We’re increasingly working with companies that are looking to the future after Brexit. They could already have EU operations or they might be planning to expand into Europe. One solution we’ve been exploring is to use an EU hub company that could theoretically protect against EU tariffs. This involves creating an EU headed structure, probably outside the UK group (although a sub-holding company within the group may also work).
The exact structure of the EU hub will vary between companies because it needs to be the best fit for the business’ commercial strategy and long term plans. It’s important to take into account factors such as the number of territories involved, the level of trade in each of them, funding requirements and exit plans. In many cases it is possible to use existing tax reliefs when putting the structure in place, but careful planning is required as it is easy to trigger tax charges on the transaction.
With its benign tax regime, the Republic of Ireland is an attractive location for the EU hub, particularly as it shares a common language and has a similar legal framework to the UK, but other EU countries could work as well. Some territories are particularly attractive for certain types of business. For example, Luxemburg has long been considered an attractive location for IP-rich businesses. The ultimate decision on where to locate the hub must be a commercial one.
What the business landscape will look like after Brexit is still far from certain, but one thing is clear – it’s going to be important to be prepared for whatever may happen. After the deal (or lack of one) is done, it could well be too late to set up the best possible structure.
If you want to explore your company’s Brexit planning, please speak to your usual Ensors contact, send us a quick enquiry or email Robert Leggett, Business and Corporate Tax Partner.