Have you road tested your overseas expansion plans?

 

 

So you have decided to take on the global market by expanding your operations overseas, or perhaps you have limited overseas operations but are thinking about adding some more. 

 

 

Many businesses get drawn by the opportunity of widening their market and leap into overseas expansions before they have secured, and explored, their position in the UK.  Think about the impact that expansion will have on your existing UK business, particularly in terms of resources such as time and money. Don’t launch into your plans until you have enough capacity of both not to have a negative impact on existing operations. 

 

 

There is a range of ways in which you can tap into an overseas market; selling online with no local physical presence, setting up a physical presence through your existing company or setting up a new separate local entity. You will need to consider carefully which is the best option for your situation, taking into account local legal requirements in the country into which you are expanding, the tax obligations that will arise from your decision, as well as whether you wish to protect your existing assets from anything going wrong. Take advice at an early stage as it can be difficult to change once you have set the structure up.

 

 

It is really important, once you decide to go for it, to have a clearly defined strategy which provides a clear financial forecast.  This will allow you to continually asses your future requirements and make any necessary changes in a timely manner. Having considered the best structure for your operations, you will need to decide what funding is required, and if you have set up a legal entity overseas, in what form you will provide it. Debt finance may provide you with an easier route to repayment and provide additional tax deductions, although some local requirements may require a minimum amount of equity investment. You should also consider how you will repatriate any funds to the UK in a tax efficient manner or whether you will use them to further additional overseas investment.

 

 

A particular challenge when expanding overseas is how to keep an eye on your operations when they are so far away. You need to ensure from the outset that you are happy with any local management that you take on. It is important to decide up front and clearly communicate what level of authority they have. This can change the tax position of your overseas operations as well as having commercial issues. Ensure that you are motivating staff in the same way as local employers to attract good calibre staff and prevent a high level of staff turnover. You also need to ensure that your resource levels appropriately support your business strategy and forecasts.

 

 

Local corporate governance and legal regulations can vary widely from country to country and it is therefore essential that you take local advice to ensure that you don’t make any costly mistakes. This includes issues such as making sure that you have the necessary insurance and appointing a tax resident director if required.

 

For more advice on the above or for assistance with recommendations of a local advisor overseas, please contact Claire.cook@smith.williamson.co.uk or call Claire on 01483 407164. Claire is an Associate Director in the Business Tax Team at Smith & Williamson specialising in international tax. 

 

 

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