Welsh town declares itself offshore for tax purposes

[woohoo]

The Mouse that roared. Passport to Pimlico.

Passport to Pimlico (1949) - IMDb

Great film.

[DaveB]

I'm afraid these people are going to get clobbered.

Google, Starbucks and Facebook are US companies owned by US citizens that's why it works

When you have Sweet shop in North Wales and you run it through an offshore company, it's a company owned by the UK tax payer.

i.e. Google UK doesn't own Google Bahamas.

I'm afraid this is a very significant point.

They're just going to get taken to the cleaners using UK law and it won't make a ha'porth of difference because HMRC can't take Google US to court..

To get Google to pay tax they need a change to the UK/US and probably other countries tax treaties.

No. Ownership is irrelvant. It doesnt matter that it's owned by a UK resident, as corporate and personal taxation are seperate.

You set up an offshore company and transfer all the intellectual proprty rights including name, branding etc to that company. UK Company then pays offshore company a licensing fee in order to use that IPR in the uk. The fee for this happens to amount to the profits earned in the UK. This leaves little to no profit in the UK and so no corporation tax.

Offshore Co. then pays dividends to it's shareholders having paid little to no corporation tax itself due to it's local tax regime. The shareholders may or may not pay tax on those dividends depending on the amount received according to UK personal tax rules.

[BlasterBates]

I'm not sure this part is true. It is surely not impossible to find a way to word "profit" appropriately, and/or make certain types of expenditure non-deductible, under "the business you do in the UK is subject to UK law" rules?

How much tax does MacDonalds pay in the UK ?

Answer: none

MacDonald doesn't actually own anything it sets up franchises, i.e. you can buy the right from MacDonalds to run a MacDonald's restaurant, You pay MacDonalds most of your profit to stick the Yellow M sign up on your restaurant. Now small businees people do it because it's a simple way of running a restaurant.

In other words if MacDonalds were to own these franchieses themselves they can justify why they charge a huge amount for the marketing rights. It's justifiable because they can point to franchise owners prepared to pay extortionate franchising fees.

Starbucks could do the same.

That'S why it isn't as simple as people make out, there is a commercial reason behnd it and I suspect Starbucks would franchise if they had to.

Google and Facebook have similar "mega-marketing" muscle, if they wanted to they could charge fees and get UK business people to run Google UK something similar to a franchise, and people would fall over backwards to do it.

[MrMarkyMark]

Looks like they will be fine, if HMRC "approves"

Mrs Carthew said the traders had a “very good meeting” with HMRC when they submitted their offshore tax plan for approval.

[BlasterBates]

No. Ownership is irrelvant. It doesnt matter that it's owned by a UK resident, as corporate and personal taxation are seperate.

You set up an offshore company and transfer all the intellectual proprty rights including name, branding etc to that company. UK Company then pays offshore company a licensing fee in order to use that IPR in the uk. The fee for this happens to amount to the profits earned in the UK. This leaves little to no profit in the UK and so no corporation tax.

Offshore Co. then pays dividends to it's shareholders having paid little to no corporation tax itself due to it's local tax regime. The shareholders may or may not pay tax on those dividends depending on the amount received according to UK personal tax rules.

Yes but you're an owner of this offshore entity, and HMRC will tax you on the proceeds.

What is comparable with google is you move to the Bahamas, set up your own company and then set up a subsiduray in the UK. That is comparable, but you still need to justify marketing charges. That will work.

Living in the UK and then setting up a company in the Bahamas which you never visit, and charging out to your UK company and then paying yourself dividends in the Bahamas will have you in court, and Google doesn't do that.

[MicrosoftBob]

Good luck to them, it's about time the farce of internationals tax laws are shown up

[BlasterBates]

In 5 years time there will be some Daily Mail article about some Welsh shop owners who are about to lose their homes and businesses due to some large unpaid tax bill, and then there will be lots of gnashing of teeth,

[VectraMan]

Google, McDonalds and co. are obviously US companies, so the real question is how they've managed to get out of paying US tax rather than why they don't pay UK tax. Stopping the sandwiches and IP transfers would be a good thing, but it won't necessarily result in more money for the UK exchequer from these companies.

[GJABS]

I expect HMRC will disallow it as a "sham arrangement"

[d000hg]

How much tax does MacDonalds pay in the UK ?

Answer: none

MacDonald doesn't actually own anything it sets up franchises, i.e. you can buy the right from MacDonalds to run a MacDonald's restaurant, You pay MacDonalds most of your profit to stick the Yellow M sign up on your restaurant. Now small businees people do it because it's a simple way of running a restaurant.

So a)why doesn't McD UK have to pay tax on the franchise profits? b)How much tax do McD franchises pay collectively?

I wasn't aware McD were on the list of "evil" companies, they get good press and are early adopters of new tech, etc?