Navigating international banking

For businesses venturing into the UK market, understanding the banking regulations and procedures is paramount to a smooth transition and sustainable operation.

Setting up a foreign bank account, particularly in the UK, can be a time-consuming process, often taking three months or more. It's a step that requires planning and proactive engagement with your advisers. It's advisable to discuss your plans with your bank at the earliest stages of your international expansion planning.

The first step is to understand whether your current bank can support you internationally in the locations you plan to hire in. You should also determine if they can offer proactive advice around areas like foreign exchange on international payments. 

The need for a local bank account varies depending on the country where you’re setting up. Take, for example, the intricacies of banking in different European countries:

In the UK, it is crucial to set up a domestic bank account to facilitate mandatory pension contributions and to receive VAT repayments from the tax authority. You can find pension schemes that accept manual payments, but this will limit the schemes you can use. They are also more costly, as most enforce the direct debit route. While some flexibility exists, the default route involves transactions through a UK-based bank account. Also, the UK tax authority will generally only make VAT repayments into a domestic UK bank account in the name of the VAT registered entity, in very limited circumstances a payment can be made to a non-UK bank account.

In Spain, you will need a Spanish bank account to pay your payroll taxes. In Germany, when incorporating your entity, you will need to set up a German bank account. This is because you need to pay the initial capital into this account to form the entity. 

If the banks in your home country lack international presence or capability, consider partnering with local UK banks or international financial institutions. However, it’s essential to ensure that the chosen banking partner aligns with your operational needs as insufficient funds flowing through the UK may mean UK high street banks cannot support you either.

International banks with a robust presence across multiple jurisdictions will allow you to quickly open accounts in new countries and potentially use a ‘virtual wallet’ in the interim.

Alternatively, online banking providers offer a faster account setup process, but they have some limitations, such as setting up direct debits. You should carefully evaluate these providers to determine if they’re suitable for your business requirements.

When setting up in the UK, you should plan ahead and leave yourself enough time to set up international banking operations. Our expert FDI team can introduce you to a range of high street, global, and online banking providers to facilitate this process.