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Payments for "consulting" and "software dev" -- suspicious for banks? How to mitigate it?

#21
JustAnotherNomad said:
I'm not talking about your own residency, I'm talking about the corporate tax residency, i.e. where the company pays its taxes.

To the best of my knowledge, it works like this:
A UK Ltd. is always tax resident in the UK, unless it is effectively managed from a country the UK has signed a tax treaty with.
In such a case, it is possible to apply to HMRC and explain that the company should pay tax in that other country instead.
This used to be very popular a couple years ago when many countries required higher capital to incorporate a local Ltd. company. By registering a UK company, you could circumvent that capital requirement (UK companies require only 1 GBP in capital), but it didn't make any difference for the taxes the company had to pay.
However, in the absence of a tax treaty, a UK Ltd. company is always tax resident in the UK and has to pay UK corporate income tax.
So the question remains: What did you tell HMRC where your company is managed from?

You can find this explained here for example:


https://www.ashurst.com/en/news-and...pany-may-not-be-tax-resident-where-you-think/
Click to expand...
Thanks for the clarification.
What i wanted to say with my previous comment ("Anyway, residency has no impact on the type of setup I've in place") is that based on what I've in place, my residence has no impact. It works even if you are based in somewhere Africa, US or elsewhere.
That's it ;-)
 
#23
#26
cangarooo said:
I've a UK Non Resident Ltd. and make theese type of transactions since more than 10 years.
Never had any problem with my bank.
Only the very first transaction they requested a copy of the invloice.
That's it.

Moreover, i help my customers to reduce their fiscal exposure by issuing "invoices" for services never delivered.
They pay the amount in full. I retain a % and they get the money bank (withdrawing money via Debit Card issued by me).

I would say that most of the possible problems may come from the bank you will be using.
Click to expand...
Interesting!

1) At this point I don't use any bank, but Transwerfise and Stripe, biz accounts. Later on I plan to use Bankera too.

A customer can, or rather will, pay for consulting via either. Obviously, with Stripe there'll higher fees, but for some customers it's easier to pay via it because he'll only need a bank card as opposed to sending a swift transfer via Transferwise.

Question:

*who* in my cause would or could ask me for a proof (invoice and such things) of consulting or software dev? Stripe? Transferwise? UK revenue service? Or any of them could?


2) You say "withdrawing money via Debit Card issued by me" -- how have you issued your own bank card?
 
#27
3) Also, for now I expect that an average payment will be relatively small - one or a couple of hundred dollars. Sometimes they'll be thousand(s), but only sometimes. And in sum -- a thousand or several thousands per month, that is.

Is it be likey that there'll be little to no any scrutiny along the way with such amounts?
 
#28
AdvancedGene8320 said:
Interesting!

1) At this point I don't use any bank, but Transwerfise and Stripe, biz accounts. Later on I plan to use Bankera too.

A customer can, or rather will, pay for consulting via either. Obviously, with Stripe there'll higher fees, but for some customers it's easier to pay via it because he'll only need a bank card as opposed to sending a swift transfer via Transferwise.

Question:

*who* in my cause would or could ask me for a proof (invoice and such things) of consulting or software dev? Stripe? Transferwise? UK revenue service? Or any of them could?


2) You say "withdrawing money via Debit Card issued by me" -- how have you issued your own bank card?
Click to expand...
Stripe are easy for the customers paying via credit card.
And yes, unfortunately, fees are on you except if you want to charge it to your customers.
TW i'm not an expert as I don't use it so .... cannot say anything here.
I only receive money via Bank Transfer (IBAN Based Account).

Questions on the transactions may come from both Stripe and the bank where Stripe is sending money to.
Stripe is performing an initial KYC plus having a continous monitoring on the transactions.
Bank should do the sam but this mostly depends on the jurisdiction where the bank is located.

Yeah, sorry, bad description. It's obviously not "my own bank".
With my existing bank account, I can issue several Debit Cards to be used for my team members.
And that's what I do.
Assuming you are my customer and you want me to manage for you a transaction of 10.000€ with your final customer:
- I issue the invoice to your customer
- I collect the payment from your customer via Bank Transfer
- when money are on my bank account, I create a new Team Member Debit Card for you for the total amount minus my fee: 9.000 €
- the Debit Card is sent to you via Registered Mail directly by the Bank

Checking of the transactions is made by the banks or Stripe indipendently from any amount. A suspicious transaction can be based on the payment initiation country, based on the currency, based on many different factors.

Hope this helps
 
#29
Thx man

---

You pay no taxes with your UK Ltd and you're own the true owner of it, right? But even with this set up, how could someone legally avoid paying taxes in the UK with LTD?

If it was UK *LLP*, then it'd be understable how to not pay taxes, and legally so.

But in case of UK *LTD* - one has ALWAYS to pay taxes AT LEAST to the UK. No?

And when there's no DTA, then one would pay taxes to the UK *and* in a country where he's a resident too. Or vise versa -- first in a country where you're a resident, then, in required, in the UK? :) Redardless, one would still pay taxes at least in one country. Or not?
 
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#34
cangarooo said:
Sorry to say but you'd read the full discussion.
It has been explained HOW IT WORKS!!!!

Again, ZERO TAXES paid by me and my UK LTD.
Click to expand...
won't last long. You will face troubles sooner or later with such an setup. Alternative you circulate lot's of UK LTD's use and trash them.
 
#35
won't last long. You will face troubles sooner or later with such an setup. Alternative you circulate lot's of UK LTD's use and trash them.
I always thought that way, but how to explain that:

HMRC issue briefing: taxing the profits of companies that are not resident in the UK

1. Introduction​

The general rule is that a company which is not resident in the UK has to pay UK Corporation Tax only if:

  • it has a permanent establishment in the UK
  • the economic activity that generates its profits is carried out in the UK
 
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#36
EuroKiss said:
won't last long. You will face troubles sooner or later with such an setup. Alternative you circulate lot's of UK LTD's use and trash them.
I always thought that way, but how to explain that:

HMRC issue briefing: taxing the profits of companies that are not resident in the UK

1. Introduction​

The general rule is that a company which is not resident in the UK has to pay UK Corporation Tax only if:

  • it has a permanent establishment in the UK
  • the economic activity that generates its profits is carried out in the UK
Click to expand...
Also:
United Kingdom - Corporate - Corporate residence
 
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#37
There are ways around to do what OP say he does, but it is way more complicated then described here!
 
#40
uplana said:
There are ways around to do what OP say he does, but it is way more complicated then described here!
Click to expand...
But they clearly stated that if you have no PE (like in the OP case) you have no corporation tax; I mean, it seems pretty clear to me. Invoicing to UK customers with an Irish company is an additional safety measure (even if gov doc stated that having UK customers don’t mean you have PE).
 
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