UK Remittance Considerations for International Businesses

UK Remittance Considerations for International Businesses

Starting operations in the United Kingdom is relatively simple and straightforward compared to areas such as the Middle East, Asia, and Africa. That’s why plenty of companies set their sights on the UK being their base for European expansion and end up familiarizing themselves with UK remittance along the way. There are a couple of nuances such as the apprenticeship levy and auto-enrollment into UK retirement and pension plans for employees. Overall, the region is a great choice for companies seeking a stable economy (pre-Brexit at least – time will tell) with plenty of resources available for keeping their multinational expansion in tip-top shape.

Understanding UK Remittance: Paying Employees

Getting money into the region to pay your company’s employees is simple; it’s usually just a matter of having the right partnerships and resources established. First, you’ll need to ensure that your organization is set up as a legal UK employer, which includes a few options ranging from a full business entity to a more agile method for operations.

Creating an Entity in the UK

For larger organizations with more than 25 employees in-country, and those that must purchase real estate or are in manufacturing, your company will need to establish a legal entity to pay your team members.

The process for establishing a legal entity includes registering with the proper authorities, setting up a local bank account, and finding in-country partners to help you manage the compliance on a day-to-day basis. It can be a long and confusing process, not to mention expensive, especially if your organization is a small to midsize firm without plenty of in-house resources. While this may be necessary to operate in-country, you will want to explore all of your options before establishing a permanent entity, even in a secure area like the UK.

Foreign Employer Exception

If your company is testing the waters and not necessarily ready to make a full commitment to the UK through a foreign subsidiary, you can take advantage of foreign employer exception. This option, which is only available in the UK and Thailand, allows your company to hire and pay local staff without making local withholdings and contributions, hence without needing a legal entity. Your employee will instead, bear the burden of UK tax and social security filings as if they were self-employed. This option is similar to hiring a foreign independent contractor. Your company will just need to ensure that the employee is working autonomously as to avoid contractor misclassification issues, which can be costly and time-consuming.

International PEO

Another option, and arguably the most flexible and compliant method for UK remittance is International PEO (Professional Employer Organization). This service leverages a third-party’s resources in-country to help your company get into markets quickly, efficiently and compliantly without setting up an entity. It ultimately enables your company to forego maintenance costs, onboard your candidates quickly, and keep global operations, including payroll, streamlined.

Paying Employees in the UK

In general, paying your employees in the UK is straightforward and involves standard withholdings and pay schedules. Your organization will need to record your employees’ pay including salary and wages, calculate deductions such as national tax and withholdings, calculate your company’s contribution to the National Insurance fund, produce payslips for each employee, and report your team members’ pay and deductions to HMRC in a Full Payment Submission (FPS).

The primary considerations for UK remittance are the withholdings including taxes, social security contributions and where and how your team members are paid. You can attempt to manage payroll in-house or work with a global payroll provider to help you consolidate your international payroll and take care of compliance.

Understanding UK Remittance: Transferring Money to and from the Region

Trade

When it comes to trading across borders, the UK is a bit more difficult, ranking number 28, compared to other countries around the globe. The lower ranking is likely a direct result of the impending Brexit, which will impact many aspects of doing business in the region. Currently, the EU membership allows Great Britain to sell goods and services across the bloc under a free trade agreement. Brexit creates some uncertainty given that the EU is the UK’s biggest trading partner, providing a market for 44% of all British exports and supplying 53% of its imports.

Restrictions on trade could make getting money in and out of the country more difficult because of increased regulations, taxes, and tariffs.

The Risk of Brexit

Right now, there are many unknowns involving the effects of Brexit as negotiations between the EU and the UK get heated in 2018. While leadership is trying to avoid any disruption in business operations given the results of the transition, it appears that longer-term trade and the regulatory environment will not be defined for some years. This means that for a long period of time, there will be unresolved uncertainties surrounding the financial state of the region.

One area that can be directly impacted is the transfer of EU-specific money to and from the UK. When it comes to foreign currency transition, invoicing, and VAT, it’s difficult to understand all of the regulations surrounding money transfers in the UK. This is another reason why it’s beneficial to rely on a payroll provider to help your business navigate the difficulties involved with UK remittance, especially during a confusing transition period.


If you’re interested in exploring more to save on payroll costs, reduce global treasury management headaches, or just need help maintaining compliance on the global scale, give us a call or shoot us a message. Thank you for your attention!

 

 

**This article is for informational purposes only. It is not intended to constitute legal advice.

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