Cracking new markets means understanding how each jurisdiction operates
The UK fintech sector is an international success story, in more ways than one. From 2020 to August 2025, the UK saw more startups achieve unicorn status than Germany, France and the Netherlands (the most successful EU countries) combined, according to Dealroom and The Economist. Fintechs have accounted for the lion’s share, as well as some of its best known, such as Revolut and Monzo.
But such success frequently depends on looking beyond Britain’s borders. Revolut has expanded into the US, Australia and Singapore, as well as Europe. Monzo, too, has ‘international ambitions’, as its annual report notes.
When the British Virgin Islands group BVI Finance surveyed 451 fintech business leaders in June 2025, it found that 95 per cent of those in the UK said cross-border growth was important or critical to their success. Similarly, a survey by the World Economic Forum and University of Cambridge found that, among European fintechs, seven in10 had an international presence.
“Most fintech businesses we work with have international ambitions. With global workforces and products, expanding beyond Britain’s borders is always a natural part of their plan,” says Emily Berry, partner and head of fintech at leading professional services firm S&W.
But seeing a global vision through to a successful international expansion is not easy. Beyond the different markets and regulatory regimes, fintechs must contend with international taxation, navigating different jurisdictions and demands. In particular, they must consider the tax issues around their sales, people and pricing.
Sales taxes
For many fintechs, of course, expanding abroad doesn’t require leaving home. Nor does exposing the business to the complexities and risks of overseas VAT or sales taxes. Simply selling to a buyer overseas may create obligations to the jurisdiction’s tax authorities.
“Some countries have minimum turnover thresholds, but others don’t,” says Jade Els, VAT associate director at S&W. “In certain territories, if you make a single sale, you may have an exposure.”
A wide range of different VAT and sales tax regimes complicate issues. Even within the EU, Els points out, there are numerous VAT regimes to consider. Likewise, the different states in the US have their own sales tax provisions.
“There’s a bewildering array,” she says.
As important are the varied approaches and attitudes to enforcement. Some territories are a lot stricter than others in terms of penalties for failing to abide by the VAT rules, according to Els. These can include even criminal liabilities, she adds.
“A big part of what we do is help clients take a pragmatic approach so they can scale quickly and access new markets while taking into account their potential exposures and the risks of failing to register.”
International workforces
When fintechs do need a local presence, there’s often a sense of urgency to get the right people in the right place, as quickly as possible. But, just as corporate structures are a critical aspect in planning international expansions, employment structures require careful consideration.
“You might need boots on the ground, but lack an entity from day one,” explains Natasha Karp, S&W director and a specialist in global mobility and employment tax. “In those cases, businesses may consider contractor arrangements or use an employer of record, but these solutions can bring their own risks.”
She adds: “None of these arrangements should be taken lightly.”
Quite often, according to Karp, there is a ‘disconnect’ between tax functions and HR, with the latter looking to place people quickly, while the former seeks to manage and mitigate the risk.
“It’s important to look at how the need for a local presence can be facilitated, without creating exposures,” she explains. An employer of record (EOR), for instance, can enable a business to access talent overseas without having established a local presence, but it cannot eliminate all risk.
“The EOR won’t manage your corporate Cracking new markets means understanding how each jurisdiction operates Cracking new markets means understanding how each jurisdiction operates risk for you,” warns Karp. If the employees’ activities (regardless of their legal employer) risk creating a permanent establishment for the business in the overseas jurisdiction, it could lead to unplanned exposures and liabilities.
At the same time, in placing their own employees abroad, fintechs should be aware of the tax risks those individuals face, particularly when it comes to equity incentives. “When structuring reward packages, schemes that are tax efficient from a UK perspective may not translate well internationally,” warns Karp.
Founder relocation: CGT and IHT implications when leaving the UK
It’s not just workforces that may move internationally, of course. For founder-led fintechs, international expansion often raises the question of whether they can relocate and take the business with them.
While the idea of working from anywhere is appealing, the reality is more complex – especially from a UK tax perspective, according to Monica Daddar, a director focused on entrepreneurs and privately owned businesses at S&W.
Entrepreneurs considering a move abroad must carefully assess the capital gains tax (CGT) and inheritance tax (IHT) implications. The UK tax system is based on residency, not just assets’ location. This means that even if you move your wealth offshore, you may still be liable for UK tax unless you’ve formally broken UK tax residence.
To fully escape UK CGT on the sale of shares or business assets, you must:
- Break UK tax residence before the sale
- Remain non-resident for at least six complete tax years
For IHT, the rules are even stricter.
This creates a tension for founders: the desire to relocate and optimise tax exposure versus the long-term commitment required to achieve meaningful tax relief. It’s not just about where you live – it’s about how long you stay away, and how you structure your exit.
Transfer pricing
No matter where your people are and how they are employed, knowing who is doing what for your business and where they’re based is vital from a transfer pricing perspective. New HMRC guidance issued in September 2024 reflects rising scrutiny in the UK, and internationally, on how businesses price cross-border transactions.
As Michael Beard, S&W director in business tax and a specialist on the issue explains, transfer pricing audits are becoming increasingly commonplace. The enquiries can seem somewhat random but shouldn’t be dismissed as inconsequential.
“From the headquarters’ perspective, the aspects of transfer pricing under review may seem immaterial, but the point of enquiries for tax authorities is often identifying if there are bigger issues to explore.”
A new International Controlled Transactions Schedule (ICTS) should bring increased transparency to this process, however. If businesses can demonstrate accurate information through the ICTS, it could help focus HMRC enquiries.
It’s not just from the UK authorities that fintechs face increased scrutiny, either. US tax reform, for example, will see the introduction of exemptions for dividends received into the US. That will largely be welcome, but if income isn’t being taxed upon repatriation to the US, the IRS is likely to be more interested in where that profit arises. This makes it a core transfer pricing question. That’s particularly true where intellectual property is involved.
“We can expect the IRS to be taking a far greater interest in the key value-drivers within a business, with a particular focus on IP,” Beard warns. “Businesses need to ensure they have strong supporting documentation evidencing any positions taken that may not align with the IRS’s default view that the US is central to profit generation.”
As with all issues around international expansion, careful consideration of the issues at the outset can help prevent problems down the road. When heading overseas, it pays to ensure you’re not underprepared.
For help planning your international expansion or to review your arrangements, please get in touch with S&W Director and fintech specialist Will Webber on +44 (0)204 617 5228 or at will.webber@swgroup.com.
