Reply to: Advice on UK contracting using offshore company with UK agency agreement

[NotAllThere]

And with that, thread locked.

[northernladuk]

In effect I will be working for my own UK company collecting a fee for an offshore company that is not legally connected to me or under my control.
.

Sound more like a good explanation of evasion to me.

[Darren at Fox-Bartfield]

Tax Avoidance/Evasion

Slightly late to the party but would firstly agree with Jessica, there are a number of holes in the structure/legals that wouldn't work. I see where you're coming from but quite simply it wouldn't work in this case and open up a potential can of worms with HMRC.

As for a company dealing with me, they are still dealing with a UK limited company owned by myself so the UK facing side is absolutly no different to it is now, I will be the sole director and shareholder, accounts will be submitted and taxes paid on turnover ( the 5 % fee).

So you're saying that your subcontracting the work to an offshore company but the agency would have you down as the named consultant so you would be expected to be on site providing the service. In which case you'd be deemed as working for the offshore company (5% fee doesn't cover your wage!) and as such required to register as an employer, etc.

Would I be correct in thinking that HMRC has no power over incorporations in other countries, as in there would be no way for them to contact the offshore and demand that anything were handed over ? (in any case if nothing were given what can they do )

Not correct, HMRC and other Gov Depts have information sharing agreements with almost all countries. There aren't many jurisdictions left without such an agreement. Whether they could be inclined to use them is another question but also bear in mind if you use a UK based bank or a bank that is based in an info sharing country, they can obtain all transactional information.

Repatriation of the funds is also a major issue, as soon as it is brought back, in effect you get taxed in any event. Basically you're advocating tax avoidance/evasion (fine line) and any facilitator or promoter of such a structure could become liable to any tax or penalties that follow.

[Jessica@WhiteFieldTax]

I undertstand the idea behind me persoanlly having control of the company, this is why they suggest using nominees and a power of atorney so on paper and legally I have no controll or association wih the offshore company. That company runs legally in its own duristriction and has a UK agent agreement with the Company owned by me in the UK

But who do the nominees and POA answer to? You. You therefore control the company.

I have no fear of answering HMRC questions as I am verse to them banging on my front door on a saturday morning, I used to use the aggressive method of submitting no returns and letting companies house close the company down however this method has now sadly died

It was always illegal.

• Intent to defraud
• Fraudulant trading
• Common theft

Take your pick

[ASB]

Dear console, please find enclosed assessment for loads. Pay up. Hugs HMRC.

Then you have the possibly non trivial task of proving them wrong.

There is nothing wrong or illegal in the structure you propose. It is just ineffective because it will be treated as uk resident.

Sure go on about how its not yours but given you have the power of a sole director the reality is obvious.

It may well be that you dont get found out for quite some years. But that only makes the bill worse.

Also you will need a uk entity in the chain to contract with a uk agency.

You could consider an ip licencing arrangement depending upon exactly what you are doung. But if you ever want to repatriate any funds it will get problematic.

[console]

Thanks for the prompt replies.

I undertstand the idea behind me persoanlly having control of the company, this is why they suggest using nominees and a power of atorney so on paper and legally I have no controll or association wih the offshore company. That company runs legally in its own duristriction and has a UK agent agreement with the Company owned by me in the UK

As for a company dealing with me, they are still dealing with a UK limited company owned by myself so the UK facing side is absolutly no different to it is now, I will be the sole director and shareholder, accounts will be submitted and taxes paid on turnover ( the 5 % fee).

In effect I will be working for my own UK company collecting a fee for an offshore company that is not legally connected to me or under my control.

As I understood it I would have to have UK agency contracts in place between the two companies.

Would I be correct in thinking that HMRC has no power over incorporations in other countries, as in there would be no way for them to contact the offshore and demand that anything were handed over ? (in any case if nothing were given what can they do )

It would seem on paper compliant as the taxation would be due only in the offshore destination (0 percent in this case). My UK accounts would be submitted and taxation paid on the companies turnover (the 5 percent fee).

Does the law also stand with HMRC that you do not have to say anything that will incriminate yourself. ie: They can not force me to disclose anything about a company that I dont own ?

Has anyone here gone through the process of a UK agency agreement with an offshore company ?

It may be difficult but then again the law states that as a UK limited director I am obliged to do what is right for the UK company, which in this case would be securing a long term contract with an overseas client and collecting a fee.

I have no fear of answering HMRC questions as I am verse to them banging on my front door on a saturday morning, I used to use the aggressive method of submitting no returns and letting companies house close the company down however this method has now sadly died.

Thanks for the responses so far.

[Invisiblehand]

Avoid like the plague.

[BrilloPad]

If it were that easy and was legal wouldn't we all be doing it? The fact we haven't seen a single person on this forum that's pulled it off speaks volumes.

And plenty who have badly suffered...

[northernladuk]

If it were that easy and was legal wouldn't we all be doing it? The fact we haven't seen a single person on this forum that's pulled it off speaks volumes.

[BrilloPad]

and there are enhanced penalties if you get caught.

Starting with APNs. Rising to raiding of bank accounts. Then prison.

HMRC fight dirty at every turn. Remember when HMRC were made police officers of an overseas territory for a day so you could be part of a raid?

[Jessica@WhiteFieldTax]

If it was that simple, everyone would be doing it

If you are UK resident then with full disclosure of the facts the Belize company becomes UK controlled and subject to UK taxation, same as your existing UK company.

"Schemes" like this have often been built around secrecy. Worldwide doors are slamming on secrecy as a tax planning tool, and there are enhanced penalties if you get caught.

[BrilloPad]

OP, what could possibly go wrong?

If your company is called "Amazon", nothing. And if you have a spare few million for legal advice, possibly nothing either.

[Fred Bloggs]

OP, what could possibly go wrong?

[BrilloPad]

Have you read this thread: -

http://forums.contractoruk.com/hmrc-...following.html

[cojak]

I doubt that you'll find any agency prepared to take you on with this method of tax avoidance.

Just because it doesn't involve a scheme doesn't mean that HMRC won't go after you (or the agency, particularly if you work in the public sector).