Legitmate offshore structures and HMRC

[prozak]

Afternoon Chaps.

I want to set up an offshore company to develop some business ideas and enable me to more easily trade across various countries outside of the EU.

I currently have a UK Ltd Co that although it was set up for other purposes I use for contracting.

I want to have my UK company a wholly owned subsidiary of the offshore company and pay dividends to it.

Obviously hector is going to be interested in this arrangement as it might be considered avoidance or even evasion?. However, any dividends I pay myself from offshore co. will be duly declared on my personal self assessment.

One issue is that I currently do not pay myself dividends beyond the 40% tax threshold, but it would of course be possible to pay the offshore company all the profit.

What will HMRC think of this arrangement?
What if I only pay my offshore Co. the amount I have been paying to myself? Any difference in HMRC attitude then? - i.e. HMRC will be getting the exact same amount of tax from me.

Thanks.

[Clare@InTouch]

If you're resident here, and carry out the management of the offshore company here, then HMRC may be interested in that company from a CT point of view. Best to get specialist advice from an accountant on this one, the country you chose to incorporate the new company in could have a bearing on treatment (double tax treaties etc).

[prozak]

If you're resident here, and carry out the management of the offshore company here, then HMRC may be interested in that company from a CT point of view. Best to get specialist advice from an accountant on this one, the country you chose to incorporate the new company in could have a bearing on treatment (double tax treaties etc).

Yes I had read that somewhere also. That is not necessarily an issue. If taxes are due I am happy to pay them.
The main issue is that revealing the whole structure removes the anonymity of the offshore structure which removes the additional benefit of asset protection.

Perhaps I need a new company.....

[BlasterBates]

The main question is, what would your "business activity" be that would be taxable in an offshore location when you're not resident there, not working there and trading in another country?

I would be questioning yourself on that, because if you're in the UK and doing the work there, or in the other country you'd be expected to pay tax either in the UK or that other country, even if you aren't there for 183 days most countries still expect you to pay tax on business and trading activities.

If you're resident and working in the offshore location no-one is going to question it.

[prozak]

The main question is, what would your "business activity" be that would be taxable in an offshore location when you're not resident there, not working there and trading in another country?

I would be questioning yourself on that, because if you're in the UK and doing the work there, or in the other country you'd be expected to pay tax either in the UK or that other country, even if you aren't there for 183 days most countries still expect you to pay tax on business and trading activities.

If you're resident and working in the offshore location no-one is going to question it.

Good points.

I would be resident and I would be working offshore.

[geoff from contracta IOM]

Good points.

I wouldn't be resident but I would be working offshore.

The very brief answer to your question is - without knowing the exact details it is impossible to comment, the variables are infinite

[davetza]

Are you sure you properly understand the tax benefits of having an offshore company. As has been stated before work that is done in the UK must be taxed in the UK.
One of the the ways big companies like Google and Amazon use offshore companies is to assign all the rights for IP to the offshore companies and then these companies "charge" the onshore companies for the rights to use the IP. So if you have some IP you have developed and can license then this would be an option but there is not much benefit if you are just doing work for someone.

[prozak]

Are you sure you properly understand the tax benefits of having an offshore company. As has been stated before work that is done in the UK must be taxed in the UK.
One of the the ways big companies like Google and Amazon use offshore companies is to assign all the rights for IP to the offshore companies and then these companies "charge" the onshore companies for the rights to use the IP. So if you have some IP you have developed and can license then this would be an option but there is not much benefit if you are just doing work for someone.

Yes. There are a couple of things I am working on that are not my services. t'internet type stuff. Multi-currency revenue.