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Engaging in U.S.–U.K. Trade? Don’t Get Tripped up by Regulatory Terminology
"Each time I must choose between you and Roosevelt, I shall choose Roosevelt." These were Winston Churchill’s words to France’s Charles de Gaulle shortly before D-Day, signifying the strength of the British-American alliance. Even now, as Britain considers its future relationship with the European Union, many of its citizens agree there is still one country they will never walk away from.
The U.K. is the single biggest contributor of foreign direct investment in the U.S. (approximately $42 billion), and the U.S. gladly returns the favor (approximately $16 billion). But despite our mutual respect and trust, shared trade opportunities, and common language, a few regulatory matters still manage to get lost in translation. Here’s a brief list of the concepts that can stymie people on either side of the pond as they conduct business between the two countries.
- Public records — In the U.K., Companies House requires incorporated entities to publish business financial data and personal details of the ultimate beneficial owner(s) on public record. But in the U.S., all financial and ownership data are retained by the IRS and kept out of the public domain.
- Statutory audits — The U.K. requires an audit under statute should the subsidiary and/or its parent fall foul of the rules by virtue of its size.
- State taxation — As if it weren’t bad enough tackling U.S. federal laws and regulations, there are a further 50 states’ individual taxation policies to contend with.
- Sales tax is not VAT — Value-added tax (VAT) is basically a recoverable tax for businesses in the U.K. Sales and use tax in the U.S. is not its equivalent and is a direct cost for a business.
- LLC ≠ LLP ≠ LTD ≠ INC — Don’t assume that a U.S. limited liability company (LLC) or incorporated business (INC) is the equivalent of a U.K. limited company (LTD), or that a limited liability partnership (LLP) is the same in each country.
- Employment rights — The U.K. has protective rights for employees, while the U.S. employs at will. Neither approach is simple.
When engaging in U.S.–U.K. trade, it’s wise to acknowledge and understand the differences in the two countries’ laws and customs. The terms above are a good place to start. Consult with legal and business advisory professionals to comprehend their applicability to your business and where you should conduct more research.
How we can help
British organizations entering the U.S. market can take advantage of CLA’s global concierge services — a single resource with a vast national network to help you simplify complex issues and make your expansion a smooth one. U.S. entities engaging in trade with the U.K. can work with CLA’s international professionals to enter the global market with confidence. Our affiliation with Nexia International offers helpful connections and resources throughout the world.