Before you go international: are you already there?

Hannah Magee, Tax Director in Grant Thornton UK's Private Capital Tax team, explains why founders rarely skip advice on going international, and why that still isn't enough.

Before you go international

Every one of my clients either has an international presence already or has thought hard about it. Some have looked and walked away. The ones ready to go have a solid home base and have tested the demand, perhaps through a distributor or subscriptions arriving from one country. Done well, it changes your growth story. Showing investors that US sales are working makes the size of the prize far easier to argue than it is from the UK alone.

Founders take advice, but on the wrong question

On international expansion, most founders I meet have taken advice, but have been asking the wrong questions.

We spend a lot of time on whether to set up overseas as a branch or a subsidiary. It gets attention because it feels like a real choice with a neat answer. The questions that trip businesses up sit to one side. How will VAT work? Who's working out there? How will you pay them? Can your goods cross the border?

Compliance, payroll and customs sound dull but they’re vital. I've heard of companies unable to pay overseas staff because their payroll registrations weren't in place. Good advisors in each country don't close the gap either. A UK accountant and a US accountant can both do excellent work while nobody checks how the two pieces fit together.

How accidental expansion catches up with you

Each small step makes sense on its own. Together, they can create a permanent establishment or a VAT problem nobody planned for.

Sometimes an overseas tax authority spots it first. Authorities in continental Europe tend to be more proactive than UK businesses expect, and penalties can be criminal as well as financial. Some US states chase businesses, and even their customers, for unpaid sales and use taxes. Sometimes nothing happens until due diligence, when a buyer looking to chip the price goes straight to overseas expansion done badly.

Share options are where I've seen it go most wrong. If founders or employees with tax-advantaged UK options spend long stretches working overseas, those benefits can be restricted. At exit, arguments over who compensates people for the lost benefit get heated fast.

Three steps before you go overseas

1. Know why you’re expanding overseas, and test it. Size the market and the share you can realistically win, then ask what that money and management time could be doing instead.
2. Get local knowledge early, whether that's a local advisor or an early hire on the ground.
3. Make one person responsible for joining up the advice. Not the founder, and probably not your finance director, who'll otherwise repeat the same thing to five advisors and hear five slightly different answers back.

What early advice would have changed

I can't name a client whose mind I changed on whether to go. What I can name is a lot of avoidable cost, mostly penalties paid to US states by businesses who did not realise they needed to pay sales taxes or to the IRS for missed filings. Having a conversation early could have prevented this. One client came to us early with a US structure that needed tweaking. Fixing it early was straightforward. Left alone, it would have exposed the business to tax enquiries and penalties that would need defending at the most stressful point of a sale. It only gets harder and more expensive to put right as time goes on.

I also worked with a construction business that started taking projects in continental Europe. The demand was real. But between health and safety rules, visas, site registrations and different working patterns, the paperwork wasn't worth it, and they pulled out. Advice before they went would have saved them the round trip.

Go international on purpose

My one piece of guidance is to expand intentionally. Decide whether you're testing or going at scale, and be honest about whether you have enough cash and management time to see it through. Keep your structure flexible so each step teaches you something. Far better to dip a toe in than discover your product doesn't land with 50 people already on the ground.

Borders feel softer than ever. Tax authorities still see them clearly.

Planning your first move overseas, or wondering if you've already made one? Join PerfectTed co-founder Levi Levenfiche and our specialists on 24 November to hear which growth decisions are worth getting right first time. 

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