As the global tax landscape evolves - especially in areas like digital taxation, cryptocurrency regulation, and remote employment - investors are looking far beyond revenue growth.
Recent data shows that 68% of venture capitalists now conduct detailed tax due diligence before investing, up from just 42% three years ago.
Investors aren’t just looking at your forecasts — they’re scrutinising your tax governance.
Unclear or poorly managed tax positions represent tangible financial risk. A company with weak tax planning or unresolved liabilities can face:
For UK founders operating in the digital economy - whether selling SaaS abroad, managing remote teams, or transacting in crypto - robust tax governance is now an investment signal, not just an admin task.
The UK’s Digital Services Tax (DST) applies only to large multinationals with global revenues over £500 million and UK digital service revenues over £25 million.
While most startups are exempt, cross-border VAT and digital service tax obligations in other jurisdictions can still create complexity.
Investors will expect you to show that you:
Action step:
Consult a chartered accountant or tax adviser specialising in international digital taxation to confirm compliance in each market. HMRC VAT guidance: https://www.gov.uk/vat-businesses
With nearly half of UK startups now employing hybrid or fully remote teams, understanding the tax footprint of your workforce is critical.
Key areas investors look at include:
Action step:
Use compliant payroll software such as Xero or QuickBooks Advanced to automate calculations and maintain accurate location-based records.
Before engaging contractors, confirm IR35 status using HMRC’s CEST tool:
https://www.gov.uk/guidance/check-employment-status-for-tax
HMRC treats cryptoassets as property, not currency — which means every disposal or exchange may create a Capital Gains Tax (CGT) event.
If your company:
...you must maintain contemporaneous records of market value in GBP at each transaction.
Note: Businesses trading or paying staff in crypto may also face Corporation Tax or PAYE/NIC obligations.
Action step:
Use crypto accounting tools such as Koinly or CoinTracker to track transactions and report values in sterling. Review HMRC’s official guidance:
https://www.gov.uk/government/publications/tax-on-cryptoassets/cryptoassets-for-individuals
If you operate internationally through related entities, transfer pricing becomes a key area of scrutiny. Under UK law, all connected-party transactions must be conducted at arm’s length and properly documented.
While most startups won’t meet the Country-by-Country Reporting threshold (€750 million group revenue), demonstrating awareness of compliance requirements signals scalability and governance maturity.
Action step:
Document intercompany pricing policies early, even if not yet required. HMRC guidance:
https://www.gov.uk/guidance/transfer-pricing-country-by-country-reporting
AI-driven platforms such as Avalara, TaxJar, and TaxBit automate tax calculation and reporting across jurisdictions.
Ensure your chosen software supports HMRC’s Making Tax Digital (MTD) framework for VAT, PAYE, and Corporation Tax filings. HMRC MTD overview: https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital
Before engaging investors, commission a tax health check from a chartered accountant.
Expect to invest £2,000–£5,000, covering:
This small upfront cost can prevent funding delays and strengthen investor confidence.
Create a concise 2–3-page tax strategy outlining your:
Public tax strategy statements are mandatory for UK companies with turnover over £200 million — but publishing one voluntarily shows transparency and investor maturity. HMRC guidance: https://www.gov.uk/government/publications/large-businesses-their-tax-strategies
If you’re developing innovative technology or software, R&D Tax Relief can significantly reduce your Corporation Tax liability.
From August 2023, HMRC required an Additional Information Form (AIF) for all claims, including detailed descriptions of qualifying projects and costs.
Action step:
Keep contemporaneous records of R&D activities and expenditures throughout the year.
HMRC guidance: https://www.gov.uk/guidance/corporation-tax-research-and-development-rd-relief
In your forecasts, include tax assumptions that reflect:
This ensures your projections are realistic and investor-credible.
✅ Review digital payment reporting obligations for Stripe, PayPal, and other gateways
✅ Audit crypto transactions and record valuations in GBP
✅ Verify PAYE and IR35 compliance for all remote workers
✅ Ensure your accounting platform meets MTD filing standards
✅ Schedule an independent tax review before your next funding round
Tax complexity can slow you down — or set you apart. Founders who master compliance early signal discipline, foresight, and governance maturity. That translates directly into investor confidence and higher valuations. Companies with robust tax frameworks often experience:
Investment readiness isn’t just about growth metrics — it’s about governance.
By proactively managing your tax position, you’ll remove barriers to funding and present your business as the kind of operation investors can trust to scale.
Disclaimer:
This article is for general information only and does not constitute tax or legal advice. Always seek guidance from a qualified chartered accountant or HMRC-registered tax adviser before making decisions about your tax structure or compliance.