Posted: Wed 29th Aug 2018
A move into the European Union could help protect some British small businesses from Brexit fallout, but does yours fit the bill? Rebecca Burn-Callander, business journalist and author of The Daily Telegraph Business Guide to Brexit (published in summer 2019), shares advice.
Amid the ongoing Brexit uncertainty, some business owners are hedging their bets by opening an outpost in the European Union or even moving their headquarters to the continent.
According to recent research by Silicon Valley Bank, as many as a quarter of UK start-ups are planning to open an office within the EU to mitigate trading risk. However, these moves are not without cost and complexity.
Who should move?
The UK remains one of the easiest and most affordable places to start and build a business, with incorporation rates starting at just £14. But there are a few scenarios whereby it could make sense to relocate to the EU.
Businesses that are staffed predominantly by EU workers may struggle to find more EU talent following Brexit. If you worry that you will not be able to replace staff, or hire additional staff, from the UK talent pool, this could be a strong reason to move.
Many exporters have experienced a sales surge due to the weak pound but net importers are struggling. The pound could sink even further post Brexit, according to some economists. Some of these companies may benefit from establishing an EU outpost.
Similarly, firms with a significant number of EU customers may find it easier to move closer to their income source, and bypass any regulatory barriers at home.
Where should you go?
You don't have to venture very far from home to have a foothold in the EU.
Ireland is culturally similar to the UK and is geared up to help UK firms passport into the EU post-Brexit - it is also the only English-speaking nation in the bloc. It is estimated that in the 12 months following the Brexit vote, some 100,000 British firms registered in the Republic of Ireland. Corporation taxes are also extremely low in Ireland, at 12.5pc.
The Estonian government has also made a play for the UK's digital businesses. Its e-Residency option lets UK entrepreneurs establish a virtual HQ there, which can be run remotely from anywhere.
In terms of benefits, there is 0% tax to pay on reinvested a profits, a major boon for fast-growing firms. There is 20& tax to pay on dividends, however, which is higher than in the UK.
When choosing a location, it's important to look at how the local tax rate and employment law could affect your business. For example, Paris has made a concerted effort to win over UK business but its onerous employment law is still a sticking point for many British bosses.
To try and redress the balance, the French government has now made it possible to file certain documents in English, and offers some tax breaks for foreign workers.
It is very important to tread carefully when planning a relocation or expansion. You need to enlist local experts to help advise on regulation and complaint and remember that every EU nation has its own rules. The British Chambers of Commerce can help you access trusted advisers in your chosen city.
Talk to your existing staff and make everyone aware of the situation. Ask for feedback on potential locations. You may find that some staff would jump at the chance to live in a cosmopolitan EU city. Invest in training - language skills are essential - for the employees who will be moved over to the new office.
A working example
Ben Axtell is co-founder of video content agency Hiten.Media, which creates promotional materials for many universities based in the EU.
Axtell and his co-founder Bruno Mathez spend a lot of time flying into Europe, and are worried about the impact Brexit could have on their ability to work on the Continent. For example, if Swiss-style carnets are required for travel between the UK and EU, that could be a major burden on the micro business, which employs up to six people, depending on project sizes.
"If we need to start using carnets for all our video equipment every time we travel, that will be a nightmare for us," he says. "It would mean recording serial numbers, purchase dates, weight and more. It adds an hour at least to every job plus two hours at the border."
Axtell is weighing up an Estonian e-Residency or an office in Paris. "We could open a Paris office and leave equipment there to speed up the process," he explains. "It wouldn't be too hard for us because Bruno is French.
"The Estonian system is also interesting because it gives you the option to pay tax in Estonia or in the UK, while trading in the EU without barriers."
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