Is it possible to create an offshore investment company whilst residing in the UK?

[mickael28]

Hi guys,

I've got a personal cash surplus that I won't currently need in the short term, so I was going to use it for trading in the stock market. I've been trading for the last few years and I'm trying to think if there's a more efficient way to do it.

Do you know if it'd be possible to open an investing company offshore (to which I'll lend the initial capital to invest), in a country where the capital gains of company investments is lower, and then just keep compounding those profits until the time where we'd need them, at which point we would pay personal tax to HMRC in the usual way about the extracted profits?

Or is there any law by which HMRC doesn't even allow this kind of setup?

[northernladuk]

I believe Old Greg has something that would interest you...

But apart from that. Have you done some research in to how this works, the pro's and con's and the cost of trying to do this?

It's pretty well documented.

EDIT : Didn't the wife take it all last year?

[mickael28]

I just thought about it today as I was thinking if I should extract the maximum amount of dividends for myself an my wife before the end of the tax year from the limited company, even though we haven't got any use for it in the near future.

I didn't like the idea of keeping investing personally as it doesn't seem as flexible as investing via a limited company (IHT, control about how much to extract yearly, etc), but I'm not quite sure about the implications of the offshore idea. I'll have a further look these days, but if someone has an idea about the subject or good resources to start looking, I'd be grateful if you could let me know...

[northernladuk]

Well I'd say you need professional legal and financial advice for a start... but before that I'd check the sums of money needed before you can enter in to anything like this. The few setups I've seen state a minimum of 100k to start. These things tend to be for the super wealthy and well out of scope for Joe Average... or else we'd all be doing it, which we aren't. That alone speaks volumes.

Not sure I understand why you think personal investing is less flexible that via a company though.

Can't help any more than that.

[Maslins]

Will you remain living in the UK? If so, I'd have thought any profits of the company would be taxable in the UK, as well as whichever country you set it up in, based on the "central management and control" being from the UK.

[Syd]

Alternatively OP can take a 6 months+ vacation to said country so his tax residence changes before extracting his profits.

[SimonMac]

Hi guys,

I've got a personal cash surplus that I won't currently need in the short term, so I was going to use it for trading in the stock market. I've been trading for the last few years and I'm trying to think if there's a more efficient way to do it.

Do you know if it'd be possible to open an investing company offshore (to which I'll lend the initial capital to invest), in a country where the capital gains of company investments is lower, and then just keep compounding those profits until the time where we'd need them, at which point we would pay personal tax to HMRC in the usual way about the extracted profits?

Or is there any law by which HMRC doesn't even allow this kind of setup?

How much are you talking about?

£20k In a stocks and shares isa for you and the wife this week and in two weeks time after the 6th April will be £80k tax free

[SimonMac]

I just thought about it today as I was thinking if I should extract the maximum amount of dividends for myself an my wife before the end of the tax year from the limited company, even though we haven't got any use for it in the near future.

I didn't like the idea of keeping investing personally as it doesn't seem as flexible as investing via a limited company (IHT, control about how much to extract yearly, etc), but I'm not quite sure about the implications of the offshore idea. I'll have a further look these days, but if someone has an idea about the subject or good resources to start looking, I'd be grateful if you could let me know...

Why are you taking it out of the company in dividends if you don’t need it? You’ll be paying over the odds in dividend tax

[mickael28]

Well I'd say you need professional legal and financial advice for a start... but before that I'd check the sums of money needed before you can enter in to anything like this. The few setups I've seen state a minimum of 100k to start. These things tend to be for the super wealthy and well out of scope for Joe Average... or else we'd all be doing it, which we aren't. That alone speaks volumes.

Not sure I understand why you think personal investing is less flexible that via a company though.

Can't help any more than that.

Yes, we were thinking about larger amounts, hence that I wanted to think about a setup long term. Thinking that personal investment would be less flexible in the future when we need more funds to help kids with university fees and other expenses, if the profits are in a company I've read they can become shareholders and pay for their expenses with dividends from there rather than from personal savings from myself.

That's one thing and the other that IHT at 40% is much larger than passing them shares in the investing company whilst they're still young adults and we could organise affairs as needed.

Will you remain living in the UK? If so, I'd have thought any profits of the company would be taxable in the UK, as well as whichever country you set it up in, based on the "central management and control" being from the UK.

Good point about this subject. Maybe the offshore company is not something that we could use then?
We're currently UK residents but not-domiciled here, but if something along these lines goes ahead, we'd be staying in the UK for quite a few more years.

Alternatively OP can take a 6 months+ vacation to said country so his tax residence changes before extracting his profits.

The idea was to not extract the profits all in one go, but to keep them in a specific company and use them as we need them in many years to come.

How much are you talking about?

£20k In a stocks and shares isa for you and the wife this week and in two weeks time after the 6th April will be £80k tax free.

Why are you taking it out of the company in dividends if you don’t need it? You’ll be paying over the odds in dividend tax

Thinking about getting the maximum dividends until the high tax bracket, percentage wise it'd be just 7.5% in around £30K each. So £5K in tax is not so much, but the doubt was that if we don't need it for anything at the moment, not sure if even extracting it now is the best of the ideas.

Regarding the ISAs and personal investments, there are a few problems. The main one regarding investments is that if you're trading frequently, UK brokers charge a fortune in commissions and FX fees (if you invest abroad) so I wouldn't be able to do it with my method, plus most have not even setup international stocks in their platforms, to some you need to ask them to be added one by one(taking weeks), others don't support pending orders carried forward on international stocks.

I've had money sitting in ISAs for 3 or 4 years and I've not traded anything there yet as brokers have not improved much in all this time.

We might put more this week and in 2 weeks, but I'd prefer to invested via a company for the idea which I mentioned above to 'northernladuk': future IHT in profits and having the possibility to add kids as shareholders so that they can enjoy income from the company when they're young adults as well.