Question When is offshore worth it?

[TinyTim]

Hi all,

When would you consider an offshore company worth it?

I have a profit of £300k a year in my uk Ltd. At 19% corp now, and then my own tax - I dream of an offshore setup where my £300k sits each year in an offshore bank, with no tax - and only paying tax on the money I bring back into the uk.

I’m scared approaching an offshore accountants would laugh at me trying to pay less tax on £300k a year.

What do you think?

Just to add… all my income comes from Ireland google YouTube

 

[KDX]

Hi all,

When would you consider an offshore company worth it?

I have a profit of £300k a year in my uk Ltd. At 19% corp now, and then my own tax - I dream of an offshore setup where my £300k sits each year in an offshore bank, with no tax - and only paying tax on the money I bring back into the uk.

I’m scared approaching an offshore accountants would laugh at me trying to pay less tax on £300k a year.

What do you think?

Just to add… all my income comes from Ireland google YouTube

You will need to relocate/make lots of substance offshore to be able to do this.

Familiarize yourself with terms like:

Permanent Establishment, Tax residency, Economic substance, AEOI & CRS, UBO

However, your activity if it's only YouTube, not sure but, it could be easier to structure e.g. you produce for a salary and the company retains all income from the video, but then again, it's not easy anymore in 2022, the HMRC will be on your a*s as soon as they catch on

 

[CaptK]

Ok so the numbers need to be worth it but this is dependent on your sector of business.

Set up about £10K and renewal cost about £6K. If we take a UAE structure with substance and staff it would cost you about £30-40K to run. Competent staff members who can actually do the business.

You can do it for a little less but I would factor this as a decent structure. Ideally budget £60K per year on average from my experience.

You would then pay yourself a salary and keep the rest of the profit in the company, ideally invest in something low risk.

So if you calculate the tax against the structure you can make an informed decision

 

[Sols]

Are the costs of relocating to a tax haven less than the difference between your current taxes and the taxes (if any) payable in your new home? Then it's worth relocating. Factor in the costs of the relocation and changes in costs of living, and of course whether it's at all feasible. Note that in this case, you could be looking at removal or reduction of corporate tax and personal taxes.

If you don't plan to or can't relocate, the question becomes: are the costs of setting up a sophisticated structure less than the potential tax savings? This is harder to calculate but I would estimate that for 300,000 GBP/year it would not be worth it. Attorney fees, administration fees, and salaries to overseas workers (to establish exclusive tax residence and permanent establishment there) will likely approach the 19% out of 300,000 GBP you're currently paying in corporate tax. This doesn't work if you keep doing the actual business activities in UK, as the HMRC will consider the company UK tax resident wholly or partly.

Finally, no one is going to laugh at you if you speak with tax advisers with an income of 300,000 GBP. OK, maybe in Monaco but elsewhere no.

 

[gh71]

If I were you and didn’t want to leave the country, I’d keep the money in the UK company and pay myself a tax efficient salary/dividend of 50K (basic rate tax) or 100K if needed (before personal allowance gets reduced). If YouTube revenue dries up you will be able to continue paying yourself 50K yearly from the company retained profits with little tax. On the other hand, if your revenue increases and personal circumstances allow, it might be time to consider a change of residency and become non resident for tax in the UK. You should then be able to use a US LLC for YouTube revenue as an example.

 

[CyprusLawyer101]

Where is your current tax resodency?
You could transfer your operation into a Cyprus company and under certain circumstances reduce your efffective tax rate to 7-8% or similar. Take some profit or salary and have the rest remaining and sitting into your account or investdd in a low risk prtoflio of stocks and bonds which would be subject to 0% tax in capital gains.