UK - Amazon seller - Need Urgent Help For Offshore Company

[ShanX]

Hey guys need some advice please.

I am a UK resident with a UK Registered Amazon LTD company. Currently only sell in UK marketplace. But will look to expand to other Europe marketplaces.

Started this company in early May 2020 and every since it has seen exceptional growth.

Just got my recent Corporation Tax bill of £7,500+ which is after all expenses were deducted ( was initially £16,000+ ) Keep in mind this was for a Tax bill from Sept-Nov 2020.

With me adding more and more stock to my catalogue this bill is going to get higher and higher , thanks to UK's 19% Corporation Tax Rate.

I have no issues with Income TAX as I have set my salary the most tax efficient way to avoid paying any income Tax ( Of course I would like to have more money in my pocket which I will in future through Dividends etc )

Hence the reason I am looking for an offshore company to reduce my Corporation Tax Bill down or eliminate it all together which would be a great benefit reinvesting the money back into the company.

The few places I have looked at include :

Mauritius
Hong Kong ( very high maintenance cost with audits etc so this will probably a no go for me )
Ras al Kamiah UAE
Any others you recommend ? ( some are on EU Blacklist or not accepted by Amazon Europe Marketplace )

I am going to use a company called BBCIncorp to incorporate my new company ( Unless you guys can recommend someone else )

The question I have is do I have to open a Bank account offshore also to reduce my corporation TAX or can I still use a UK Business Bank registered in my new company address and still make use of the low/none corporation tax the offshore address will provide ?
This will save me alot of hassle as I have herd its a hard process opening a offshore bank. I rather do it in UK as I live here so can walk into Barclays and change my current business account to new one.

Also do you think this will a good way to go forward or is there something important I'm missing out that would cost me more in the long run ?

Thanks in advance guys and happy holidays

 

[Sols]

The problem here isn't the tax bill. The problem is in how you run your business. This is a classic beginner's mistake, when you have a good business idea and execute it properly but don't seek tax advice early enough. Generally speaking, don't think of income tax as an annual thing. Plan for it every month and set funds aside. Outsource accounting to some accounting firm to help you improve your cash flow. That's a much better investment than going offshore.

The tax planning you have proposed is Tax Evasion 101 and risks falling apart very quickly. It's not 1990 or 2000 when this type of setup maybe would've worked (and maybe even been exploitable through legal loopholes). You're a few decades too late.

You're not going to be able to legally avoid UK tax this way. Any company you own and control from UK is going to be tax resident in UK and liable to pay just as much tax as a UK company would. All you've done is add a bunch of paperwork.

If your tax bill was 16,000 before you probably had a net revenue somewhere in the neighbourhood of 100,000 GBP. Short of moving to a tax haven (which is an option you may want to consider), you need 10x or preferably 100x that for legal tax planning to be effective in your case. Your current revenue is a good income for you personally, but you don't have enough margin to play around with things like setting up proper physical presence in a tax haven and relocating your warehouses overseas. If you think a Hong Kong company has "very high maintenance costs", then you definitely don't have the means yet to set up an overseas office and warehouse to ensure your business isn't UK tax resident.

Don't waste your time with offshore for this. You risk huge penalties and fines (or worse), far beyond the 19% tax bill.

 

[georgio]

Just got my recent Corporation Tax bill of £7,500+ which is after all expenses were deducted ( was initially £16,000+ ) Keep in mind this was for a Tax bill from Sept-Nov 2020.

How did you get to have a Corporation tax bill so fast? Normally declaration is annual, sometimes I extend the period if I need the extra cashflow..

I would agree with above that this sounds like a bad idea, especially when you're based in the UK, and selling mostly there.

 

[ShanX]

Thank you for your reply guys. Really appreciate it , been banging my head against wall trying to get some information but due to holidays all advisors etc are closed.

Just a few things which has confused me now ..

My company is completely online ( I don't have a physical warehouse , I have a prep company who prepares my products and send to Amazon FBA - They fulfil all orders and customer service )

So for example - I open a offshore company in Mauritius and offshore bank in Mauritius

In this above example I'm I not correct in thinking I only pay income tax / dividends tax on my salary I pay myself whilst a UK resident ?

Would the example above not mean I don't pay any Corporation Tax as Mauritius Corp Tax rate is 0% for income sourced from outside of Mauritius ?

I have had an accountant from day one and currently in process of finding a new one as my current one just does not understand Amazon very well so need one who is very familiar with how Amazon works. Any Recommendations ?

 

[Sols]

My company is completely online ( I don't have a physical warehouse , I have a prep company who prepares my products and send to Amazon FBA - They fulfil all orders and customer service )

Doesn't change much. You and your companies are still tax resident in the UK.

I don't mean to sound snarky but if you what you propose were possible, how come not everyone is doing it? Why is there even a single pence from corporate tax in the HMRC's pocket?

So for example - I open a offshore company in Mauritius and offshore bank in Mauritius

In this above example I'm I not correct in thinking I only pay income tax / dividends tax on my salary I pay myself whilst a UK resident ?

Definitely not. The company is tax resident in the UK by being owned/operated/controlled from there.

Pack your bags and move to Mauritius, and it's a different story.

Would the example above not mean I don't pay any Corporation Tax as Mauritius Corp Tax rate is 0% for income sourced from outside of Mauritius ?

You might owe zero tax or very low tax in Mauritius (depending on how you structure it), but you still also owe 19% to the HMRC. Look into things like tax residence and permanent establishment (PE), as well as the Common Reporting Standard (CRS) and Automatic Exchange of Information (AEOI).

I have had an accountant from day one and currently in process of finding a new one as my current one just does not understand Amazon very well so need one who is very familiar with how Amazon works. Any Recommendations ?

Grant Thornton, Vistra (formerly Jordans), and BDO are some good firms that probably have experience with Amazon sellers, and that don't charge Big Four prices.

 

[Fazoule]

Yes and the fees these big firms will ask him will outweigh is annual income. No later than last week I spoke with several of these firms regarding a similar scenario as @ShanX and they all gave the same advice you did on your first reply.

"don't go offshore and pay your 19%"

 

[ShanX]

Thank you for the help guys really appreciate it . I will stick to finding a better accountant who can handle Amazon for now ( thanks for recommendation will look into them ) Will work on saving more money for a year or 2 then move to Dubai where I enjoy the 0% Tax along with having enough money to live a comfortable life. Thanks again guys