Reply to: non-domicile tax status

[thezou]

Didn't want to start a new thread and this seemed like a good topic for my question:

I currently run a advertising company that mostly deals with US clients (1 bigger German account and 2 small UK ones (these only account for <5%)). Right now I got a limited company set up and pay myself a dividend of <35k pounds, the rest stays in the company and is taxed at 19% or so. Current Revenue is mid 7 figures with roughly half of that being profit.

As I'm sick of not being able to touch my money and don't particular want to pay close to 40% income tax, I've been weighing my options the last few months. The service I provide can be done from anywhere in the world and I got no direct employees (I work with contractors and freelancers only), so I've been taking a look at Monaco and Andorra the last few weeks.

However, as I'm a German citizen, I just realized that maybe the non-domicile status might help me stay in the UK. Please let me know if the following situation would be legal & realistic, I'll obviously talk to my accountant next week, but the guy that deals with international setups isn't in until later next week ..

Anyway, here it goes:

- claim non-domicile status (no property in the UK, property in Germany, German nationality, family etc, so I figure this should be no problem)
- set up a offshore company
- Clients pay the UK company
- Offshore company invoices the UK company for 90% off the profit or so
- UK Company wires the money to a non-uk bank account
- UK Company pays corporate tax on the remaining 10%
- UK Company pays me 30k pounds, which I pay income tax on
- I pay myself a further 35k pounds in dividends (tax free?)

Am I being delusional, or would this work? Or would this be considered tax evasion? I could also cut the relationship with the UK clients if that would help my setup, or fully pay taxes on those accounts.

Also, could I use the profits from the offshore company to buy real estate anywhere outside the UK?

Thanks a lot guys.

[Likely]

Is anyone aware if any of the companies discussed on the site (Sanzar , MTM , Taxdesign ) offer "schemes" for non-doms ( as opposed to domiciled UK residents ) ?

[dude69]

I wish my father was a bloody foreigner. This non-dom is a ticket to wealth. Tax free life!

Not any more though, if you spend more than 7 years in last 10 in the UK they want £30k/year from you.

I actually qualify as non-dom, but £30k/year aint worth it.

[meridian]

I wish my father was a bloody foreigner. This non-dom is a ticket to wealth. Tax free life!

But then you'd have to support a crap football team.

Oh, hang on a minute....

[DimPrawn]

I wish my father was a bloody foreigner. This non-dom is a ticket to wealth. Tax free life!

[meridian]

This is what all big co's do now the the HMRC take no notice.

Doesn't cost much to do.

I've heard of people having a credit card linked to the offshore account and simply pay for everything on that card, where the monthly balance is automatically settled by the offshore bank.

How clever this is I don't know.

This is exactly what Barclays have set up for me for nowt - two cards (one Sterling, one Euro) issued in the IoM, so any spend in the EU is paid for from the IoM.

For a UK resident your spend in the UK is deemed to be money remitted so is tax evasion if you don't declare it, but for a non-dom any spend outside of the UK is tax free.

[Cheshire Cat]

Sounds like tax evasion to me.

[DimPrawn]

Look at setting up an off-shore (holding?) company which invoices YourCo large sums thereby reducing the tax it has to pay to zero. Then all your money is offshore and not subject to tax (assuming in a tax haven). However when you bring the money in the UK to spend it, it'll be taxable.

I know someone who claimed to be doing this, the off-shore Co invoiced HisCo for "management fees" or somesuch. Not sure how he got the money back into the UK though.

This is what all big co's do now the the HMRC take no notice.

Doesn't cost much to do.

I've heard of people having a credit card linked to the offshore account and simply pay for everything on that card, where the monthly balance is automatically settled by the offshore bank.

How clever this is I don't know.

[Platypus]

Alternative?

Anyone doing the non-domicile thing to get their clients to pay their ltd company abroad, and then only bring in a tiny portion of salary to live in the UK?

Look at setting up an off-shore (holding?) company which invoices YourCo large sums thereby reducing the tax it has to pay to zero. Then all your money is offshore and not subject to tax (assuming in a tax haven). However when you bring the money in the UK to spend it, it'll be taxable.

I know someone who claimed to be doing this, the off-shore Co invoiced HisCo for "management fees" or somesuch. Not sure how he got the money back into the UK though.

[Not So Wise]

Look up Nominee Company Structure (with an Irish onshore front) if you don't need/want to bring the money back into the country and can claim non dom status (which is NOT non resident).

It's costly to setup and maintain but if you have decent revenue coming in could save you a bundle and honestly the gov is unlikely to touch the basic format as it's just an variation of what most large internationals now do, just with an offshore part added

Though to be honest until we see what happens with the whole non dom thing the gov is trying would not be changing to non dom just yet

If you are not able to claim non dom status the whole set up changes from tax avoidance to tax evasion

[meridian]

It is legislation largely unique to the UK (Japan and a few others have shorter limited version etc).

Ireland has it too.

Take this example. Irish ltd co, runs at 15pc corp tax rate right? that runs all the contracts tendered for. Then the irish ltd co pays salary to employees who do the work, at their salaried rate. Money which is paid to employee in ireland or the irish ltd isn't claimable by HMRC as In understand it.

No. See here. Counts as a UK employer.
Never mind that you'll still need a UK bank account (I doubt any agencies would wire overseas every week/month) and will be stung for transfer charges and exchange rate spread.

if the UK habiting employee wishes to bring in more of his dividends, that is fine but they will then get taxed in the UK as I understand it. Although upto 5k doesn't have to be declared on flights..!? heh, joke

You don't have to bring your dividends back, you'll just get taxed on them in Ireland - the co will need to pay DWT on any dividends declared to the Irish revenue unless you get a certificate of non-residence from the UK revenue.

the best thing is just getting to pay 15pc corp tax!

But you'll be paying the extra 5% in administration and other fees just to keep up with the offshore regulations and manage the structure.

so.. anyone doing non-dom or foreign ltd co?

thx, richy.

Yes. But not in the UK.

[malvolio]

And I suggest you go look up mutual tax treaties and incorporation requirements in foreign countries within the EU, not to mention more interesting points like in Eire R&D companies pay no tax at all so why not be one of those, and their economy is in a much worse state than ours so the 15%, previously supported largely by incoming EU money, is likely to go up sharply.


Also, if you're going to ask ambiguous, incomplete or unclearly defined questions, you're not going to get useful answers. GIGO rules...

[richy]

Don't be silly. Go away and find out what "non-dom" means and try again.

HTH

Didn't really help.. you might as well not have bothered posting! as I already understand it fully. It is legislation largely unique to the UK (Japan and a few others have shorter limited version etc). Maybe you could refresh your memory of it if yr not clear!

Take this example. Irish ltd co, runs at 15pc corp tax rate right? that runs all the contracts tendered for. Then the irish ltd co pays salary to employees who do the work, at their salaried rate. Money which is paid to employee in ireland or the irish ltd isn't claimable by HMRC as In understand it.

if the UK habiting employee wishes to bring in more of his dividends, that is fine but they will then get taxed in the UK as I understand it. Although upto 5k doesn't have to be declared on flights..!? heh, joke

the best thing is just getting to pay 15pc corp tax!

so.. anyone doing non-dom or foreign ltd co?

thx, richy.

[thunderlizard]

OK, the Sun then.

Anyway New Labour has always respected and feared the Mail. Its James Bulger coverage helped give Tony Blair his big break as Shadow Home Secretary ("Tough on crime...").

& this is what Gordon Brown thinks of them:
"Paul Dacre has devised and delivered one of the great newspaper success stories. He also shows great personal warmth and kindness as well as great journalistic skill."
Quoted here

[malvolio]

Except HMG doesn't take any notice of the Mail...