Non-UK forming ltd company in UK

[bluehorseshoe]

Hi there,

I understand a non-UK / non-EU resident can form a company and open a bank account in the UK but I have a few questions that I hope the community here can help me with.

To give you an idea, we are looking to use the UK company that we will form, to work with a local payment gateway to process payments for us from European customers and then have that money sent back to our company back home outside of the EU - the purpose of the UK company would be only to receive the funds transacted on our website from the payment gateway (we need the UK payment gateway and can't get an equivalent provider in the home country).

I was thinking of setting up an agreement with Company A (home country) and Company B (UK company) where Company A would pay a small % of the transactions to Company B as remuneration for the work.

The questions I had were:

1) Would this nature of agreement/transaction be allowed where the UK company is sending tens of thousands of £ back to the home country every week (less a % fee)? Would this cause any legal consequences or complications with the tax authorities? We are not looking to do anything illegal - it is literally just to process payments on our site in a different currency, we need the services of a london-based payment gateway to use on our site.

3) Does this have any POEM (Place of Effective Management) implications?

4) Does this have an BEPS (Base Erosion and Profit Shifting) implications?

5) Will the UK company be subjected to transfer pricing audit?

6) Do any of the answers above change if we incorporate an LLP, partnership or sole proprietary concern in UK instead of a company?

Many thanks in advance!

 

[sierra]

Hi there,

I understand a non-UK / non-EU resident can form a company and open a bank account in the UK but I have a few questions that I hope the community here can help me with.

If you can evidence your lawful presence in the UK/have a credit file footprint with one of the big three, you may be able to open a bank account in the UK. If not, you'll be able to use the UK entity to obtain an offshore bank.

To give you an idea, we are looking to use the UK company that we will form, to work with a local payment gateway to process payments for us from European customers and then have that money sent back to our company back home outside of the EU - the purpose of the UK company would be only to receive the funds transacted on our website from the payment gateway (we need the UK payment gateway and can't get an equivalent provider in the home country).

I was thinking of setting up an agreement with Company A (home country) and Company B (UK company) where Company A would pay a small % of the transactions to Company B as remuneration for the work.

UK company acts as an agent. Very common.

The questions I had were:

1) Would this nature of agreement/transaction be allowed where the UK company is sending tens of thousands of £ back to the home country every week (less a % fee)? Would this cause any legal consequences or complications with the tax authorities? We are not looking to do anything illegal - it is literally just to process payments on our site in a different currency, we need the services of a london-based payment gateway to use on our site.

Leave at least 10-15% of your income in the UK entity and pay the tax on it, preferably more. HMRC are not silly.

3) Does this have any POEM (Place of Effective Management) implications?

Yes it would. That's where you'll need to take advice, but you've suggested you or your nominee are going to be a non-UK/non-EU resident.

4) Does this have an BEPS (Base Erosion and Profit Shifting) implications?

5) Will the UK company be subjected to transfer pricing audit?

Seek professional advice.

6) Do any of the answers above change if we incorporate an LLP, partnership or sole proprietary concern in UK instead of a company?

The primary use of LLPs in offshore structures are that, because of their pass through nature, where you have two offshore entities as partners of said LLP, if (and this is the catch - a big if) you have no UK source income, there would be limited if any UK company tax obligations, but a nice UK entity with which to do business. By its nature as acting as an onshore agent, I see no benefit to using an LLP personally.

 

[JohnLocke]

If you want to setup something in the UK you want to consult a local law firm or certified accountant! Otherwise you will struggle to get any bank account opened and you will get problems with the tax office too.

 

[fshore]

UK companies are subject to transfer pricing except if you can use the exemption (small company dealing with companies where UK has a tax treaty)
INTM412070 - International Manual - HMRC internal manual - GOV.UK

You can also reduce taxable profit by drawing a salary.

 

[bluehorseshoe]

thanks so much guys!!!

 

[sergeylim88]

is the original poster still around?
what did he findout in the end?
which solution did he take?

 

[Jerry1911]

is the original poster still around?
what did he findout in the end?
which solution did he take?

I am curious to know as well but in general you need 4 people to make this work:

- a UK accountant for your UK company
- a UK tax advisor to advise you on transfer pricing issues
- a UK lawyer to draft the agency agreement
- a tax advisor in your home country to make sure the UK company does not become tax resident in your country of residence

 

[sergeylim88]

yes, for any uk company you need to keep the books
so first point is clear

transfer pricing is not straight forward.
i am really wondering is it possible to avoid transfer pricing (in case that the owner of both companies (uk and tax haven one) is the same, or owners are connected in some form to trigger transfer pricing).
not really sure how that agreement would look like, and if it is really possible.
the fact that someone got away with(for now), doesn't mean that the tax authorities even checked him(or the transfer pricing rule), maybe they got away because of that and not because of the agreement being legit.
we need some kind of proof or information, what happens if you have that kind of deal and company gets audited (for transfer pricing, meaning the tax authorities do know that ubo is the same for both companies)

the cfc rules apply as for any other company, and it all depends on the country where you are the resident, so the company in uk might require some substance(so it wouldn't be considered a resident in your residing country), or maybe it is already resolved with the agreement for avoiding double taxation