UK Ltd for payment processing

[John Andrews]

Is it possible to incorporate a UK Ltd which transfers all profits to an offshore company based on some kind of an agreement?

The UK Ltd would process payments through PayPal/Stripe and the money would be transferred to a different company on a regular basis.

 

[GiGoGo]

UK companies can be used in tandem with an offshore company to enjoy a tax rate of less than 5%. This type of structure is commonly known as an "Agency Company", where an onshore company acts as nominee or agent for an offshore principal. This set-up offers an onshore “face” with all the offshore benefits.

The offshore holds the IP, brands and valuable asset and licenses it to the UK Ltd

 

[fshore]

The UK company can also be a payment processing company for the other company.

 

[GiGoGo]

UK companies can be used in tandem with an offshore company to enjoy a tax rate of less than 5%. This type of structure is commonly known as an "Agency Company", where an onshore company acts as nominee or agent for an offshore principal. This set-up offers an onshore “face” with all the offshore benefits.

The offshore holds the IP, brands and valuable asset and licenses it to the UK Ltd

 

[JohnLocke]

Many setup a UK Ltd because it's cheap and it opens up your options to get a merchant account / payment processing for their business. You can setup the company as already suggested here to be the processing company for any other company i.e. offshore company.

Once you have setup your UK LTD you can check with payment processors like Stripe, WorldPay, PayPal, GoCardless and so forth, there are hundreds to choose from and you are not limited to only UK payment processors.

 

[1nomad]

And what about UK LLP? Isn't it better than LTD?.

 

[JohnLocke]

You will get troubles with an LLP because of the structure reasons. As you are not new to the forum you must have seen the many threads about UK LLP and banking. Now it's 2020 and I don't believe they want to board such companies but worth to try.

I'm not a payment processor so I can't predict the outcome!

 

[John Andrews]

The UK company can also be a payment processing company for the other company.

Okay, but how is one supposed to structure this so it doesn't fall under BEPS and so that HMRC stays happy?

 

[JohnLocke]

You have to do accounting and file tax reports as any regular other company. I don't understand what the problem is if everything is legit.

 

[fshore]

Okay, but how is one supposed to structure this so it doesn't fall under BEPS and so that HMRC stays happy?

You should charge at least the same as other payment processing companies do (stripe, paypal etc).

 

[speedster]

Okay, but how is one supposed to structure this so it doesn't fall under BEPS and so that HMRC stays happy?

You obviously also need to make sure the offshore is a genuine company with substance in the foreign jurisdiction.

 

[fshore]

You obviously also need to make sure the offshore is a genuine company with substance in the foreign jurisdiction.

I think we are talking about different matters. BEPS is relevant if you are UK resident and artificially trying to send UK profits out of the UK. If you are not UK resident and starting a payment processing company in the UK then the income of the UK company is the percentage it charge its client(s). This might fall under related party / arms length transactions and you might have to make related parties documentation, but it should be quite simple to show that you charge a resonable rate as there are so many other payment processing companies to compare with.

 

[speedster]

I think we are talking about different matters. BEPS is relevant if you are UK resident and artificially trying to send UK profits out of the UK. If you are not UK resident and starting a payment processing company in the UK then the income of the UK company is the percentage it charge its client(s). This might fall under related party / arms length transactions and you might have to make related parties documentation, but it should be quite simple to show that you charge a resonable rate as there are so many other payment processing companies to compare with.

Surely you would still need to comply with beps requirements, or op would end up being taxed on his home nation. Granted OP did mention anything about tax reasons, this was added by a reply in the thread. He might not be concerned by the tax at all and only looking for the functionality.

 

[fshore]

Surely you would still need to comply with beps requirements, or op would end up being taxed on his home nation. Granted OP did mention anything about tax reasons, this was added by a reply in the thread. He might not be concerned by the tax at all and only looking for the functionality.

Yes, I'm referring to how this would be treated in the UK.

 

[user9823671]

Have often thought about this and just assumed there was a catch I wasn't aware of.

But from what the replies here say I can:

a) set up an offshore company in seychelles "offshore computing solutions ltd"
b) setup a company in UK "payment solutions ltd"

"Payment solutions ltd" is a legit UK company, everything above board, file taxes, everything legit. They get a UK bank account, paypal, whatever. Build them a website and offer to process payments for any company (but never accept anyone).

"offshore computing solutions ltd" then signs up to use "payment solutions ltd" and obviously gets accepted. They act like a proper processor, charge 5% to process payments, keep a float of some of the payments and then transfers each month the remainder to "offshore computing solutions".

And that is completely above board? If there anyway, that "payment solutions" could be liable for actions taken by "offshore computing"? If someone wanted to sue "offshore computing" and figured out "payment solutions" was just a sister company, could that be a problem? As obviously "payment solutions" would be listed in company house?


Would it possible to use similar names?
offshore: JohnSmith Computing
uk: johnsmith payments

Being blatant that they are sister companies of the same people, are the actions of "johnsmith computing" still irrelevant to "johnsmith payments"

 

[user9823671]

This might fall under related party / arms length transactions and you might have to make related parties documentation

I think this is what I am asking about above. Do you have more infomation on "related party / arms length transactions"?

If the companies have different / unrelated names, one company is offshore, how would anyone know is related party?

 

[JohnLocke]

Why does it need to be "related party" if that is an requirement it's easy to find out if the owner is the same of both companies.

 

[fshore]

I think this is what I am asking about above. Do you have more infomation on "related party / arms length transactions"?

If the companies have different / unrelated names, one company is offshore, how would anyone know is related party?

You legally have to disclose if the other company is a related party.

 

[John Andrews]

He might not be concerned by the tax at all and only looking for the functionality.

This is correct, the country I am tax resident in DOES NOT care about foreign/offshore companies. They are also fully reported to tax authorities.

Would it possible to use similar names?

I don't think this would be a problem tax-wise but the payment provider might ask you what's up with the name.

You legally have to disclose if the other company is a related party.

To whom? HMRC?

I don't understand what the problem is if everything is legit.

What's stopping HMRC from claiming I am just diverting UK Ltd income to an offshore company for no good reason, considering I am the UBO of both companies?

 

[user9823671]

You legally have to disclose if the other company is a related party.

To who? The whole point would be solve the issue of paypal / payment processors not wanting to work with an offshore company (lets say seychelles but any really).
Although you are the UBO of both companies, only the UK company which processes payments will have that info publicly known.
Although CRS / AEIO (or whatever it is) / other standards may give you being the UBO of the seychelles company to governments / tax offices, this isn't public. So paypal / stripe / payment processes the uk payment front compny uses will never know.