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Where Taxpayers and Advisers Meet

Taxation rules on offshore companies

JamesB1975
Posts:5
Joined:Tue Apr 25, 2017 10:17 am
Taxation rules on offshore companies

Postby JamesB1975 » Tue Apr 25, 2017 8:19 pm

Hi,
I could use some advise on rules in regards to companies registered offshore.

If a company was registered in Dubai and was completely based in Dubai. And is entirely online based taking payments online for a service from users not just in the Uk but across the globe. Where would I stand in the UK in regards to corporation tax?

I am a UK citizen however I have been advised to appoint a nominee director and shareholder if I was to open this business by a Dubai firm. I would like to know if this is legal.

Due to being entirely based in Dubai would I not pay corporation tax?

Would I only pay income tax on money I take from the business and send to myself in the UK?


Thanks

James

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Taxation rules on offshore companies

Postby maths » Tue Apr 25, 2017 10:23 pm

If you are both UK domiciled and UK resident then simply setting up a Dubai registered company with local nominee directors will not "work" for UK tax purposes. A number of anti-avoidance provisions would apply making the structure UK tax inefficient.

UK tax advice from a Dubai based firm needs to be considered very carefully.

JamesB1975
Posts:5
Joined:Tue Apr 25, 2017 10:17 am

Re: Taxation rules on offshore companies

Postby JamesB1975 » Tue Apr 25, 2017 10:43 pm

I'm not too sure as to what you mean by uk domiciled.

I have residency of the UAE and also the UK. I will be conducting the business in the UAE. I will travel to the UAE whenever I need to conduct business.

As a Dubai resident and a Dubai company I would be liable for Dubai taxes. Surely double taxation would stop me being taxed again in the UK?

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Taxation rules on offshore companies

Postby maths » Wed Apr 26, 2017 3:22 pm

I'm not too sure as to what you mean by uk domiciled.
Are you a national of the UAE or UK?

Where do you live most of the year?

Do you have a spouse/children in which case where do they live?

JamesB1975
Posts:5
Joined:Tue Apr 25, 2017 10:17 am

Re: Taxation rules on offshore companies

Postby JamesB1975 » Wed Apr 26, 2017 5:56 pm

I spend most of my time in uk I suppose.

I am a uk national since birth I believe

No wife no children.

The advisor said he could set up a nominee service so that for all intensive purposes the company isn't mine so I wouldn't be taxed.

Struggling to find an account in UK to confirm if this is legal or not

Thanks

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Taxation rules on offshore companies

Postby maths » Wed Apr 26, 2017 6:37 pm

Prima facie, you are both UK domiciled and UK resident. Most of the UK's anti-avoidance provisions will apply to you.

My first post stands.

You say:
The advisor said he could set up a nominee service so that for all intensive purposes the company isn't mine so I wouldn't be taxed.
This is a common comment made by those in the offshore tax industry and is meaningless and will not allow you to achieve UK tax efficient planning.
To pretend, as suggested, that although it's your company nominees will be interposed to hide your ownership amounts to fraud for UK tax purposes (let alone any Money Laundering issues).

JamesB1975
Posts:5
Joined:Tue Apr 25, 2017 10:17 am

Re: Taxation rules on offshore companies

Postby JamesB1975 » Wed Apr 26, 2017 9:26 pm

Thanks for providing your input I appreciate it.

As I said I havnt set up any companies yet I wanted to check what they were saying.

What I'm confused about though is that they told me that I am a UAE resident and therefore liable to their taxation system and pay tax there.

They said due to double taxation laws I would not be asked to pay tax again on income already taxed in UAE.

Surely at some point the company must be considered completely in the UAE And not taxed in UK?

I mean if I spent my whole year in the UAE And I didn't even trade with the UK at all would I still be charged UK tax even though I havnt done any business with the UK at all?

Thanks

AnthonyR
Posts:322
Joined:Wed Feb 08, 2017 2:33 pm

Re: Taxation rules on offshore companies

Postby AnthonyR » Thu Apr 27, 2017 10:51 am


I mean if I spent my whole year in the UAE And I didn't even trade with the UK at all would I still be charged UK tax even though I havnt done any business with the UK at all?

Thanks
2 posts ago you said you spend most of the time in the UK.

If you move to Dubai and run the business entirely from Dubai then there are no issues, but that doesn't seem to be the case here?

The question is where the company's central management and control is based. If you are the management and control and you are in the UK the company is (for tax purposes) in the UK. If you are based in Dubai then the company is based in Dubai for tax purposes and not subject to UK tax.

Unfortunately we see this regularly that offshore company formations agencies will say that you can simply appoint a nominee director offshore and the company is magically free from tax. HMRC see through this and have done so for a long time. As Maths mentioned, at that point you are evading tax that should be paid in the UK and committing fraud.
Anthony Rogers LLB CTA TEP
Fusion Partners LLP
anthony@fusionpartners.co.uk

JamesB1975
Posts:5
Joined:Tue Apr 25, 2017 10:17 am

Re: Taxation rules on offshore companies

Postby JamesB1975 » Thu Apr 27, 2017 12:01 pm

Thanks for explaining.

The reason I ask is because I havnt even set up a company yet it was only opening a company advice.

I currently live in uk however I have no family ties here so options are available.

It does seem strange how they are advising these nominee accounts then according to them there would be no paperwork stating I own it so they can't tax me.

I thought things like this were not allowed anymore. Thought they were clamping down on anonymous banking and KYC rules prevented it yet they are opening advising people do it.

It's a good job I came looking for second opinions

AnthonyR
Posts:322
Joined:Wed Feb 08, 2017 2:33 pm

Re: Taxation rules on offshore companies

Postby AnthonyR » Sat Apr 29, 2017 2:28 pm

The problems with a lot of offshore agents that:

1. They probably state somewhere in the T&Cs that they aren't providing any advice, they are just making an application to the local company registry on your behalf.
2. It's your responsibility to disclose and declare the tax as the ultimate beneficial owner
3. For years people "got away" with running offshore companies and not declaring tax due to the lack of transparency and reporting.

However, international agreements mean that there is far more information exchange these days and my advice to clients nowadays is that if you set up an offshore company and any money comes to the UK HMRC will spot it as some point. Even if you hold the funds offshore for ever more there may be official disclosures, or whistleblowing (see Mossack Fonseca) which brings you to the attention of HMRC - at which point they will aggressively pursue you.

However, not all the agents are "bad guys" just the good ones will make it clear that you need to take specific tax and legal advice...
Anthony Rogers LLB CTA TEP
Fusion Partners LLP
anthony@fusionpartners.co.uk


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