Off Shore shareholding company

[bobmorane]

Hi,

Is that legal to get an off-shore shareholder for my private limited company?
Can the shareholder be the off-shore company itself instead of nominating someone from that company?
And to go straight to the point, can that be my own company oversea like in BVI. If so, would granting 80% to that company raise HRMC attention?
Bonus question: if it was legal, I would expect to see a lot of thread about this... which is not the case!

Thanks

[LucidDementia]

If your question is, as it appears to be, "can I send all my company profits to a tax haven and thus evade a bunch of tax?" I'd suggest not, but speak to your accountant. Try and get the guy Ken Dodd used, or Lester Piggott

[MrMarkyMark]

Hi,

Is that legal to get an off-shore shareholder for my private limited company?
Can the shareholder be the off-shore company itself instead of nominating someone from that company?
And to go straight to the point, can that be my own company oversea like in BVI. If so, would granting 80% to that company raise HRMC attention?
Bonus question: if it was legal, I would expect to see a lot of thread about this... which is not the case!

Thanks

Just go for it .

FTFY

If so, would granting 80% to that company raise HRMC attention and cause me to be locked away with only a tube of lube and lots of, frustrated, grown men for company?

Yes.

HTH.

[LucidDementia]

Doubtful on the lube tbh.

[northernladuk]

Bonus question: if it was legal, I would expect to see a lot of thread about this... which is not the case!

Thanks

Oh there are plenty of threads about it alright..

HMRC Scheme Enquiries

Zero points for doing absolutely zero research for yourself though. I mean, it only your livelihood. No point researching anything for that is there?

[meridian]

It's not too far fetched. Yes, yes, and no idea, to your questions.

Remember that your UK company will still be paying full corporate tax on earnings. Your BVI company will pay BVI tax (if any) on their dividends received and you will have corporate fees and possibly exchange rates to deal with.

If you are UK tax resident and domiciled you will need to pay personal tax on your 20% dividends plus anything that you take out of the BVI company.

In short, a whole lot of administrative hassle, forex issues, fees for accountants in two jurisdictions, and likely additional fees for the HMRC investigations, all while paying the same amount of tax.

If you're a non-domicile then there are additional advantages, but it depends on how long you've been here and what you might save in tax.

[ASB]

The answer to the questions you actually asked is yes.

just because it is something legal though is not the same as it being prudent.

given you dont know whether or not corporate shareholders are allowed I would be pretty cautious in considering what the taxation consequences might be. And the potential criminal consequences if declarations are not impeccable.

the bvi, or wherever, end of things needs to get genuine trading income from the uk endof things. Potentially by some form of licensing franchising or ipr utilisation.

that might get some elements away from the uk net. But highly unlikely.

[BlasterBates]

I don't see any benefit.

Yes an offshore company can own your Ltd, but the profits of your Ltd are still taxed in the UK.

If that offshore company then pays you dividends then you need to tax them in the UK, of course they would take into account tax paid wherever this parent company is located.

I can't see any way you can avoid tax through this construct, you may as well just leave the money in your Ltd and you have the risk that HMRC chases you for tax you paid in the foreign country by claiming transfer of assets or on some other principle.

I would just simply not try and be clever on tax as normally "clever" tax avoiders come to a sticky end.

[ASB]

I don't see any benefit.

Yes an offshore company can own your Ltd, but the profits of your Ltd are still taxed in the UK.

If that offshore company then pays you dividends then you need to tax them in the UK, of course they would take into account tax paid wherever this parent company is located.

I can't see any way you can avoid tax through this construct, you may as well just leave the money in your Ltd and you have the risk that HMRC chases you for tax you paid in the foreign country by claiming transfer of assets or on some other principle.

I would just simply not try and be clever on tax as normally "clever" tax avoiders come to a sticky end.

The "normal" method would be to assign some sort of rights to the BVI company which enable it to charge the UK company for the ability to undertake its work, this then is a chargeable expense when computing UK tax, eg my image rights, or a right to use my trademark or similar.

Often, like a number of major corporations, these fees are coincidentally very similar to the profits generated by the UK operations.

So, that removes £X from UK tax net and places it in (e.g.) BVI net. By another quirk the holder of the rights is located in a country which doesn't access foreign earned income to local taxes. Or very low taxes, often a flat fee. Another coincidence is that all shareholders are often in bearer form and other such things.

So, at this point £X has been saved in UK taxable profit. Hooray.

The problem is keeping it out of UK net. In this case it would need declaring since the place of management of the BVI entity is the UK. And it's operation is here. And its beneficial owners. So, for HMRC it is UK residents and needs to file and is taxed accordingly.

There are also the transfer pricing regulations that ensure that the value for goods/services/rights etc represents a reasonable commercial basis.

As a multi national looking to shelter profits for working capital that is not going to get taxed or distributed it can be effective. As an individual it is unlikely to be (save for straying into evasion territory if/when caught).

A structure like this can be used advantageously (or at least could) in certain limited situations which involve you becoming non resident whilts it is happening and repatriates the funds growth by distributing as dividends whilst non resident. This would be clear in UK terms.

However the host country is going to be mighty offended, you've just moved where any evasion has been committed.

[meridian]

What ASB said.

The original poster only asked about overseas shareholding, not any potential mechanism for transferring profits. If the OP thinks that profit transfers a la Google, Starbucks, etc are available to contractors, s/he should also bear in mind that those companies pay hundreds of thousands of pounds to specialist tax accountants and lawyers to ensure the setup and the resulting paper trail match the intention.