Red tape and unexpected costs are hampering many UK-based businesses despite the expectation that trade would be unaffected following December's deal with the EU. Is establishing a base on mainland Europe now the most viable option for those seeking to reduce the friction of cross-border trade?

Feeling the pinch

Increased red tape, customs paperwork, VAT complications and overloaded ports are challenging businesses trading between the UK and EU in the wake of Brexit. The increased friction is leading affected companies to consider what their next move may be, especially those based in the UK.

With options such as absorbing VAT costs, or ceasing trade altogether with the EU, likely to pose too great a threat to the survival of many UK companies, establishing a presence within the EU is becoming an increasingly attractive prospect. It seems that the best way to circumvent border issues and VAT problems is to register new firms within the EU, from where UK-based companies can distribute their goods far more freely.

While not the government's official line, recent reports suggest that this is the very advice given to some UK businesses by members of Department for International Trade (DIT), as businesses seek to reduce disruption and return to 'business as usual'.

Where to set up?

Should companies pursue the establishment of a branch or entity within the EU, with 27 countries to choose from, the first question will be around where to set up. Tax incentives, location, political stability, languages and incorporation procedures are all important considerations.

Fortunately, TMF Group experts can provide some insight on this topic, identifying that Ireland, the Netherlands, Luxembourg, Malta and Jersey feature among the most attractive options. For a more in-depth examination of what makes these countries attractive, read our article  here.

Appointing directors

Directorship requirements may prove a challenge for UK companies looking to set up a branch or entity based in the EU. Incorporation requirements vary from country to country, but UK residents are unlikely to be eligible for board appointments to EU entities, owing to no longer being resident in the EEA.

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