With the ever increasing vigilance of the tax authorities, especially with the introduction of offshore blacklists, it has, in recent years, become increasingly difficult for companies incorporated in offshore jurisdictions to trade with onshore companies.
By using a UK registered company, which agrees to transact business on behalf of an offshore company, a structure is available which gives an on-shore profile yet allows the benefits of offshore taxation.
The UK company is formed specifically to operate as a nominee for the offshore company – in effect the UK company acts as a fiduciary or agent for the offshore company. The two companies sign an agreement which specifies the terms of the agreement between them. All business is then conducted in the name of the UK company, but on behalf of the offshore company. The existence of the offshore company behind the UK company need not be apparent to customers; as far as they are concerned, all they will see is the UK company. The customer enters into a contract with the UK company, is invoiced by them and pay the invoices into the bank account of the UK company. Income is then remitted to the offshore company by the UK company after deduction of an agreed commission. The UK company is managed and controlled by the offshore company and its officers, as is the bank account of the UK company.
It should be noted that the UK company cannot trade within the UK or with any UK businesses. If it does then this income would be subject to UK taxation.
Ideal for use as a European trading structure where the receipt of invoices from an offshore company would not be acceptable
Excellent for situations where an onshore profile is required but where offshore tax treatment is desired
If linked to a discretionary trust this may prove a suitable structure for long term income/inheritance tax planning
Can be used effectively in VAT triangulation situations
The UK company pays UK Corporation Tax on its commission although all allowable expenses incurred in carrying out its business will be deducted first. The ultimate success of this type of structure relies on the fact there is no UK source income. This, in conjunction with the fact that the company is being controlled and managed from outside the UK, means that the UK Inland Revenue can only assess the UK company for tax on the fees it earns by way of commission for effecting the business of the offshore company. The payments made to the offshore company by customers are therefore not subject to UK taxes. Usually a commission of between 5% and 10% would be arranged which would mean that, on average, the effective rate of tax would be around 1.2% on a total turnover of GBP100,000 which would reduce on turnover above this. Annual accounts must be filed which may need to be audited.
Q: Is it advisable that the offshore company is the only owner of the UK company?
A: The offshore principal can certainly be the sole owner of the UK Nominee company, however, this would then mean they are related entities and as such the UK Inland Revenue have additional capabilities to increase annual commissions if deemed to low. If the two entities are retained under separate ownership, then the Inland Revenue’s involvement with the commission is somewhat reduced.
Q: Can the UK nominee company trade within the UK (or with other UK entities)?
A: A UK Nominee company should not conduct any activity within the UK. Any trade with other UK entities would mean that the whole amount received would be taxable in the UK as it would be UK source income. In cases where UK entities are involved, the offshore principal should contract directly not through the nominee company.
Q: Can the UK nominee company get “Certificate of Tax Residency”?
A: A UK Nominee company cannot obtain a certificate of tax residency. We can create a suitable UK company with appropriate structuring to deal with this request, however, the nominee company certainly cannot.
Q: Should the UK nominee company transfer the profit to the offshore company bank account immediately after every business transaction or once a year only (say before filing the Annual Return)?
A: The terms of transfer of funds from the nominee company to the principal will depend on the agreement entered into. It can be done every month or once a year.
Q: Should the offshore company send an invoice to the UK nominee compa-ny to support transfer of the profit?
A: The agency agreement will support the payments made to the offshore principal, however, the offshore company can certainly issue a specific invoice for collection purposes.
The following fees are all inclusive, this means the said fee is all you will pay for receiving both company documents in your office. Your next payment will be for renewal after the first year.
The annual renewal fees are payable after the first year and are ALL INCLUSIVE (registered office, nominees, etc)