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The first steps to international expansion For companies moving to the UK, outsourcing the back-office finance and human resources functions continues to make sense. Samantha George, a Partner at Silver Levene, explains why.

US firms moving to the UK are often doing so as their first step in an international expansion strategy. In order to cope with the unfamiliar territory, the recruitment of cost-effective and experienced local country advisers is hugely beneficial. The following areas all need to be considered as part of the move:

• Location – where to set up;
• The form of business entity required in the UK – place of business, branch of the US company, or a UK limited company;
• Assessing banking requirements, financing the UK operation and setting up banking arrangements;
• Planning, documenting and implementing internal controls;
• Implementing an appropriate IT system, including designing the relevant chart of accounts;
• Arranging initial tax registrations for corporate, payroll and sales tax;
• Advising on tax-planning opportunities, compliance and filings, transfer-pricing and income-recognition issues and on taxefficient ways of extracting profit from the UK operations;
• Dealing with UK company secretarial duties;
• Operating the financial back office functions: accounts payable and receivable, treasury management and general ledger accounting;
• Reporting on a timely basis to US parent company management, to an agreed financial reporting structure;
• Annual accounting, audit and taxation compliance function;
• Strategic business advice on financial and commercial issues;
• Advice on future European and international expansion.

When it comes to setting up in the UK, your personnel are a key area to get right. UK legislation is much more restrictive than US legislation, with the concept of “employment at will” not applying in the UK. Good advisors in this area will offer services which should include:

• Advice and guidance on recruiting staff whilst complying with current UK employment legislation;
• Setting up employment policies and procedures;
• Employment contracts and advice on employee terms and conditions;
• Tax efficient remuneration and benefits, including pensions;
• Advice on any employment issue, from recruitment to termination;
• Most essentially, the provision of a dedicated payroll service.

In addition, US firms often run into pitfalls when it comes to employee stock options. Many often fail to take advice on the alternative forms of stock options available under UK legislation, and unthinkingly continue to issue stock in the US parent company to non-US employees.

However, in the UK, such stock options may count as unapproved share schemes for UK tax purposes. The tax consequences include the need for both the company and the employee to make annual filings with the UK authorities and, depending on circumstances, could lead to a need to tax options through the payroll at the point of exercise. There are elections available to potentially mitigate UK tax liabilities under such schemes, but specialist advice is required.

There are other services and additional value that your outsourced providers of back-office services can add. The best advisors will have a comprehensive network of professional intermediaries, industry specialists and inward-investment support agencies to which they can refer you. From business bankers to immigration law specialists, property location agents to UK patent agents, expat networks to export specialists, providers serious about supporting your transatlantic investment are an invaluable source of advice and contacts.

Silver Levene, winner of the Accountancy Age Award for mediumsized firm of the year 2007, is a London-based UK Top 60 accounting firm. We offer a comprehensive and scalable service to US companies moving into the UK covering accounting, audit, taxation, payroll, human resources and strategic business advice. Our menu-based, fixed-fee service applies for the small start up to the listed company. As a member of the IGAL Network, we can help your business expand into Europe and the rest of the world. You can download our free guide to expanding your operations into the UK from our website: www.silverlevene.co.uk

For more information or a free initial consultation, contact:

Samantha L. George, Partner
Silver Levene
37 Warren Street,
London W1T 6AD
Tel: +44 (0)20 7383 3200
E-mail: samantha.george@silverlevene.co.uk
Website: www.silverlevene.co.uk

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