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Gibraltar - Is it the best option for me?

HexusOdy

HexusOdy

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Dec 11, 2019
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#1
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I have run my own UK business for 7 years now via a UK LTD company and earn a decent living. Myself and the wife are the owners and only directors and I have no other employees. I pay myself the bare minimum to live a decent lifestyle and retain the rest in the business as my retirement fund (I'm 42). I deal in physical goods but use a UK 3rd party logistics company to handle them. That may well change to an EU company after Brexit.

By far my largest tax outgoing is corporation tax. That's something I want to manage into a smaller number.

I have recently been looking into Gibraltar as my understanding is they don't require a resident director and while their corporation tax rate is 10% it is 0% on transactions outside Gibraltar, which is all my business.

Given the information I have provided does Gibraltar seem like a viable solution?
 
#5
HexusOdy said:
I reside in the UK.

I am not looking to avoid tax on dividends. From the research I have done it seems that is extremely difficult to do and I rarely need to take out more than the tax free dividend limit.

This is primarily about managing corporation tax.
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The problem is that as a UK resident controlling the company in the offshore environment, the company will be considered a Controlled Foreign Company (CFC) by HMRC in the UK and they will require you to pay income tax on the profits of the offshore company in the UK. There are situations in which this would not be the case, but this likely requires a little more thought to make it work. This situation will occur regardless of the company location chosen.
 
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#6
#7
James Turner said:
The problem is that as a UK resident controlling the company in the offshore environment, the company will be considered a Controlled Foreign Company (CFC) by HMRC in the UK and they will require you to pay income tax on the profits of the offshore company in the UK. There are situations in which this would not be the case, but this likely requires a little more thought to make it work. This situation will occur regardless of the company location chosen.
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Ahh ok, I did not realize. I thought for personal taxation reasons I would still be liable to UK tax but did not realize for business.

Any other suggestions?

Might it actually be preferable to have a resident director? I know you can often pay for this service, it was something I was looking to avoid as it's fairly expensive.
 
#8
Martin Everson said:
Have a read of the below thread. Corporation tax shouldn't really be an issue for a UK business if you are making all the deductions you are entitled to make. Unless you have profits > 100k.

https://www.offshorecorptalk.com/th...te-tax-residency-in-the-uk.27553/#post-113297
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Hi Martin,

Thanks for that, it's something I have also been considering. The main problem for me is that my retained profit is also my operating capital. I deal in consumer goods, so need cash to buy and sell product.

I could probably put 40% of my annual retained profit in the pension scheme and still have enough for trading, that would offer me some savings, but are there any other options that might over greater savings?
 
#9
James Turner said:
The problem is that as a UK resident controlling the company in the offshore environment, the company will be considered a Controlled Foreign Company (CFC) by HMRC in the UK and they will require you to pay income tax on the profits of the offshore company in the UK. There are situations in which this would not be the case, but this likely requires a little more thought to make it work. This situation will occur regardless of the company location chosen.
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If it makes any difference I should add that I am not looking to divert profit from the current UK company ala Starbucks. My intention would be to trade as the new Gibraltar entity and let the UK company go dormant.
 
#10
HexusOdy said:
If it makes any difference I should add that I am not looking to divert profit from the current UK company ala Starbucks. My intention would be to trade as the new Gibraltar entity and let the UK company go dormant.
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The issue is not trading between the two companies, diverting profit etc, it is the fact that as control of the offshore company would be in the UK, the company falls under CFC rules. This does not apply in some circumstances where ownership is not all in the UK, but this would probably warrant a more in depth discussion.
 
#12
mange38 said:
What if the offshore company is owned by a trust/foundation or something similar?

If it's not owned by him or by a UK entity I don't see how CFC applies in that case.
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That is what requires discussion. There may be individuals involved that reside overseas who would own sufficient percentage of the shares to remove the company from the CFC regime. Trusts are a definite option, but in my opinion too complicated to discuss in a forum.
 
#13
Thanks everyone for the sage advice. I figured it wouldn't be easy and CFC knocks that idea on the idea.

I imagine the path of trusts is complicated and expensive for a company that's paying 20k a year in corporation tax.
 
#14
HexusOdy said:
Thanks everyone for the sage advice. I figured it wouldn't be easy and CFC knocks that idea on the idea.

I imagine the path of trusts is complicated and expensive for a company that's paying 20k a year in corporation tax.
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Trusts don't have to be expensive to be honest and I think you will still get a reasonable saving from using a structure tailored to your circumstances.
 
#18
The Gibraltar company is likely not subject to CFC rules, as it will be deemed tax resident in the UK and taxed as a normal UK company. Cfc rules only applied to companies not tax resident in the UK.


Martin Everson said:
Have a read of the below thread. Corporation tax shouldn't really be an issue for a UK business if you are making all the deductions you are entitled to make. Unless you have profits > 100k.
Click to expand...

As you wrote in that other tread the remaining amount after deductions will be taxed as 19% before paying dividends and paying personally dividend tax.
 
#19
fshore said:
The Gibraltar company is likely not subject to CFC rules, as it will be deemed tax resident in the UK and taxed as a normal UK company. Cfc rules only applied to companies not tax resident in the UK.




As you wrote in that other tread the remaining amount after deductions will be taxed as 19% before paying dividends and paying personally dividend tax.
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I thought CFC rules are what makes it tax resident in the UK?
 
#20
speedster said:
I thought CFC rules are what makes it tax resident in the UK?
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No, from HMRC:
A foreign company is a CFC if it’s a non-resident UK company that’s controlled by a UK resident person or persons.

UK corporate tax resident generally:
Residence of a company is determined according to where its central management and control is to be found
 
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