US Delaware/Wyoming or Dubai Offshore company with US/Dubai bank account and IRS 5472 form

[ShillGates]

@jahmac
A company is resident where it is managed and controlled. No matter where your corp is in the world it will be UK resident for as long as your rear end is in the UK. Not a difficult concept and been subject of a numerous high court decisions. So do whatever you like doing but if you want to sleep at night, either move your a*s to a different country with 0% tax or if not, then accept that this is the reality, which you might or might not get away with.

Company Residence: Laerstate BV v HMRC - Corporate Tax - UK

This is a recent case that acts as a sharp reminder that care and attention is needed to ensure that a non-UK company does not become UK tax resident.

www.mondaq.com

Laerstate BV [2009] TC 00162 | Croner-i Tax and Accounting

[2009] UKFTT 209 (TC) John F Avery Jones CBE (Chairman), Roger Berner Decision released 11 August 2009 Corporation tax – company residence – whether Dutch company was UK resident – yes – whether place of effective management was in the UK for the UK-Netherlands double taxation agreement – yes

library.croneri.co.uk

Company residence: courts considers wider picture - www.rossmartin.co.uk

How is company residence established and how do the courts view it?

www.rossmartin.co.uk

Thats just the part of it, the cfc regime also does pass though - disregards the entity as if you id the busines privately, anyway good luck

 

[jahmac]

Can you please elaborate central management and control thing. All the example I have read all about board meeting/sales of share and all. Which will be nothing in my case. I wont need any Board meeting or sales or share or anything related to central management and all.

 

[jahmac]

If any central management/control situation arise like signing any documents with bank or company any major decision about company I will do everything from outside UK. Then whats the issue. I am sure sending invoice to customers or customer support via website/email is not part of central management/control thing.

 

[jahmac]

Also another funny thing is...most of these example of UK company residence cases are very high level multimillion £ corporate level business with board of directors/sharholders/board meeting and all and they are so many central control and management process involves more frequently.

 

[Sols]

Can you please elaborate central management and control thing. All the example I have read all about board meeting/sales of share and all. Which will be nothing in my case. I wont need any Board meeting or sales or share or anything related to central management and all.

Not having board meetings at all isn't some amazing loophole you just discovered. You need to give the HMRC a bit more credit than that.

Are you a director? Then central control rests with you, because directors control companies.

Are you a large/majority shareholder/UBO? Then you control and can direct the company by having the power to appoint directors.

No board meetings? A court could easily determine that when you make a decision — any decision — that's effectively a board meeting. I've seen that particular situation happen elsewhere. A court found that board meetings were taking place locally because the sole owner/director was taking business decisions at their residence.

If any central management/control situation arise like signing any documents with bank or company any major decision about company I will do everything from outside UK. Then whats the issue. I am sure sending invoice to customers or customer support via website/email is not part of central management/control thing.

You live in the UK. You take day to day decisions for the company. It is your work that creates the company's economic value, and therefor the company's economic substance is in UK. That's what makes it tax resident in UK.

Also another funny thing is...most of these example of UK company residence cases are very high level multimillion £ corporate level business with board of directors/sharholders/board meeting and all and they are so many central control and management process involves more frequently.

Small cases rarely make it to the news. Tax enforcement is also only getting easier and easier with things like FATCA, CRS/AEOI, and increasingly public registers feeding tax authorities with easily digestible data.

Why don't you just exchange some emails with tax advisers at firms like Grant Thornton or BDO? They are usually happy to give general guidance for free, and personalised advise for a reasonably fee.

Alternatively, go ahead with your plan and just see what happens. Maybe you're right and the law doesn't apply for you or has loopholes that you can exploit.

 

[jahmac]

thanks guys. will take any decision from outside Uk and will keep a proof of my travel documents and all. Also will have a consultation with tax advisers and will say all my logical arguments and se what comes up.

 

[jahmac]

can anyone tell me even in worst case scenario if foriegn offshore company is being treated as UK resident company is it just corporate tax on profit/gains or is that UK VAT involves as well.

 

[Sols]

Probably VAT as well. It depends on a lot of factors. But generally speaking, you're looking at full compliance with UK tax law.

There really is no value in setting up offshore companies like this anymore. Everything is based on residence, unless you live in a tax haven. The whole industry has changed, with many jurisdictions closing down completely or rewriting their tax laws, and those left enacting laws to increase transparency and compliance with modern regulatory standards.

The only somewhat similar solution that does seem to work are the classical Isle of Man, Channel Islands, and Malta/Cyprus arrangements where you appoint local professional directors. They sign agreements and control the company's bank accounts. On paper, you're just a shareholder and sometimes an employee getting a salary. There is still a risk that a tax authority rejects the structures and claims that the company is in fact controlled and therefore resident in UK, in which case you'll have to go fight them in court.

 

[jahmac]

Probably VAT as well. It depends on a lot of factors. But generally speaking, you're looking at full compliance with UK tax law.

There really is no value in setting up offshore companies like this anymore. Everything is based on residence, unless you live in a tax haven. The whole industry has changed, with many jurisdictions closing down completely or rewriting their tax laws, and those left enacting laws to increase transparency and compliance with modern regulatory standards.

The only somewhat similar solution that does seem to work are the classical Isle of Man, Channel Islands, and Malta/Cyprus arrangements where you appoint local professional directors. They sign agreements and control the company's bank accounts. On paper, you're just a shareholder and sometimes an employee getting a salary. There is still a risk that a tax authority rejects the structures and claims that the company is in fact controlled and therefore resident in UK, in which case you'll have to go fight them in court.

if a local director has full authority on the company and bank account then how risky it can be that they can take your money or change or use company in thehir any other activities which you may not aware of it....including opening may more company account in other countries and all.

 

[Sols]

if a local director has full authority on the company and bank account then how risky it can be that they can take your money or change or use company in thehir any other activities which you may not aware of it....including opening may more company account in other countries and all.

That's why you'd only work with a local director who's licensed and regulated by the local FSA. They do this for dozens or hundreds of companies. There have been a few threads about this specific topic recently such as Nominee director protection

 

[ShillGates]

It’s about who makes the ultimate decision. Very simple - a nominee director does not. A real director who you hire needs to make the decisions for the company.

the fact you travel abroad for meeting abroad in whatever jurisdiction is great - however it’s about where the majority of the directors reside .
Remember - it’s not about hmrc to proof something is true. They will just send you massive tax bill based on assumptions/ you are guilty till proven innocent - reverse burden of proof.

 

[ShillGates]

can anyone tell me even in worst case scenario if foriegn offshore company is being treated as UK resident company is it just corporate tax on profit/gains or is that UK VAT involves as well.

Back taxes , interest , court costs , fines as ultimately you did not follow the rules clearly marked out on the hmrc websites

 

[Asterion]

Hello Sols,
does all of that matter even if you are a UK resident but not domiciled?
I've been told by somebody working as an international tax advisor that this doesn't apply in the case... Do you know any different?