The Cross Border Trading Package
A proven route for cross border trading is through a UK limited company, who acts as agents for a company in a low-tax jurisdiction. The Principal in a low-tax jurisdiction takes most of the profit, but only trades through its agent: the UK company.
A UK limited company is a normal "onshore" company, covered multiple tax treaties. If you are based outside the UK, or are resident outside the UK and in a country which has a double tax treaty with the UK, the following package could mean that you pay minimal tax on a large volume of international trade.
This package is proven; the British tax authorities approve of it as does the US Revenue Service. The British company represents the international trading operations as agents for the company in the low-tax jurisdiction..
The cost of the entire package depends on the choice of low-tax company.
What could be needed:
(this list can be shortened, depending on circumstances)
| The offshore company | The UK company |
| an offshore company formation | a UK company formation |
| an offshore resident nominee director | registered office facilities |
| a local tax representative | VAT registration |
| a nominee shareholder | a UK tax representative |
| registered office facilities | a Company Secretary |
These are linked by an agency agreement
Should you choose to ask us to draft the agency agreement, this has a minimal cost.
As with all our clients, we will guide you through the incorporation steps. You can trade within a few hours as the UK company will be incorporated online.
Answers on UK/ Offshore trading package.
Q: Can the offshore nominee company trade within the UK in this structure (or with other UK entities)?
A: The offshore nominee company in a structure described above, should not conduct any activity within the UK, because the agency agreement will state that the British company has the right to trade in a 'territory' which excludes the UK. If they do trade with UK businesses, there may be VAT problems as well as pressure from British tax authorities to 'look-through' the agency structure.
Q: So, I want the UK company to trade occasionally with other UK companies, without having VAT or Corporation Tax problems; how do I arrange things?
A: The UK company can do all the dealing with their UK clients.
Q: Can the UK company get "Certificate of Tax Residency"?
A: A UK company which operates in the UK can get a certificate of tax residency.
Q: Should the UK 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 UK 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 company 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.
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 GBP100,000 which would reduce on turnover above this. Annual accounts must be filed which may need to be audited.