I manage a UK Limited company selling physical good to B2C and B2B customers (VAT registered in various EU countries). Turnover >1M GBP. Profits ca. 50% of it. Business is growing.
I'd like to use an offshore setup in order to legitimately decrease corporate tax burden on profits in the UK.
My idea is to use an offshore company (e.g. Belize) with registered bank account in Switzerland to do either of the following:
Option 1: Make a 100% profit transfer agreement between the UK limited and the Belize offshore. At the end of the year (or end of each quarter) 100% of the profits are moved to the Swiss bank account of the Belize company. In terms of taxes the UK will get nothing else other than the 20% VAT paid on the physical goods (i.e. no corporate tax).
A slimmed down version of option 1 would be to make the profit transfer agreement only 90% so 10% of the profits would still be taxed in the UK.
I assume I would need at least one legal contract: A profit transfer agreement of the UK Ltd with the Belize company. Question (among others) is if this agreement would have to be signed under UK jurisdiction or Belize jurisdiction.
Option 2: Bill the UK company via the Belize company in order to legitimately increase expenses of the UK company. This could be achieved by
a) Managing and paying freelancers through the Belize company and bill for their time on a monthly basis. e.g. it would cost the Belize company EUR 5,000 to hire the freelancers (to do work for the UK company) but the bill would be EUR 50,000 (or varied on demand). This monthly bill could also include services such as SEO, online marketing activities, use of server space etc.
I assume one would need at least one legal contract: A service agreement between the Belize company and UK Ltd.
b)Transferring the IP of the UK company to the offshore company (which is in the form of a trademark and multiple domain names) and then bill for royalties on a quarterly basis - e.g. 70% of quarterly profits (transferred quarterly to the Belize's Swiss bank account)
I assume at least 2 legal contracts are necessary: An IP sales agreement (from UK to Belize company) for either a nominal or a real valued amount. Question is if one needs to be able to proof that the wire transfer really took place (and/or to a realistic valuation). Also I guess a royalty pay agreement would be necessary.
One would combine options 2a) and 2b) in such a way that corporate tax burden in UK is minimal - e.g. instead of UK corporate tax on 100% of the profits only on 5%
Would you prefer Option 1 or Option 2. Any thoughts how HRMC would question/view?
I'd like to use an offshore setup in order to legitimately decrease corporate tax burden on profits in the UK.
My idea is to use an offshore company (e.g. Belize) with registered bank account in Switzerland to do either of the following:
Option 1: Make a 100% profit transfer agreement between the UK limited and the Belize offshore. At the end of the year (or end of each quarter) 100% of the profits are moved to the Swiss bank account of the Belize company. In terms of taxes the UK will get nothing else other than the 20% VAT paid on the physical goods (i.e. no corporate tax).
A slimmed down version of option 1 would be to make the profit transfer agreement only 90% so 10% of the profits would still be taxed in the UK.
I assume I would need at least one legal contract: A profit transfer agreement of the UK Ltd with the Belize company. Question (among others) is if this agreement would have to be signed under UK jurisdiction or Belize jurisdiction.
Option 2: Bill the UK company via the Belize company in order to legitimately increase expenses of the UK company. This could be achieved by
a) Managing and paying freelancers through the Belize company and bill for their time on a monthly basis. e.g. it would cost the Belize company EUR 5,000 to hire the freelancers (to do work for the UK company) but the bill would be EUR 50,000 (or varied on demand). This monthly bill could also include services such as SEO, online marketing activities, use of server space etc.
I assume one would need at least one legal contract: A service agreement between the Belize company and UK Ltd.
b)Transferring the IP of the UK company to the offshore company (which is in the form of a trademark and multiple domain names) and then bill for royalties on a quarterly basis - e.g. 70% of quarterly profits (transferred quarterly to the Belize's Swiss bank account)
I assume at least 2 legal contracts are necessary: An IP sales agreement (from UK to Belize company) for either a nominal or a real valued amount. Question is if one needs to be able to proof that the wire transfer really took place (and/or to a realistic valuation). Also I guess a royalty pay agreement would be necessary.
One would combine options 2a) and 2b) in such a way that corporate tax burden in UK is minimal - e.g. instead of UK corporate tax on 100% of the profits only on 5%
Would you prefer Option 1 or Option 2. Any thoughts how HRMC would question/view?
