European Union: Brexit On Your Mind? Practical Considerations For Doing Business In The UK And Europe

Last Updated: 17 April 2018
Article by TMF Group

Trade between the United Kingdom and Europe certainly won't grind to a halt on 29 March 2019, but there are some practicalities for those doing business on both sides of the Channel to consider, to help make sure operations continue to run smoothly.

Many companies breathed a sigh of relief last month when the United Kingdom and European Union agreed to the terms of a transition deal. The conditional agreement means that, instead of a 'hard Brexit', Britain will progressively exit the trade bloc from 29 March 2019 to 31 December 2020.

Existing trade deals will be upheld, while the UK will be able to negotiate and sign new ones (to come into force from 1 January 2021). Freedom of movement for EU and UK citizens will also continue during the transition period, which is welcome news for HR departments. But Brexit itself signifies a fundamental shift in the business landscape, and Brexit is on the mind of many. For some, the transition deal will not halt plans already in motion to relocate core operations.

TMF Group experts in Germany, the Netherlands and the UK share their insights when it comes to shifting or establishing your business.

Germany

"Frankfurt is of course one of the places where a lot of financial services companies and banks are looking to, or at least enquiring about at the moment" says Johannes Schoenfeldt, Lawyer at TMF Germany.

"We have a few clients that have already made a move – opened a GmbH ('Gesellschaft mit beschränkter Haftung'), where they only had a branch of an English Limited Company before."
Johannes says a UK company looking to set up a European base will find establishment relatively straightforward in Germany.

"It's just sometimes difficult to prove the representation of the shareholder, because there is no trade register in the UK that lists all the MDs with power of representation. The most common company to set up would be a GMBH (limited company equivalent), and it would take on average 4-6 weeks. But it's also possible to buy a shelf company in Germany for example, which is one of the other services that we offer. Basically it's all ready to go, comes with a bank account, and you can begin trading within about two weeks."

When it comes to accounting and tax filing, there are some unique aspects that can surprise those new to the country. "A requirement in Germany that is less common in other countries is that the actual accounting paper documentation must be kept within the country for tax reasons", explains Johannes. "So your invoices must be stored locally. Tax filing needs to be completed in German. And, there are strict regulations around who is allowed to provide you with tax advice, finalise your financial statements and tax returns."

"TMF Germany is not a tax advisor - but we connect our clients with the good ones!"

The Netherlands

The Netherlands is another destination that firms have been eyeing since the Brexit vote, but companies on the whole are not rushing to move.

"It's mostly due to ongoing uncertainty around what is going to happen exactly" explains Ashley Begina, Team Leader Tax & Accounting at TMF Netherlands. Although he believes some aspects can be somewhat anticipated.

"If you are established in the UK or want to have registration in the EU for VAT purposes, the process is the same currently, except it's a European transaction. If the UK leaves the trade union after 2020, it would become import-export."

"So from a VAT return perspective, it would mean just filling out a different box. Where it would have a bigger impact potentially, is on tariffs and duties."

A company looking to move its base from the UK will find many accounting and tax process similarities in the Netherlands, according to Ashley. "Mainly the issue is the communication with the local authorities, being in the local language. But you have business service providers such as ourselves who can help you out with that and make things straightforward."

UK

While there is a lot of commentary around what a post-Brexit Britain will look like, for now it's very much business as usual.

"Most companies are quite content here" says Paula Cosier, Head of Corporate Accounting and Payroll at TMF UK. "We are still on-boarding new clients, we are still seeing international ventures set up businesses in the UK. Is it at a slower or faster rate than prior to the Brexit vote? Not tangibly."

Paula says business setup itself in the UK is relatively straightforward and can be achieved within a working week. "It all depends on circumstances though of course, what you're doing and the type of business you are can have an impact." She explains that the VAT registration process has become more complex in recent years. "It can take as long as three months, longer if authorities make an enquiry or come back looking for more details. I had one client who waited seven months for their registration to come through."

Typically when ventures establishing in the UK get it wrong, it's down to not receiving correct advice or support. Paula says that's where support from experienced companies like TMF Group proves invaluable. "We had one client who went ahead and started doing things – the wrong way – because that's how he was used to it being done in the USA."

"For example, as part of the corporation tax registration, many new companies don't inform Revenue within three months of trading, and so they receive a fine." And when it comes to UK accounting and tax filing, there is a quirk that takes most by surprise – iXBRL format.

"When you are submitting a corporation tax return to HMRC, it must be in this format," explains Paula. With the exception maybe of Ireland, I don't know of any other country that requires it. A lot of people confuse it with XBRL, but you can only produce iXBRL with specialised software, and you can't make your submissions to Revenue without it."

TMF Group in the UK provides administration services and expertise to clients entering the UK. And the local team can introduce clients to tax, legal and financial advisers where they identify specific advice would be beneficial or needed.

Need more information? Get in touch with us today.

Discover where Germany, the UK and the Netherlands rank globally for financial complexity.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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