Hiring developers, designers and freelancers abroad is how a lot of agencies grow margin fast — but get the VAT, status or presence wrong and it gets expensive. Get a straight answer for your set-up.
Here's a story we hear most months. An agency lands a couple of bigger clients, the work outgrows the founders, and rather than hire locally they bring on a brilliant developer in Poland and a sharp designer in the Philippines. Output goes up, margins look healthy, everyone's happy — and then someone asks the awkward question: "Do we actually owe any tax or VAT on these people, and are we treating them right?" Cue silence.
It matters commercially because overseas talent is one of the most reliable ways a UK service business widens its margin. But the things that can go wrong — missing the VAT reverse charge, misclassifying a full-time worker as a "contractor", or accidentally creating a taxable presence abroad — are the kind of mistakes that surface 18 months later as a back-bill, interest and a lot of stress. Cheap to get right up front; pricey to fix afterwards.
This is a sub-guide within our pillar on how digital service businesses scale globally, so start there for the wider VAT and pricing picture. Below we focus on the specific question of paying people based overseas.