Even in today\u2019s interconnected world, businesses tend to start local and expand their geographic reach over time.\u00a0 Initially regulations seem relatively straight forward \u2013 everyone in the US knows what\u2019s meant by a 401K, just as everyone in the UK knows what a P45 is \u2013 because they\u2019re the ones everyone grew up with.\u00a0 Many of the rules affecting new businesses are ones its management is broadly familiar with.\u00a0 Managers know what they know, the better ones have a good feel for what they don\u2019t.<\/p>\n
The problems start to pile up when that geographic reach extends beyond home territory.\u00a0 Initially, there aren\u2019t any \u2013 businesses find a third party agent with appropriate territorial expertise and stick to their home markets with little more than gentle forays into foreign lands.\u00a0 But over time, and as those forays become more regular, reliance on third party agents becomes increasingly unsatisfactory.\u00a0 They may not have done anything wrong, their service may be excellent, but they\u2019re not you, their priorities aren\u2019t yours, their flexibility doesn\u2019t match your own, and if you\u2019ve a growing presence in that territory, the day comes when you have to have your own facility. And that\u2019s when the problems start.<\/p>\n
A typical example is a US corporation that\u2019s developed a significant and growing activity this side of the pond.\u00a0 Up to now it\u2019s used third party agents to distribute goods to retailers \/ third party installers to install product \/ third party maintenance technicians to maintain its equipment \/ third party sub-contract professionals to help fulfil contracts.\u00a0 They might be in the UK, or Germany, or France \u2013 somewhere, anywhere, in Europe or the Middle East, or Asia or further afield.<\/p>\n
The decision is taken \u2013 \u201cwe\u2019ll set up our own support operation\u201d.\u00a0 Easily said \u2013 but then the problems start.\u00a0 What form should that operation take?\u00a0 Does every territory require its own operation? Who do we send to set it up, how do we pay them, will they be taxed locally, and on what?\u00a0 Where will they live?\u00a0 Will we be taxed locally?\u00a0 If we are, how will profits be determined?<\/p>\n
Over the years we\u2019ve helped many such US businesses get their own European support operation off the ground. The answers to the questions are usually, but not always:\u00a0 a UK limited company, not necessarily, someone you trust, pay locally, yes they will, on what you pay them, London or home counties\u2019 rented accommodation, yes you will, and \u201ccost plus\u201d.\u00a0\u00a0 But there are variances \u2013 a US-owned UK registered branch rather than a UK limited company, everything overseas controlled through the UK establishment with no place of business elsewhere, wages paid in the US with a grossing-up process undertaken in the UK to ensure UK tax compliance, and business taxed on apportioned profits to reflect genuine revenue generation outside the US.<\/p>\n
There are all the other issues as well \u2013 just how adequate are your US employment contracts when it comes to employing overseas (generally, not very!), are you obliged to register for VAT and how do you account for it (answer \u2013 not invariably, though it\u2019s usually in your interest to do so), should your UK operation have authority to contract with third parties or should all third party contracts remain in your control (answer is, apart from contacts for overheads, best if authority vests in the US \u2013 the more arms-length activity initiated in the UK, the greater the \u201cplus\u201d in \u201ccost plus\u201d becomes).<\/p>\n
Expanding your horizons to foreign climes? –\u00a0 you need the support of those who\u2019ve grown up in them.<\/p>\n","protected":false},"excerpt":{"rendered":"
Even in today\u2019s interconnected world, businesses tend to start local and expand their geographic reach over time.\u00a0 Initially regulations seem relatively straight forward \u2013 everyone in the US knows what\u2019s meant by a 401K, just as everyone in the UK knows what a P45 is \u2013 because they\u2019re the ones everyone grew up with.\u00a0 Many[…] <\/p>\n