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Where Taxpayers and Advisers Meet

UK company owned by Swiss Holding for tax avoidance purposes

monkeytennis
Posts: 5
Joined: Wed Aug 06, 2008 4:09 pm

UK company owned by Swiss Holding for tax avoidance purposes

Postby monkeytennis » Wed Nov 05, 2008 5:58 pm

Hello, I operate a ltd company that employs only myself - I am an IT contractor and this is a standard setup.
I am interested in setting up a swiss holding company which would then own the UK company.

The Swiss Holding co would then charge the UK company for use of its IP or anything really - the idea being to ensure there is no profit in the UK company and hence no corp tax. The Swiss HC would pay corp tax on its profits in Switz

After money has built up in the Swiss company I was planning to become swiss resident for tax purposes and close the company up - I assume these gains are classified as Capital Gains and as such Switz has no CGT on such earnings.

A few questions:

Is this setup feasible? I feel I may have missed something important

Can the swiss holding co buy shares of the existing UK Co to hold it - or does a new UK co need to be set up and owned by the Swiss HC.

Is swiss tax resisdency really as simple as having a work permit for Switzerland? (as I have read).

My current accountant is UK based and not particulary helpful with international matters.

Thanks for any help!

robbob
Posts: 2842
Joined: Wed Aug 06, 2008 4:01 pm

Re: UK company owned by Swiss Holding for tax avoidance purposes

Postby robbob » Wed Nov 05, 2008 6:33 pm

Hi monkey

Are you expecting to claim corporation tax deduction for these made up expenses from the swiss company? They sound a bit artificial in nature to me.

monkeytennis
Posts: 5
Joined: Wed Aug 06, 2008 4:09 pm

Re: UK company owned by Swiss Holding for tax avoidance purposes

Postby monkeytennis » Wed Nov 05, 2008 7:50 pm

Hi robbob,

Yes they are artifial - they exist only to move the money from England to Switz without paying tax.

I'm wondering if they are defensible from a kind of caveat emptor perspective. Surely my UK co can pay whatever it likes for IP, Training courses, Trademarks, from the Swiss Co.

Please note: this is only a hypothetical question - I'm interested in the probabilities and pitfalls of the whole process.

TN
Posts: 297
Joined: Wed Aug 06, 2008 4:09 pm

Re: UK company owned by Swiss Holding for tax avoidance purposes

Postby TN » Thu Nov 06, 2008 5:21 pm

You will be taxable on the income of the Swiss company under s720 ITA if you divert income to an offshore person which you can benefit from. You should get a credit for the swiss tax paid, but effectively you're still paying 40% tax on the income.

When you come to wind up the company, if you are not UK resident then you won't have a UK CGT charge. But you will have to stay non-resident for 5 complete tax years. I believe that Swiss tax residency is reasonably straightforward if you can get a work permit over there. Of course, you would need to lose your UK residency as well which could be the difficult bit.

JSK TAXATION
Posts: 200
Joined: Wed Aug 06, 2008 2:18 pm

Re: UK company owned by Swiss Holding for tax avoidance purposes

Postby JSK TAXATION » Fri Nov 07, 2008 10:38 am

Monkey,

TN is correct in a general sense i.e. that on the basis that your proposed arrangements are wholly artificial, they are very likely to be caught by the various UK anti-avoidance codes.

Nevertheless the type of structure you propose is being used all the time in situations where it is not caught by s720 et seq. either because it has passed the 'motive' test, or because it was structured correctly in other ways or because the asset is being transferred to another EU member state and is thus likely to be protected under Article 43 or 56 of the EU Treaty.

If you are prepared to invest the time and cost of taking proper advice, then it may be possible to achieve the desired aim. But, otherwise you maybe heading for stormy waters.

Kindest regards,
John S King
Chartered Tax Adviser
e: help@taxation-advice.com
w: http://www.taxation-advice.com
01732 897850

monkeytennis
Posts: 5
Joined: Wed Aug 06, 2008 4:09 pm

Re: UK company owned by Swiss Holding for tax avoidance purposes

Postby monkeytennis » Fri Nov 07, 2008 12:32 pm

Thanks for all your advice so far guys.

Many websites offer a service to setup a swiss holding company through a lawyer in Switzerland - ensuring your name is not on the articles of association (or whatever the swiss equivalent is).

Therefore if assets go from my UK Co to a Swiss holding company without my name on - or any connection to me - then surely I wouldn't be see to be benefiting?

Anyway I'll do some more reading... Cheers


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