Breaking ties with UK for Dubai - drop UK ltd co?

[Au999]

I'm looking to set up a Dubai fz co, residence permit - with proper substance, renting apartment and office etc.

In order to help with making new UAE tax residence more clear to UK HMRC would it be beneficial to resign my directorship and transfer my shares at UK company? The UK company will own a small stake in Dubai co but not enough to trigger CFC especially if I'm no longer connected to it.

At least that's my theory.

Or am I overthinking this?

 

[ImKing]

company will own a small stake in Dubai co but not enough to trigger CFC especially if I'm no longer connected to it.

what is not enough, I mean, what is the percentage you can hold to not trigger CFC ?

 

[Au999]

what is not enough, I mean, what is the percentage you can hold to not trigger CFC ?

I believe it's less than 20% in the UK.

 

[CaptK]

A connection is a connection. You have resigned from one company which now owns a share of the new company.

Please ensure that you kill all ties in the UK. Ensure your story regarding the company situation is proper and what was your share of profits before you left.
What is the reason you resigned and what remuneration did you receive.

 

[CyprusLawyer101]

If there is additional value to keeping this company you may decide to re-domicile it to another jurisdiction.

 

[Au999]

If there is additional value to keeping this company you may decide to re-domicile it to another jurisdiction.

I don't think UK companies can re-domicile

What it is, is my wife and I are separating and currently both directors of UK limited co. The company owns a valuable website which has 3 main markets - UK, USA and UAE.

I'm effectively setting up a branch in Dubai which will run UAE and USA elements - these are completely separate and I'd be wholly responsible for their management. I believe I can elect to use "branch profit exemption" due to my circumstances which will stop Dubai co profits (or losses!) from being considered in UK company accounts.

The companies would be effectively divorced much as I will be.

Even if this election isn't something we do I've read through the 4 tests for a CFC and this new Dubai company passes every one, as it's genuinely better if I'm on the ground in Dubai not simply a tax excercise.

 

[CaptK]

Right, that makes sense.
Then you should be fine, to proceed as you wanted but branch exit I don’t think is the right frame for you to do. You want a clean break and you can justify everything to HMRC via the split.

Your Ex can sell that part of the business to you for a nominial amount £1. She sells it to you personally so you own it as an individual, all the data and customers.

Go for a 6 month holiday to Dubai while the dust settles.

 

[CyprusLawyer101]

This is a long due process for you, so it is important that you start making simple and small steps. Also instead of cutting ties you may decide to engage carefully with the authorities such as obtaining a tax rulling etc. Build a bridge on your way out, dont just burn a hundred.

 

[Au999]

Right, that makes sense.
Then you should be fine, to proceed as you wanted but branch exit I don’t think is the right frame for you to do. You want a clean break and you can justify everything to HMRC via the split.

Your Ex can sell that part of the business to you for a nominial amount £1. She sells it to you personally so you own it as an individual, all the data and customers.

Go for a 6 month holiday to Dubai while the dust settles.

Many thanks yes a clean break would be perfect!

Final question(!)

The Dubai free zone company will obviously be fine for dealing with US side of business but to work legally with UAE companies on the ground I'm assuming the fzco will *also* need to own an onshore Dubai LLC?

Dubai clients are a mix of local LLCs and dmcc companies so I'm guessing the onshore LLC is essential?

Thanks!!

 

[CaptK]

Yes to sell to UAE clients you will require an onshore set up. It does come with VAT and accounting. All your clients outside the UAE are not liable for VAT, so there is no point in in having and FZ. Just use the onshore.