UK Company (Software) selling via Paddle

[dogprince]

What do you guys think?

Online software selling. I live in Asia. Not a British citizen or resident.

1. Incorporate in UK (LLC). Very cheap and easy to get.

2. Use "Paddle" for all my software sales (Paddle automatically takes care of all the VAT, worldwide tax compliance, etc).

3. Estimated income: About $150,000 US a year (it's pure profit as everything is run from my laptop).

4. Take all profit as salary and pay no corporate tax in the UK since I'm not leaving any money left in the company.

5. Pay income tax in Asia.



Please tell me what is wrong with this plan? How am I going to get screwed up here?

Also, am I required to submit audited yearly accounts? How onerous is the accounting the UK?

Will "Paddle" withhold any tax for UK companies when paying out?

Can I get a UK PayPal account without a traditional UK bank account? Getting a normal UK bank account might be tough since I have no ties to the UK.

Thanks!

 

[Sols]

1. Incorporate in UK (LLC). Very cheap and easy to get.

It's a small detail and probably not one that matters in your case (since your understanding in general is correct) but there's technically no such thing as an LLC in the UK. I suspect you mean a normal UK private limited company, though.

2. Use "Paddle" for all my software sales (Paddle automatically takes care of all the VAT, worldwide tax compliance, etc).

If they accept your company, sounds good.

3. Estimated income: About $150,000 US a year (it's pure profit as everything is run from my laptop).

I know that's tempting to think of it all as profit just for the sake of ease, but you could probably claim a bunch of costs as expenses to reduce the taxable basis.

4. Take all profit as salary and pay no corporate tax in the UK since I'm not leaving any money left in the company.

This sounds a little bit like wishful thinking. It could work (and it often does for businesses your size), but bear in mind that HMRC will sometimes go after companies that artificially reduce their tax basis by taking out all or nearly all of the company's profits in salary. It might be necessary to take out for example 25-50,000 USD/year in salary and the rest as dividends (after paying corporate tax).

Please tell me what is wrong with this plan? How am I going to get screwed up here?

The UK company is probably tax resident wherever in Asia you live. This can be a good or bad thing. It's good if there is a tax treaty between UK and your home country that you can use to make the UK company TNR (Treaty Non-Resident). A TNR company might be exempt from UK tax entirely. It's bad because you're not saving anything on taxes in the end: the UK company just has to pay tax like any local company where you live.

Also, am I required to submit audited yearly accounts? How onerous is the accounting the UK?

Audited accounts are only required once you meet certain criteria. It doesn't sound like your business would be in scope for any of that.

Accounting in UK is easy. There are a lot of software you can use to simplify the process (Xero, Sage, FreeAgent, and many more). If you can't/don't want to do it, look for accounting firms and outsource it. Search for firms outside of London to get much lower rates.

Will "Paddle" withhold any tax for UK companies when paying out?

AFAIK, Paddle only takes care of VAT, not any other taxes.

Can I get a UK PayPal account without a traditional UK bank account? Getting a normal UK bank account might be tough since I have no ties to the UK.

Probably not a traditional bank account but you can try different EMIs. PayPal is tricky. You can probably open the account and run it for a while, but when you start approaching 50–100,000 USD turnover, they might perform more in-depth checks on the company. When they do that, they sometimes kick out companies that don't have any bonafide connection to the UK.