Moving your business abroad

20 Oct 2016 by BusinessTraveller
Research provided by Hiscox

With the seismic shockwaves of Brexit reverberating throughout the UK and Europe, many companies are now considering their geographical positions carefully.

Although the political, economic and financial implications of UK’s controversial decision are still unclear at this point, recent surveys have shown that many CEOs are now thinking about moving their operations abroad.

Drawing on a sample of 100 UK CEOs from companies with over £100 billion in combined revenue, research commissioned by KPMG found that 72 percent of participants voted to remain in the EU. And 76 percent would look for some sort of ‘relocation’ when Article 50 is triggered.

One of the main concerns amongst industry leaders is that conducting business from an isolated UK will be tough. Although 69 percent of those surveyed believed the British economy would continue to grow in the coming year, many noted that the idea of relocation was widely being used as a way to ‘hedge against’ future disruption.


Moving Abroad: What You Need to Know

So, what benefits await a company that does decide to relocate and start up in a new country? If they decided to move to an EU country, they’ll enjoy the benefits of being part of the single market. Aside from making it easier to broker trade deals, companies could potentially keep their revenue at a stable level by avoiding some of the tariffs those in the UK may be subjected to post-Brexit.

Another potentially positive effect of moving abroad is the free movement of labour. EU nationals may soon have to jump through a myriad of bureaucratic hoops in order to grab a visa to work in the UK. Newly relocated companies could avoid becoming entangled in this matrix of red tape and enjoy the luxury of choosing from a much larger talent pool by moving to an EU member state.

However, there are some things a company needs to be aware of if they do make the move. Language, for instance, is one potential obstacle countless companies fail to consider.

Despite the fact that most countries in the western world will speak English, the terms of business might not be as smooth when those around you don’t speak your language. It doesn’t take a business magnate to acknowledge that a language barrier could put you at a distinct disadvantage.

Other commentators, such as insurance specialists Hiscox, are quick to point out that money handling can also be an issue abroad. Breaking down four of the most common problems IT companies encounter when relocating to a different country, they note that local tax laws can often be problematic.

“No matter how unintentionally or innocently you may go about it, there’s a distinct chance you’ll slip up when it comes to local tax laws,” they explain. “Opening up an office abroad for any longer than around six months, for example, could make you liable for accounting requirements including local tax returns.”

Additionally, as well as mentioning funding and setting up trade deals, the blog post highlights the dangers of transfer pricing. This is when the company in question doesn’t pay a fair amount of tax to the UK Treasury and, instead, tries to offset everything in the more favourable tax climate where its subsidiary is based.

“You need to make sure you have a fair profit registered in the UK,” Hiscox says. “Or HM revenue will make an assessment on what the fair profit would be and charge tax accordingly.”

Relocation Can be Beneficial

Despite possible problems in relation to language and tax, relocation can work. UK retail icon Harrods moved to Qatar in 2010 following Qatar Holdings buying the company from Mohamed Al-Fayed. After paying £1.5 billion to acquire the business, the Qatar-based owner immediately began to explore the possibilities of opening a new shop in China.

Beyond the expansion possibilities that relocation can bring, a change of scenery can also improve profits. After Kraft bought Cadbury and shifted its operations to the US, the company’s 2012 sales sheet started to look a lot more positive. Generating £257 million “annual cost synergies” helped Kraft to move closer to its $1 billion revenue target.

The world is becoming a smaller place when it comes to business; some would suggest that there has never been a better time to consider uprooting and moving on. Moving abroad doesn’t need to be as hard as you think, but it isn’t a decision to be taken lightly. Heeding the advice of experts, crafting a solid strategy to avoid encountering language barriers and ensuring you tackle any taxation issues ahead of your move is advisable.

If you’ve ticked all these boxes, there’s no reason your post-Brexit relocation plans can’t become very fruitful for you, your stakeholders and your customers.

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