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Where Taxpayers and Advisers Meet

Setting up a company that is owned by offshore company

Taxhelp101
Posts:5
Joined:Sat Jan 13, 2018 1:18 am
Setting up a company that is owned by offshore company

Postby Taxhelp101 » Sat Jan 13, 2018 1:27 am

I have a family member abroad who wants to setup an investment company that invests all of their profits in the USA.

It would be registered in Delaware and all of its money would be controlled by my family member and invested. I would be the shareholder however I would have no control over the decision making and the decision making would be entirely in the state of delaware.

Now, my friend has given me an idea on setting up a company in the UK and would help me run this company. The company in the UK would be owned by the parent company in Delaware.

I am aware of the anti avoidance measures however I believe due to the fact that my family member is not a tax resident of the UK permanently lives abroad and will be making the investment decisions for the company would this be a legal structure for the profits of the UK company to be transferred to the investment company as an expense for consulting and running the UK company - I could take my wage out of the UK company before the profits are sent to Delaware or I could take a wage from the parent company which would be better?

I am hoping to find an accountant who specialise in this area but could use some initial advice

Thanks

GlobalTaxAdviser
Posts:633
Joined:Fri Dec 05, 2014 1:18 am

Re: Setting up a company that is owned by offshore company

Postby GlobalTaxAdviser » Sun Jan 14, 2018 12:44 pm

Hi

If the company in the UK is owned by the US Company then its dividends that would need to to be paid to the US Company.

The US company would then distribute dividends to its shareholders. Any dividends or Salary paid to you will be taxed in the UK since you are resident here.

Please note Once profit is calculated and corporation tax paid - any remaining amount will be considered distributable reserves which can be paid out as dividends.

Kind Regards

GTA

Taxhelp101
Posts:5
Joined:Sat Jan 13, 2018 1:18 am

Re: Setting up a company that is owned by offshore company

Postby Taxhelp101 » Sun Jan 14, 2018 7:14 pm

Wouldn't the US Company be able to charge the UK company a fee so that the profits are transferred before corporation tax is paid on the UK company so that the UK company pays 0 corporation tax?

Taxhelp101
Posts:5
Joined:Sat Jan 13, 2018 1:18 am

Re: Setting up a company that is owned by offshore company

Postby Taxhelp101 » Sun Jan 14, 2018 7:16 pm

I will pay tax on all my personal income coming directly to me but from what I've read I thought the uk company would pay the US company it's profits as an expense before corporation tax is paid

GlobalTaxAdviser
Posts:633
Joined:Fri Dec 05, 2014 1:18 am

Re: Setting up a company that is owned by offshore company

Postby GlobalTaxAdviser » Sun Jan 14, 2018 8:05 pm

Hi

The US company can invoice the UK company for services. Again it needs to be Reasonable and cannot be used to evade tax in the UK

Kind Regards

GTA

GlobalTaxAdviser
Posts:633
Joined:Fri Dec 05, 2014 1:18 am

Re: Setting up a company that is owned by offshore company

Postby GlobalTaxAdviser » Sun Jan 14, 2018 8:20 pm

Hi

I would also calculate with the federal tax rate would still make it tax efficient to put all the profits through the US Company.

Kind Regards

GTA

Taxhelp101
Posts:5
Joined:Sat Jan 13, 2018 1:18 am

Re: Setting up a company that is owned by offshore company

Postby Taxhelp101 » Sun Jan 14, 2018 8:42 pm

I believe the tax rate is 0 for a Delaware IBC.

I'm looking into getting advice

Could the parent company be used to buy stock so for example usually the UK company would buy stock for 20,000

Could the parent company buy stock for 20,000 and then invoice the UK company 30,000 for the work and sourcing?

GlobalTaxAdviser
Posts:633
Joined:Fri Dec 05, 2014 1:18 am

Re: Setting up a company that is owned by offshore company

Postby GlobalTaxAdviser » Mon Jan 15, 2018 12:27 am

I thought the state taxes was 8.7% and then federal taxes too to contend with which are rather high

There has to be some tangible services rendered for inter company recharging. Share Capital is irrelevant

Kind Regards

GTA

Taxhelp101
Posts:5
Joined:Sat Jan 13, 2018 1:18 am

Re: Setting up a company that is owned by offshore company

Postby Taxhelp101 » Mon Jan 15, 2018 12:33 am

From what I understand a delaware IBC as long as no actual trading happens within USA there's no federal or state taxes on the company.

What sort of tangible services would a parent company be able to provide to the UK company in this way?

I assume from what I've said the question of the residency of the company is concrete in that HMRC won't be able to say it's UK resident based on the fact that it's ran by a director that is a resident and domiciled in the USA?

GlobalTaxAdviser
Posts:633
Joined:Fri Dec 05, 2014 1:18 am

Re: Setting up a company that is owned by offshore company

Postby GlobalTaxAdviser » Mon Jan 15, 2018 12:59 pm

Hi

What I meant there has to be genuine service rendered by the US company it could be management charges, marketing, recruitment whatever. The US company cannot be use as a vehicle to avoid tax.

Yes you are correct if there is a director in the US and the company in the US is run by the management team over there then should be perfectly fine. There should not be any tax exposure for yourself.

Remember any money that comes to you as a shareholder or employee will be taxed in the UK. You will need to work out the most tax efficient method without failing foul of the tax authorities in the US and UK.

Kind Regards

GTA


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