Incurring cost in UK company

[northernladuk]

Will the UK company then be posting a loss, or greatly reduced profits as a result of shifting the money from one to the other?

You say you won't save on tax, but in your first post you said it was to "incur a tax deductible cost in UK"

The reasoning/excuses often go out the window when trying to artificially manufacture income/tax savings with no business reason.

[GitMaster69]

Will the UK company then be posting a loss, or greatly reduced profits as a result of shifting the money from one to the other?

You say you won't save on tax, but in your first post you said it was to "incur a tax deductible cost in UK"

Assuming double tax scenario
UK LTD (company A) generates 100k after costs and is due 19k tax at 19% = net £81k (ignoring marginal rate)
transfers the remaining money to EU LTD (company B) that declares it as profit at 20% tax - leaves £64.8k and effective tax rate of 35.2% all the while still being inside LTD and not drawn
Terrible

Now what I need to happen is
Company A generates 0 profit
Company B generates 100k profit and pays 20% tax, net 80k

based on what northernladuk is saying it's illegal though :|

There must be some legal way, like company A buying company B or some other tricks

[Fred Bloggs]

Another "hey, I've got a great idea" thread?


Two pages and going strong.

[malvolio]

No I’m looking to pay tax once, not twice on the same money, so get lost idiot with your useless typical attacks

if I wanted to avoid tax I’d open on Caribbean’s

Good way to get meaningful answers. Not...

So just to be clear, you're trying to create a profit for a company that would not otherwise have any real sales income from which to make a profit that would qualify for funding to enable further growth. And you can't see the inherent flaw in your logic.

[northernladuk]

There must be some legal way, like company A buying company B or some other tricks

Another consideration is that even if you manage to do it then there will be some level of scrutiny when applying for funding. They are unlikely to lend just based on a single profit figure surely? Any hooky transfers between your LTDs to present a false representation of profit is going to be pretty transparent even to the basic diligence they'll surely apply?

[GitMaster69]

Another consideration is that even if you manage to do it then there will be some level of scrutiny when applying for funding. They are unlikely to lend just based on a single profit figure surely? Any hooky transfers between your LTDs to present a false representation of profit is going to be pretty transparent even to the basic diligence they'll surely apply?

without going into details about the business plan, I already spoke with bank about it and they are OK with my plan but need to show profits on the first accounting perdiod. Hence the constraint about profits and no debt in company B. And getting funding is the core of my strategy

[northernladuk]

without going into details about the business plan, I already spoke with bank about it and they are OK with my plan but need to show profits on the first accounting perdiod. Hence the constraint about profits and no debt in company B

Yeah but if those profits are completely manufactured and are not an indication of the viability of the business a bank will run a mile. They want profits to show it's a quality company that can fulfil any obligation the bank puts on it. You funding it some hooky way and the business is failing or non existant they aren't going to lend it money are they. That would just be madness giving money to any company that's actually got zero ability ot make any money.

Quick check to see where the money came from and it turns out it's from some other UK ltd owned by you with zero work/goods actually being delivered isn't going to work.

[GitMaster69]

Yeah but if those profits are completely manufactured and are not an indication of the viability of the business a bank will run a mile. They want profits to show it's a quality company that can fulfil any obligation the bank puts on it. You funding it some hooky way and the business is failing or non existant they aren't going to lend it money are they. That would just be madness giving money to any company that's actually got zero ability ot make any money.

Quick check to see where the money came from and it turns out it's from some other UK ltd owned by you with zero work/goods actually being delivered isn't going to work.

yeah but you don't have all the facts. The funding bit is not the problem, it's the underwriters job. The problem is the double tax...

lets see what AI has to say on the topic..

Profit shifting, also known as profit transfer or base erosion and profit shifting (BEPS), is a practice used by multinational companies to reduce their tax liability by shifting profits from high-tax jurisdictions to low-tax jurisdictions.

This can be done through a variety of methods, such as transferring intangible assets, such as patents or trademarks, to subsidiaries located in tax havens, or by manipulating transfer pricing - the price at which goods and services are sold between related companies in different countries.

While profit shifting is not necessarily illegal, it can be considered unethical if it involves artificially reducing the amount of tax a company pays in a country where it generates profits. In response, many governments have implemented laws and regulations aimed at preventing or limiting the practice of profit shifting, such as the OECD/G20 BEPS project.

It's important to note that not all profit shifting is illegal or unethical, and many companies engage in legitimate tax planning to minimize their tax liability while still complying with all relevant laws and regulations.

[edison]

I'm not sure if the OP is thinking of inter-company transfer pricing, the sort of thing companies like Starbucks does?

It must be a complicated area so surely this is the type of question an accountant can advise on?

[Lance]

Assuming double tax scenario
UK LTD (company A) generates 100k after costs and is due 19k tax at 19% = net £81k (ignoring marginal rate)
transfers the remaining money to EU LTD (company B) that declares it as profit at 20% tax - leaves £64.8k and effective tax rate of 35.2% all the while still being inside LTD and not drawn
Terrible

Now what I need to happen is
Company A generates 0 profit
Company B generates 100k profit and pays 20% tax, net 80k

based on what northernladuk is saying it's illegal though :|

There must be some legal way, like company A buying company B or some other tricks

why would company B declare investment capital as profit???? That's really dumb IMO