If you’re considering moving your business abroad, you’re not alone. According to a recent poll, a large number of UK business owners are considering a move out of the country.
A recent survey of 500 business owners found that almost half were considering the move. They say that tax increases and additional costs in light of last year’s Budget is going to make doing business in the UK difficult. And for that reason, they want to move.
If you’re one of those business owners considering moving your business abroad, here are some considerations you need to make.
Thinking of moving your business abroad?
If you are considering moving your business abroad, there are plenty of considerations to make. Doing business in a different country means getting to know a new market as well as getting to grips with legal issues. And then there’s the fact there are tax and legal requirements to tackle here before, during and after moving your business.
Changes to rules in the UK mean HMRC has the right to pursue your tax debts in 167 territories. And that number is increasing. So, you need to ‘get your house in order’ before making any move. Failing to do so could cost you more than you originally planned.
Can I move my limited company abroad?
You can certainly move your UK limited company overseas. Many large corporations operate from different countries. But they usually have the legal and financial backing to do so. There are lots of issues for SME business owners to consider before making a move.
From day one, you need to do your research about the country you’re thinking of moving to. You need to find out what regulations and laws are in place for your company in that country. This alone might make you rethink.
You’re unlikely to be taking your employees with you, so consider the workforce available in the country you’re moving to. And think about the wages. In some countries, salaries are lower than the UK. But that’s not always the case.
When it comes to legal issues, you need to employ the services of lawyers in that country. Remember, most legal firms in the UK will not have the required expertise of the legal structure in other countries.
You also need to decide on your company’s business structure.
What type of business structure?
Your choice mainly depends on the rules of the country you’re moving to. You could relocate your headquarters. This means moving all decision-making, operations and management to another country. You would have to establish that all management is now taking place outside the UK to satisfy HMRC that you are not simply dodging UK tax laws. There are other business structure options:
- Set up a subsidiary: This means the business remains active in the UK and it expands its presence around the world. Subsidiaries operate under the laws of the country in which the company is based. That might mean benefits including lower taxes or access to new markets.
- Redomicilation: Not all countries offer this process, which is a legal transfer from one country to another. You effectively change the citizenship of the company but the organisational and legal structure remains the same. It’s complex and you’ll need a legal expert behind you.
What about tax implications?
There are a number of tax implications when moving a business abroad. These can be costly and could seriously lower your profits during the move.
Corporation tax
Relocating your business could make an impact on your tax implications. It depends on whether your company is no longer a UK resident. Companies that are resident in the UK are taxed on income worldwide. If a business is a non-resident company it is only taxed on UK income.
But becoming ‘non-resident’ is more than just changing an address. As we’ve already mentioned, you must prove that all central management and control has moved out of the UK.
Capital gains tax
Moving your business abroad might mean paying capital gains tax if you dispose of certain assets. For example, selling vehicles in the UK that you cannot take abroad or equipment that is too difficult to relocate. Also, there are rules for intangible assets – such as intellectual property – which create a tax liability even if no physical assets are sold.
VAT
Businesses that continue to operate in the UK will need to pay value added tax on sales here. Relocating your business could mean you need to register for VAT in your new country. Each country has different VAT regulations, so do your research before making a decision.
What about double taxation?
You need to properly plan to ensure you’re not paying tax twice! The UK has something called ‘double taxation agreements’ with many countries. This provides relief by allocating taxation rights between the two countries and avoids double taxation. You can also restructure business operations to mitigate double taxation.
What should I do next?
Relocating a business outside the UK isn’t a simple process. If you would like to chat about moving your business abroad we can help. Contact us today for more information.
