International expansion presents UK businesses with significant opportunities, but going through complex tax obligations across multiple jurisdictions needs careful strategic planning. With recent changes to UK international tax rules and increased global compliance requirements, understanding these strategies has become more critical than ever for maintaining profitability whilst ensuring full regulatory compliance.
1. Understanding International Tax Obligations
Understanding tax regulations in target markets is the foundation of successful international expansion. The UK's new Foreign Income and Gains (FIG) regime, effective from April 2025, has fundamentally altered how businesses approach international tax planning. Companies must now report worldwide income more comprehensively, making a thorough understanding of both domestic and foreign tax obligations essential. Recent HMRC data reveals losses of £836 million to 'phoenixing' practices in 2022-23, a 45% increase from previous estimates, highlighting the heightened scrutiny businesses face when establishing international operations.
2. Utilising Double Taxation Agreements with Expert Support
Leveraging the UK's extensive network of double taxation agreements can prevent businesses from being taxed in both jurisdictions, leading to substantial savings. HMRC statistics show the UK resolved transfer pricing cases within 25 months on average, significantly outperforming the global average of 32 months. Professional guidance becomes invaluable when going through these agreements, as experts in international accountancy can guarantee businesses fully capitalise on available treaty benefits whilst maintaining compliance across all relevant jurisdictions.
3. Optimising Transfer Pricing Policies
Establishing solid transfer pricing mechanisms guarantees that intercompany transactions align with market standards and regulatory requirements. HMRC employs 395 full-time equivalent staff working on international tax issues, including transfer pricing, highlighting the significance of proper compliance. Businesses must document that their transfer pricing policies reflect arm's length principles, particularly given increased scrutiny from tax authorities worldwide looking to ensure appropriate profit allocation.
4. Implementing Efficient Corporate Structures
Choosing appropriate corporate structures impacts tax efficiency and operational flexibility. Whether establishing subsidiaries, branches, or other entities, each structure carries distinct tax implications affecting overall profitability. The UK maintains over 100 double taxation agreements with countries worldwide, making structural decisions important for maximising treaty benefits whilst ensuring operational efficiency across international markets.
5. Planning for VAT and Customs Duties
Understanding VAT obligations and customs duties prevents unexpected costs that can impact cash flow. With new Pillar Two rules requiring in-scope groups to register with HMRC within six months, businesses must stay current with evolving international tax requirements. The retail sector exemplifies these challenges, facing £7 billion in additional annual costs from new tax increases and regulations. Additionally, from April 2025, the carried interest tax rate increased from 28% to 32%, with further integration into the income tax system planned for 2026, affecting businesses with international investment structures.
Successful international expansion needs a good tax strategy that addresses these interconnected elements whilst maintaining operational flexibility for future growth opportunities.
5 Tax Strategies for International Business Expansion In 2025