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Where Taxpayers and Advisers Meet

Tax on offshore company question

eivo14
Posts:8
Joined:Sat Apr 23, 2016 9:23 pm
Tax on offshore company question

Postby eivo14 » Wed Jan 05, 2022 8:06 pm

Hi,

If I am a shareholder of a revenue-generating company (crypto/NFT investing and trading) that is registered in the Cayman Islands, and if there are no dividends paid to myself from that company, would I have any tax liability if I am also a UK resident at the same time?

Theoretically, if the year after I was a non-tax resident in the UK and paid myself a dividend that tax year, I would not owe any tax on the foreign income in the UK, right?

Thanks

AGoodman
Posts:1416
Joined:Fri May 16, 2014 3:47 pm

Re: Tax on offshore company question

Postby AGoodman » Thu Jan 06, 2022 4:11 pm

It all depends how widely held the shares in the company are.

If you set it up (alone or with others) to invest in crypto, there is a strong argument that the transfer of assets abroad legislation applies and the company's income (investment or trading) is attributed to you directly.
If you or other UK residents have a hand in running it or making its investment decisions, there may be an argument that the company is UK tax resident so subject to corporation tax
If it is a widely held fund, then you may be fine and would not be liable for UK tax if you received a dividend in a year you were not UK resident. If it is a "close" company you might also have to stay outside the UK for 5 years to avoid taxation on your return.

darthblingbling
Posts:496
Joined:Wed Aug 02, 2017 9:09 pm

Re: Tax on offshore company question

Postby darthblingbling » Thu Jan 06, 2022 5:51 pm

I think there's also CFC rules that may kick in if the company is resident in a low tax jurisdiction.

eivo14
Posts:8
Joined:Sat Apr 23, 2016 9:23 pm

Re: Tax on offshore company question

Postby eivo14 » Fri Jan 07, 2022 3:44 pm

It all depends how widely held the shares in the company are.

If you set it up (alone or with others) to invest in crypto, there is a strong argument that the transfer of assets abroad legislation applies and the company's income (investment or trading) is attributed to you directly.
If you or other UK residents have a hand in running it or making its investment decisions, there may be an argument that the company is UK tax resident so subject to corporation tax
If it is a widely held fund, then you may be fine and would not be liable for UK tax if you received a dividend in a year you were not UK resident. If it is a "close" company you might also have to stay outside the UK for 5 years to avoid taxation on your return.
Thanks for your help. I've looked into lots of different options and it seems to me that there is no way to really "avoid" it while being a tax resident in the UK, and rightly so...there are anti-avoidance laws in place.

I think the best option for me is to not be a UK resident for the next five years.


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