Agency Agreement

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 incorporated 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.

Advantages

  • 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

Taxation /Accounts

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 £100,000 which would reduce on turnover above this. Annual accounts must be filed which may need to be audited.

VAT Registration

If the company's turnover exceeds £70,000 in a 12 month period the company must register for VAT (Value Added Tax). We can handle all VAT registration formalities, and also complete and file all VAT returns to HM Customs and Excise.

Annual costs

Includes provision of nominee nominee directors/company secretary/shareholders, registered office, filing annual returns/annual accounts (although not preparation/audit of accounts which we can arrange) and all government filing fees.

Terms and Conditions for the Provision of a Standard Agency Agreement: linking a Principal and an Agent for the delivery of a product or the provision of a service

We can provide a standard agency agreement, which has been accepted by the UK tax authorities, in English law, and has been accepted by principal and agent in given circumstances.

Should a tax investigation take place when a client has relied on our agency agreement, we are prepared to receive tax officials in our offices to explain aspects of the agreement.

Our business involves distance selling, so we cannot fully understand the business of our clients, and cannot therefore create an agreement which totally reflects the nature of an individual business. We provide a standard agreement for the provision of physical goods, and a slightly adapted agreement for the provision of services.

The client must

  • Ensure that they adapt the wording of the contract to fully reflect the delivery of a product or the provision of a service.
  • Take advice to ensure that the use of the Agency Agreement is legal in the jurisdictions where the product is sold or the service is provided.
  • Put a system in place to revise the agreement in accordance with changes in the law or interpretation of the law.