As businesses grow and expand, there is often a desire to venture beyond a country's borders and operate internationally. The potential to access new customers, find new partners and ultimately, do more business, makes international expansion a lucrative prospect for many organisations.
There can also be other reasons for moving operations. The American motorcycle brand Harley-Davidson has recently stated that it plans to move the production of its vehicles for the EU market outside of the United States, increasing investment in some of its international plants across Australia, Brazil, India and Thailand. The company has made the decision based on the increased tariff the EU has imposed on US goods.
The tariff, which has risen from 6% to 31%, is reported to be costing Harley-Davidson $45 million in extra expenses this year. The company has been trying to grow international revenue and has chosen to absorb the costs so that the tariff does not affect customers and negatively impact potential sales.
Changes to legislation both domestically and internationally can cause businesses to consider the location of their operations and where costs could be saved. When considering an operation outside of your usual jurisdiction, it is important to also think about how that new location affects you legally and what advice you may need to take. Some key considerations when choosing to operate from the UK are set out below.
How does tax work in the UK?
In the UK, the taxation rates for companies differ based on how they trade. A non-UK company with a UK permanent establishment (UK PE) is subject to corporation tax on all profits made through trade in that UK PE. These profits could then also be subject to corporate income tax in your country of residence.
You would also need to consider if any of your employees are subject to payroll taxes. In the UK, employees are subject to an income tax that you will need to deduct from all salary and bonus payments as you issue them. You would also need to consider things like social security payments (known as National Insurance Contributions in the UK) which both the employer and the employee need to pay.
Businesses could be subject to multiple different taxations depending on the country they choose to reside in and it's critical that you take advice and understand what your business would be subject to.
How is employment law different in the UK?
You would also need to think about the different employment laws in the countries that you operate in. In the UK, employment is based on contracts and is part of the "Anglo-Saxon" tradition of employment, whereas the Continental European model is less "contract-based" and is much more state-regulated. England and Wales, Scotland and Northern Ireland each have separate legal systems and therefore different employment laws.
Every legal system will have different legislation in place for different aspects of employment including pensions, minimum wage, sick pay, maternity leave and working hours. There are also three main categories of employment status: employees, workers and the self-employed. Each employment status will have different rights and legislation surrounding them. If you are going to employ staff in different countries, you need to be aware of and understand how their rights may differ in each jurisdiction.
How does intellectual property law work in the UK?
You always need to make sure that your intellectual property remains protected if you begin operations in a new jurisdiction. Intellectual property includes patents, designs, copyright and trademarks.
Some intellectual property rights, such as copyright and unregistered trademarks, arise when certain criteria are satisfied. Other intellectual property rights, such as patents and registered design rights, will arise on registration.
The jurisdictional reach of an intellectual property right covering the UK will depend on the type of right it is. For example, patents may be registered for the UK or as a European Patent designating the UK. The territorial scope of the patent would be limited to the UK; therefore if you want your intellectual property to have the protection of a patent in the UK you would need to register for one.
Aside from the intellectual property you already have, you also need to think about what you will gain in the future and who will hold the rights to it. Generally in the UK, the employer will own any intellectual property created by an employee in their course of employment. However, in some cases, employee contracts can be drawn with clauses that reference, and protect, intellectual property ownership explicitly. You should also consider any intellectual property created by independent contractors as often contracts will stipulate that the rights will be owned by them.
How does data protection work in the UK?
When holding the data of individuals in different jurisdictions, you need to be sure that you are compliant with the relevant data protection laws.
Individuals in the UK and Europe are covered by the General Data Protection Regulation (GDPR). Even if you are operating outside of the EU, if you are processing the data of individuals in the UK and Europe you will need to comply with the legislation or be subject to significant fines of €20 million or 4% of annual turnover (whichever is greater). In the UK, it is also a legal requirement to be registered with the Information Commissioner's Office, providing information on the personal data being processed and the purposes of the processing.
How do you start the process of operating in the UK?
When beginning the process of moving operations to the UK, there are many areas to consider including those that have not been covered here such as accounting, auditing and registration.
If you are considering moving to the UK, our legal experts can offer a full range of services to help you get started. Our Insights and Resources are recommended to keep you up-to-date with the latest updates in UK legislation specific to your preferred sector and services.