationship with a bank, you’re looking at operating without a UK bank account for at least 3-6 months. While your company’s legitimacy is being verified, you can choose to set up a trust account with a third-party accountancy firm. This usually takes one week. The account will belong to the firm but they will conduct all incoming and outgoing transactions on your behalf. Once the bank has approved you, you can simply shut down the trust account.

Paying tax

Like most taxation systems, Her Majesty’s Revenue and Customs (HMRC) presents some complicated requirements. With several different payments required at different times of the year, you need to have your finances in order at all times and understand the various dates and gates that pertain to your business.

UK corporate tax, as mentioned above, is set to drop from 20% to 18% in 2020. However, larger companies will need to pay this percentage of their profits in the following instalments: the 14th day of the 7th, 10th, 13th, and 16thmonths after the beginning of your accounting period. It’s slightly more straightforward for smaller companies, they must pay 9 months and a day after the end of this period.

If you’re expecting a turnover of over £82,000 you need to register for and pay value-added tax (VAT) which generally amounts to a 20% levy on sales. You can offset VAT on expenses against sales though.

The full spectrum of your specific tax requirements can only be worked out with a UK tax expert – this is worth doing as any mistakes can result in serious liabilities.

Managing employee payroll

The UK has a strict set of payroll and HR processes to protect its citizens as well as allow for economic opportunities and growth. You need to consider hiring people that fit your business as well as tick all the local legal requirements. It becomes more difficult, but not impossible, when moving staff into the UK from abroad and you’ll need to make sure their visas and paperwork are all in order.

At the moment, the cost of a UK work visa or permanent residence card for a EU citizen is incredibly affordable when compared to other nationalities. This may change as the British government revises its regulations in light of Article 50. However, it’s likely that any residency documents that were issued to EU citizens prior to Brexit will remain valid.

Once your employees are hired and in-country, you’ll need to register them for pay as you earn (PAYE) tax and, if you have more than five employees, enrol them on a pension scheme. Don’t forget National Insurance, sick pay and any other employee entitlements and benefits that are also required by law.

It’s a potential HR headache for any business, particularly so for one that is trying to establish itself in a new country. It’s often far simpler to outsource your entire payroll and HR needs. This allows you and your team to focus on business critical functions that are in line with achieving your growth targets.

It may seem like a tough market to crack but the potential benefits of setting up a business in the UK are well worth the effort. Don’t let the red-tape hold you back: do your research, work with local experts and reap the commercial rewards.

By Ashley Deakin, Chief Operating Officer, Sable