The Company “Flip Up” – Moving a Foreign Tech Startup to the UK

The UK is undoubtedly a good place to launch innovative technology. The UK has a goal to transform into a tech superpower by 2030 and is developing international partnerships across academia, government and industry to make this happen.  The UK is already ranked fourth in the Global Innovation Index for 2022 and ranked 12th in the 2022 Network Readiness Index, and it is renowned for a thriving tech ecosystem.  

The “Flip Up” 

This is why the UK has become an attractive option for foreign based tech startups to move their business to the UK via a “flip up”.  Flipping up is the process of moving a foreign-domiciled company to another jurisdiction, which enables the company to take advantage of being incorporated in the new country. 

What Advantages does the UK Offer?  

Increased Access to Investment and Finance  

The most common reason to flip up is to attract international investors and to gain access to UK based accelerator programs.  The UK’s reputation for tech excellence makes it attractive to international angel investors and venture capitalists who will prefer to invest in businesses incorporated in a country with established and predictable legislation and processes.  The UK also has a very generous system of startup grants which can potentially be accessed by UK incorporated companies, including those that have subsidiaries outside the UK.

Access to Accelerator and Business Incubator Schemes 

The UK has a strong network of accelerators and business incubators which provide intensive and time-limited business support for cohorts of startups. These networks not only aim to get businesses investment ready but also provide introductions to tech savvy networks which include both potential collaborators and investors.  

Tax Benefits  

Small and medium-sized enterprises (SMEs) can benefit from venture capital schemes that offer generous tax reliefs for investors. These benefits are accessed by some well-established schemes including Enterprise Investment Scheme (EIS), Seed Enterprise or Investment Scheme (SEIS) and Venture Capital Trusts (VCTs). It’s schemes like these that make the UK an ideal place to start, finance and expand a business. 

Access to Markets 

UK incorporated companies obviously have better access to the UK market but, the UK also acts as a gateway to Europe and the US.  

Access to Talent  

The UK has a highly skilled workforce and a huge talent pool of experienced professionals, researchers and engineers across many technology sectors. UK incorporation and operating under the jurisdiction of UK legislation can have more appeal when it comes to recruiting the right talent. In addition, the UK offers tax benefits through Enterprise Management Incentives (EMIs) and employee share option schemes which are a great way to attract and retain a talented and highly motivated workforce.  

What is the Flip Up Process?  

“Flipping up” involves transferring the legal domicile or jurisdiction of a company from one country to another while maintaining the same capital structure. As a result of the flip up, the foreign startup will become a wholly-owned subsidiary of a new UK company. The shareholders of the non-UK startup transfer their shareholdings to a UK parent company in exchange for shares in the new UK parent  company, with the result that the original shareholding structure is reproduced in the UK parent company. 

This is a simplified description but in reality the flip up process involves complex legal and regulatory considerations, as well as potential tax implications. Therefore, it’s crucial to seek professional advice from legal, tax and financial experts in both jurisdictions with experience in cross-border transactions to ensure a smooth and compliant transition. The right advisors can guide you through the specific requirements of both the current and target jurisdictions, and help you navigate any potential challenges during the flip-up process. Although a flip up can be a complex process, for the right company, the benefits far outweigh the problems and complexity. 

JPP Law can help with this process. We have advised numerous international businesses through the legal aspects of a flip up, and we have the connections and local partners in many jurisdictions to ensure your business gets the correct tax and financial UK advice as well as local advice in your current jurisdiction. 

Mark Glenister

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