You say potato…. - Merryhill Accountancy Services Ltd
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You say potato….

If you are a US business considering expanding into the UK, it can seem pretty daunting. Getting sensible, practical advice will be critical – don’t be dazzled by fancy ideas. Sometimes the simplest approach is the best.

Legal Structure

You may well be told that you have 3 options here, but in reality, the first 2 are rarely suitable:

  • Representative office – This is a restrictive option and most start-ups don’t meet the requirements. For example, your UK Hire will not legally be able to conclude any sales on your behalf or then perform any after sales services. If you are really serious about doing business in the UK, then this one probably isn’t for you.
  • Branch office – Most people don’t realise that it costs more and takes longer to form a branch than a subsidiary AND you won’t be able to benefit from the limited liability associated with a distinct legal entity. Furthermore, you may discover that you have to file the Main Company accounts in the UK where they are held on public record. Freely available for all to see. Not many US business owners would happily sign up for that.
  • Subsidiary – this is the legal entity equivalent of a comfy slipper. It’s fit for purpose, easy to choose and buy and everyone knows what it looks like and what it is for. It really is almost always the best option despite what the lawyers and fancy tax advisors may try to tell you!

UK Hire number one

If you are planning on shipping someone over to help man the UK office, you might consider making them the first hire. Work permit rules are favourable where employee number one is parachuted in. Once you have a local hire in place, the rules get tighter. And while we are on the subject, bear in mind that many UK employees are on a 3-month notice period, so you may have to wait a while for employee number 2 to come on board.

Getting a local Bank Account

Getting a bank account in the UK is tough, and has been getting tougher for the last few years. Throw in overseas ownership and management and the hurdles you have to jump get much, much higher. You may think that it will just be easier to pay everything from your US bank account. Well, maybe in the short term, it will, but it’s clunky, time consuming and expensive and isn’t really a sustainable solution for a growing business. Eventually, you will need an in-country local currency bank account and here are some suggestions for how to achieve that:

  • Talk to the banking business disruptors such as Metro Bank. Where the traditional high street UK banks are indifferent about getting your business, the new players are keen as mustard and forward-thinking enough to make the effort to tick all the anti-money laundering boxes their regulators demand.
  • Leverage your existing US banking relationship. Banks such as SVB and Wells Fargo can offer you UK bank accounts with pretty decent online banking capabilities.
  • Talk to your accountants about using a client account. We offer a client account facility to many of our clients to bridge the gap until they can get their own banking in place. So you can pay your team and your suppliers from the moment you start business in the UK.

Holiday stuff

Holiday is holiday right? Well you would be surprised how many pitfalls there can be around this:

  • You say “vacation” – we say “holiday”.
  • You say “holiday” – we say “bank holiday”, and FYI there are 8 bank holidays each year unless they sneak an extra one in for a special event like the Queen’s Golden Jubilee, or a big Royal Wedding.
  • You say “Happy Holidays” – we say “Merry Christmas”.
  • You say “PTO” – we…. don’t really have an equivalent, actually. Holiday and sick leave are very separate things over here – they have different rules and need to be treated accordingly.
  • You cannot be sick and on vacation. If you become sick while on vacation, then your vacation is suspended and those vacation days go back into your allowance.
  • Every employee is entitled to 5.6 weeks of statutory paid holiday each year including bank holidays and it is not permissible to roll these over or pay them out at the end of a holiday year. The idea is that employees should be encouraged to take all of their holiday allowance in the holiday year.
  • Unlimited PTO isn’t really a “thing” over here yet. If this is something that you want to offer to your UK staff, you must remember to track their holiday in case they leave part way through the year and you need to pay them for any unused statutory holiday entitlement.
  • Top Tip - don’t negotiate different amounts of holiday with different employees. It never ends happily.

Language Barriers

Our two nations really are divided by a common language and not just our words for Vacation and holiday. But don’t worry – many of us are bilingual

Here's our quick translation guide to American / UK accounting terms:

You say We say
Accounts Payable (AP) Purchase Ledger
Accounts Receivable (AR) Sales Ledger
General Ledger (GL) Nominal Ledger (NL)
401K Pension
Workers Compensation Employers Liability
CEO Managing Director
CFO Finance Director
Pants Trousers (pants are an undergarment!)
Inventory Stock
Stock Share Capital
APIC Share Premium

 

Merryhill have welcomed many clients to these shores and we love sharing our local knowledge and finding out a little about their part of the world. It’s the differences that make it fun and interesting. So we may not agree on how to pronounce potato, but let’s not call the whole thing off.