BVI company questions

[JohnSmith1234]

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?

 

[Clinton]

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!

 

[JohnSmith1234]

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.

 

[Clinton]

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.

 

[JohnSmith1234]

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.

 

[STDFR33]

https://www.gov.uk/government/publi...-of-companies-that-are-not-resident-in-the-uk

The general rule is that a company which is not resident in the UK has to pay UK Corporation Tax only if: it has a permanent establishment in the UK. the economic activity that generates its profits is carried out in the UK

Unless you plan on physically moving, it’s a non starter.

 

[Deleted member 59730]

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.

 

[Mark T Jones]

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.

 

[JohnSmith1234]

I expect there's a good chance it becoming the second.

 

[Clinton]

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.

If there's anyone from HMRC reading this, please note that I was very much in that latter category!

 

[Highland Spring]

There is an advantage if you plan yourself to go offshore, as the point you move abroad the company will no longer be controlled from the UK. If you plan a move like that it makes some sense otherwise it will just be an extra hassle, plus it might not be eligible for UK support schemes such as furlough.