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A Guide for EU Companies Expanding to the UK: What You Need To Know

This is the best time to establish your company in the UK! Of course, as a business owner, you may be worried about the impact of Brexit that might have on your company. You may be even thinking, what about funding and taxes? Yes, things might have changed after the transitional period, which ended on 1 January 2021, but that doesn’t mean expanding to the UK is not possible. In this guide, we will show you some of the things you need to know when you are planning to expand your business to the UK.

After Leaving the European Union, What Type of  EU Grants Can UK Companies Apply For?

Previously, UK companies had no issue with applying for most EU-related funding as they belong to an EU single market. Over the years, the EU has supported a wide range of businesses across sectors. But this has changed after the UK officially left the EU on 30 January 2020.

They can no longer participate or apply in EU funding such as European Innovation Council (EIC) or other new funding programmes, EU Structural and Investment funds that are only open to EU member states. As such, you might be wondering: are there any available EU grants, which UK-based companies can tap into?

Yes. There are three available EU grants, which UK-based companies can apply for.

  1. Horizon Europe

A key funding programme for businesses, researchers and UK scientists.

  1. Euratom

A complementary research programme for nuclear research and training

  1. Copernicus

An EU earth programme that benefits all European citizens

The above programmes run from 2021 to 2027 and are part of the UK-EU Trade and Cooperation Agreement (TCA), which came into effect on 1 January 2021.

What Is the Percentage of UK Companies Trading With the EU?

According to Statista, the UK continues to remain as the main trading partner in the EU market with 51.6% of its imports and 53% of its exports in 2020. Subsequently, in February 2021, the exports to the EU single market increased by 46.6% to £11.6 billion and imports from the EU rose 7.3% to £17.1 billion. These numbers clearly show that while the EU continues to dominate the UK market, the UK trade with the EU remains strong as well, even after Brexit.

Do UK Companies Charge VAT to the EU for FutureBusiness Transactions?

No. You do not charge VAT when you export your goods to the EU. Exports to the EU will be treated in the same way as exports to any country outside of the UK. It will be considered as zero-rated. Though no UK VAT is payable, it doesn’t mean that you should put it aside and forget about it. It’s advisable to include this 0% VAT rate as part of your VAT accounting when you offer goods and services to the UK, as you may have to declare at some point.

Mein Deli Company is a French company that sells a wide selection of fine foods and wines to Europe and internationally. The head office is in France and there is the UK office that caters to the UK and other EU citizens. When the UK office has to supply goods to another business customer based in an EU country, it will be zero-rated. However, they have to ensure that the business customer is not based in the UK by getting a valid VAT or tax ID number as proof. This is crucial if you are handling overseas customers.

How Many UK Companies Export Their Goods To the EU?

Based on the UK-EU Trade in 2019, statistics showed that 46% of UK companies exported their goods to the EU. These are the types of companies that have been exporting to the EU:

  • Petroleum & petroleum products
  • Transport equipment
  • Medicinal & Pharmaceutical
  • Electrical machinery & appliances
  • Telecommunications and sound recording equipment
  • Office machines & automated data processing machines
  • Power generating machinery & equipment
  • Miscellaneous manufactured articles
  • Road vehicles

On the other hand, 39% of UK companies exported their services to the EU. These types of companies comprised the following:

  • Legal services
  • Accounting
  • Advertising
  • Research and Development
  • Architectural
  • Engineering
  • Transportations
  • Insurance and Pension
  • Maintenance and Repair

What Are the Advantages of Expanding EU Business to the UK?

Despite being out of the EU, there have been more than 1,400 EU companies expressing their interest in expanding their businesses to the UK. This clearly shows that expanding your business to the UK has its advantages. Companies that have established their business presence in the country recognised that the UK is a premier financial services hub. Moreover, it allows the UK government to establish their regulation such as tax, finance and legal. You get flexibility in the way you run your business. There are plenty of opportunities to trade with various countries, apart from the EU countries. But more importantly, as a business owner, you can recruit other experienced specialists internationally for your company.

Checklist for My Business Expansion to the UK

Preparing for a business expansion to the UK doesn’t have to be tedious if you know the type of paperwork you need.

Here is a checklist of important details to take note of:

  1. Applying for UK VAT

EU companies who are planning to set up a new branch in the UK may register for VAT if you are selling goods from the UK to other EU countries and buying and selling goods within the UK. This also includes if you are holding goods in a warehouse in the UK as stock and doing online retailing to UK citizens from other EU countries. However, do note that there is no VAT threshold if you have EU VAT. The current standard VAT rate is 20%. There are reduced rates of 5% for fuel, children’s car seats and 0% for food, books and children’s clothes. Registration for UK VAT will take about 4 to 6 weeks.

Paul set up another sound equipment company in the UK. His head office is in the Netherlands. The purpose of setting up a subsidiary company is to sell his equipment such as microphones, turntables and speakers to his customers who are based in the UK. However, if he is exporting his products to other EU customers, he will have to apply for UK VAT. Likewise, even if he is storing a portion of equipment in the UK, he will also have to apply for UK VAT.

  1. Choose a Business Entity

A business entity refers to a company created by an individual to conduct business and engage in trade. A business owner needs to know what type of business entity he or she wants to achieve his or her business objectives. There are many types of business entities: sole proprietorship, partnership, limited company and corporation. To start a company in the UK, many business owners prefer to set up a limited company as it’s easily recognised and is considered as one of the trusted means of doing business in the UK. The advantage of a limited company is that it offers protection to the expanding parent company, as the financial risk is limited to the number of shares that are issued. This means it minimises your liability and if your main office is located in the EU, it protects your company’s name.

  1. Getting EORI Number

EORI refers to Economic Operator Registration and Identification. The purpose of EORI is for customs authorities to identify the company that is importing and exporting goods to another country. It is also to complete customs formalities. You will only need an EORI number if you move your goods between Great Britain (England, Scotland and Wales) and another country (which includes Europe); between Great Britain and Northern Ireland and Northern Ireland and countries outside the EU. To get an EORI number, you need to be a registered office and permanent business establishment. During customs declarations and clearances, this EORI number has to be quoted in the documentation. But do bear in mind that if no EORI number is provided with the import or export, goods may be held up for customs clearance and associated storage fees might incur.

  1. Customs Declaration

This may prove to be a headache for some companies after Brexit as it involves completing custom formalities and working out customs requirements. So most companies outside the EU use a customs agent to help with this aspect. The job of a customs agent is to help traders to find relevant information to complete formalities and submit the required declaration. A custom agent helps to simplify the process. If your company decides not to use a customs agent, you may have to make the declaration yourself. In any case, it is advisable to get a customs agent to assist in your company’s export and import formalities in the EU.

  1. EU Settlement for EU workers in the UK

Before Brexit, EU citizens were able to work freely in the UK without applying for any permit. But this rule has changed. If you are employing any EU citizen for your UK-based company, you have to ensure that your staff has the right to work in the country. They can apply for the EU Settlement Scheme to work and live in the UK. This scheme is free to apply. To get a better understanding of this scheme, you may refer to these criteria.

Key Takeaways

  1. Under the UK-EU Trade and Cooperation Agreement, there are three available EU grants, which UK companies can apply: Horizon Europe, Euratom and Copernicus.
  2. In 2020, the UK was the main trading partner in the EU single market with 51.6% of all UK imports and 53% of its exports. This shows the UK remains a strong trading partner, even after Brexit.
  3. Exports to the EU will be treated in the same way as exports to any country outside of the UK. Therefore, you do not have to charge VAT when you export your goods to the EU. It will be considered as zero-rated.
  4. Though you do not have to pay UK VAT, it doesn’t mean you should put it aside and forget about it. It’s advisable to include this 0% VAT rate as part of your VAT accounting when you offer goods and services to the EU, in the event the authorities ask for it.
  5. In 2019, 46% of UK companies exported their goods and 39% of UK companies exported their services to the EU.
  6. Expanding your EU business to the UK has its advantages. One of them is that the UK has the ability to establish its regulations, such as tax, finance and legal. Setting up a new office also allows you to recruit other experienced specialists from other countries, apart from the EU. But more importantly, the UK is considered a premier financial services hub.
  7. Before you expand your business, do ensure that you have everything ready under the checklist. This includes UK VAT, choosing a business entity, getting EORI number, custom declaration and EU Settlement for EU citizens.


We wish you all the best as you scale your business into the UK. Meanwhile, if you are worried about UK VAT and other import taxes after Brexit, come and speak to our experienced accountants in the UK. We will gladly assist you with any tax advice.

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