Reply to: Offshore company - emotionally detached responses only please

[minstrel]

This is an excellent idea - one that I had not thought of previously. But would you not be required to pay tax on the dividends in your new country of residence, that is unless your new country of residence does not have personal income tax on investment income? Would you have to complete any UK dividend documentation as you would now while residing in the UK?

I think Simon is talking about winding up your company and making a capital distribution of the remaining funds, not distributing as dividends.

Under current UK legislation, as long as you've held shares in the company for > 2 years, the company is treated as a business asset and you qualify for 75% taper relief (i.e. 75% of the money you distribute is tax free). Of the remaining 25% you can knock of around £9k using your capital gains allowance and only pay tax on the bit left over.

Do a search on Capital Distributions and Taper Relief and you will see some useful threads explaining how it works.

[backlight]

Two things:

Why not just set up a UK Ltd, pay the 20% corporation tax, leave anything other than your basic rate income in the company and distribute the balance when you leave the UK permanently. All legal, above board, no fear of reprisals.

This is an excellent idea - one that I had not thought of previously. But would you not be required to pay tax on the dividends in your new country of residence, that is unless your new country of residence does not have personal income tax on investment income? Would you have to complete any UK dividend documentation as you would now while residing in the UK?

[NotAllThere]

I know there is no way on Earth HMRC can find out the contents of a Panama, Dubai or Seychelles bank account.

But they can (and will) talk to your client/agency and find out how much was paid into the account from them. This is where agencies can get a bit leery - they worry that they may be treated as though you are an employee, and have to pay income tax and NI on the income they paid you.

Not All There

[Zilver]

transfer of funds

To continue this discussion, consider the following scenario:

I have a UK Limited company from which I have been contracting for several years, no dodgy stuff there. I am now contracting on the continent, and do not plan on coming back to the UK (I am not tax resident in the UK, nor UK domiciled). My current continental contract is via an UK agency, and I am paid in £'s into my UK company. I do not expect the contract to last longer than 6 months in my current country. So my question is:
Can I invoice my UK company from a newly created Panama company with the aim of transferring all my retained income currently in my company's bank account into my new panama company? Maybe even mimimising the profit for my UK company for this tax year, while maximising profit in my panama company?

Zilver

[nathanwa1]

Thank you very much all for some very informative responses.

I know there is no way on Earth HMRC can find out the contents of a Panama, Dubai or Seychelles bank account. However, even with that in mind I have decided to go Ltd just in case I want to come back to Blighty.

According to some folk here, I would be hard pressed to find an agency willing to deal with an offshore company. I have to say though, this whole idea was triggered after discovering an ex-collegue had been doing exactly this for years. He most certainly hasn't had a problem getting contracts through agencies and otherwise!

Erring on the side of caution, again...........

[Darren@UptonAccountants]

IoM

what you have to remember is that the Isle of Man has a double taxation treaty with the UK and if asked has to disclose every thing.

Under the new disclosure rules you have to disclose personal accounts but this doesn't apply to corporate.

[ASB]

what you have to remember is that the Isle of Man has a double taxation treaty with the UK and if asked has to disclose every thing.

Hence the current "amnesty" looking towards voluntary disclosure.

[Simple Steps]

A couple of things come to mind.

- if the money is paid into an offshore bank account, how can HMRC ever find out how much is there? Sure they might ask some questions about the minimal amount you pay yourself but as long as its taxed, I don't see the problem. IoM and Panama etc will not reveal it to HMRC.

- I have heard that some people will pay into a pension fund and therefore get tax relief. I have no idea how they can withdraw this early though.

what you have to remember is that the Isle of Man has a double taxation treaty with the UK and if asked has to disclose every thing.

[multiuk]

A couple of things come to mind.

- if the money is paid into an offshore bank account, how can HMRC ever find out how much is there? Sure they might ask some questions about the minimal amount you pay yourself but as long as its taxed, I don't see the problem. IoM and Panama etc will not reveal it to HMRC.

- I have heard that some people will pay into a pension fund and therefore get tax relief. I have no idea how they can withdraw this early though.

[ElectricChair]

nathanwa1

If you are intending to set up an offshore company yourself with a view to not paying tax in the UK then I would echo Simon's comments. It will be UK resident if it is centrally managed and controlled in the UK and hence subject to UK corporation tax.

The alternative is that you go for one of the offshore schemes on offer. There are many based in the Isle of Man due to its helpful double tax treaty. This then effectively supersedes UK legislation and it is possible to pay a very low rate of tax.

However, once you pay the scheme provider's fees, you usually end up paying a total of 10-20% of your turnover so they particularly suit people who want to take every penny they earn on an arising basis.

Those that can afford to leave a large proportion of their earnings in a company will usually end up only paying 28% at the margin and therefore the scheme is not usually worthwhile, given the inherent risk of challenge and possible penalties and interest.

HTH

10% is usual for scheme fees. Make sure any scheme complies with the Ramsay judsgement.

[THEPUMA]

nathanwa1

If you are intending to set up an offshore company yourself with a view to not paying tax in the UK then I would echo Simon's comments. It will be UK resident if it is centrally managed and controlled in the UK and hence subject to UK corporation tax.

The alternative is that you go for one of the offshore schemes on offer. There are many based in the Isle of Man due to its helpful double tax treaty. This then effectively supersedes UK legislation and it is possible to pay a very low rate of tax.

However, once you pay the scheme provider's fees, you usually end up paying a total of 10-20% of your turnover so they particularly suit people who want to take every penny they earn on an arising basis.

Those that can afford to leave a large proportion of their earnings in a company will usually end up only paying 28% at the margin and therefore the scheme is not usually worthwhile, given the inherent risk of challenge and possible penalties and interest.

HTH

[NotAllThere]

You need to find out whether an offshore company with an onshore employee is "deemed" tax resident in the UK. IIRC, a tax resident company is obliged to pay tax on all profits generated in the UK. These profits may be offset against losses elsewhere.

You might find this helpful http://www.hmrc.gov.uk/manuals/intmanual/INTM262040.htm

Not All There

[meridian]

can anyone still actually say I am commiting tax EVASION? That's all I require an answer to.

No-one here will be able to state that. Not even Hector It'll have to go to the courts before it will definitively be shown to be tax evasion....

What it is though is tax avoidance, specifically a scheme set up for the sole purpose of avoiding tax and not apparently for any other business related purpose. As such, you're supposed to disclose it to HMRC, and when you do so you can expect a visit and lengthy chat with an inspector.

Who knows, it may pass inspection after a lengthy and costly examination.

Why not follow Simon's advice and pay 20% tax instead of tax on 20% of your earnings?

[ElectricChair]

why have you chosen not to receive private messages?

[simondolan]

Thanks for that guys.

I genuinely aim to keep 80% of my offshore company's yearly income within the company books - no two ways about that. The 20% or so that will be my salary will be declared in the most honest way to HMRC, thus fulfilling my moral obligation.

Once I have expatriated myself (to a far away non European, non-antipideon country), I will be legally allowed to (as a resident of my new country) to withdraw all of my foriegn company's funds and not pay a single cent in local taxes. Even with my intentions clearly laid out, can anyone still actually say I am commiting tax EVASION? That's all I require an answer to.

Two things:

1. No UK agency that I know of will pay an offshore Company;

2. The Company will be deemed resident wherever the central management and control of the Company is, so regardless of where it was incorporated it will take your residency (unless you or your associates have no control over the Company or the bank account - obviously not a good idea).

Why not just set up a UK Ltd, pay the 20% corporation tax, leave anything other than your basic rate income in the company and distribute the balance when you leave the UK permanently. All legal, above board, no fear of reprisals.