BVI company questions

Discussion in 'Accounts & Finance' started by JohnSmith1234, Jan 10, 2021.

  1. JohnSmith1234

    JohnSmith1234 UKBF Newcomer Free Member

    12 0
    We’re a UK limited company – all business is service based / intangible, and most of our income is coming in from international companies not based in the UK. Not sure this is massively relevant to the proposal, but it did trigger some ideas.

    A BVI based company, from the superficial materials I’ve read online, seems to make some sense for tax efficiency.

    But it all sounds too good to be true.

    Set-up and company and bank account in the BVI, put all international income through that, and then pay out dividends in to a UK bank account and self-assess the income.

    What am I missing?
     
    Posted: Jan 10, 2021 By: JohnSmith1234 Member since: Jun 5, 2019
    #1
  2. Clinton

    Clinton UKBF Legend Full Member

    5,111 2,284
    Why do you think the company won't be required to file tax returns here and pay UK tax?

    Just because it's offshore?

    Sorry to burst your bubble.

    Also, the profit made in the company could still cause you a personal tax liability if you're UK resident. Read up on beneficial ownership (a topic that came up in a recent thread in relation to base erosion, profit shifting and treaty shopping).

    A BVI company having to file UK tax returns? Not fair? Not logical? Tough.

    Don't even think about offshore stuff unless you're making some serious amounts of dosh. Even then anti-avoidance will likely get you somehow. I gave up on this years ago, I was simply not making enough to justify the aggro!
     
    Posted: Jan 10, 2021 By: Clinton Member since: Jan 17, 2010
    #2
  3. JohnSmith1234

    JohnSmith1234 UKBF Newcomer Free Member

    12 0
    Thanks for the reply.

    I'd have assumed the company would be subject to the laws of where it's based, but I am guessing that's not the case.

    Appreciate the link to the other topic and advice.
     
    Posted: Jan 10, 2021 By: JohnSmith1234 Member since: Jun 5, 2019
    #3
  4. Clinton

    Clinton UKBF Legend Full Member

    5,111 2,284
    Not to worry. And, yes, it's highly likely that because the owner is UK resident the company will have to pay UK corporation tax (as stupid as that sounds).

    Someone signed up with me last month as a client to get some strategic advice around the sale of his business. He had taken professional advice - very expensive professional advice - some years ago when he set up his offshore arrangements. Now he owes HMRC £350K because they consider his plan as "avoidance".

    And till he pays up, his business is virtually unsellable (for various reasons this liability cannot be covered properly via an SPA).

    It's also worth researching the EBT issue and how many firms got caught out on that. Note how the "watertight" EBT scheme unravelled and backfired.
     
    Posted: Jan 10, 2021 By: Clinton Member since: Jan 17, 2010
    #4
  5. JohnSmith1234

    JohnSmith1234 UKBF Newcomer Free Member

    12 0
    I think seeing people we work with having arrangements has sewn this seed, but as you state in your first post, it's probably the 'serious amounts of dosh' that has led them to effectively offshore.

    Thanks for you input.
     
    Posted: Jan 11, 2021 By: JohnSmith1234 Member since: Jun 5, 2019
    #5
  6. STDFR33

    STDFR33 UKBF Big Shot Free Member

    4,574 1,224
    Posted: Jan 11, 2021 By: STDFR33 Member since: Aug 7, 2016
    #6
  7. atmosbob

    atmosbob UKBF Ace Free Member

    4,608 1,103
    I have looked into this a few times over the years. I have friends who operate offshore and have been successful over a number of years. What Clinton says is very true. You can get in to a lot of trouble by taking the wrong advice. Do your own research and consider where you want to be in years to come. One offshore friend lives in Portugal and another has just sent me photos of her retirement home in Sicily.
     
    Posted: Jan 11, 2021 By: atmosbob Member since: Oct 26, 2009
    #7
  8. Mark T Jones

    Mark T Jones UKBF Big Shot Free Member

    5,200 2,094
    Over the years I have come across 2 distinct types of customer who base themslves offshore

    The first is shrewd cookies who are well connected and have substantial property assets to shelter.

    The second is smart-aliks who make their own lives very difficult to look clever and hopefully to save a few bob.

    I had a conversation 2 weeks ago with one of the latter - by ther own admission . They appeared to be CI based. On questioning they admitted it had been a silly decision & they had moved everything back on shore at the insistence of their investors.
     
    Posted: Jan 11, 2021 By: Mark T Jones Member since: Nov 4, 2015
    #8
  9. JohnSmith1234

    JohnSmith1234 UKBF Newcomer Free Member

    12 0
    I expect there's a good chance it becoming the second.
     
    Posted: Jan 11, 2021 By: JohnSmith1234 Member since: Jun 5, 2019
    #9
  10. Clinton

    Clinton UKBF Legend Full Member

    5,111 2,284
    If there's anyone from HMRC reading this, please note that I was very much in that latter category!
     
    Posted: Jan 11, 2021 By: Clinton Member since: Jan 17, 2010
    #10