Offshore tax haven - good idea?

jimpix12

Hi all. I've been self-employed for 5 years and about 12 months ago my business changed direction and really took off. I've had the same accountant for the past few years when I was grossing around £30k a year. In the past year my income has, thankfully, gone upwards by a large margin and I'm now looking to change accountants.

I've recently registered a UK LTD company for the new business where I'm sole director. My current accountant's knowledge pretty much ends here - I'd like to incorporate the firm overseas in order to cut down on corporation tax liabilities. Does anyone have any advice please on finding an accountant that would be able to assist with this? It would appear it's quite specialist.

Or, I wonder if I am just wasting my time in trying to find a specialist; wouldn't it just be a case of scribbling "£0" in the coproration tax liabilities box (as it'd be overseas so no filing would be necessary), meaning I could stick with my current accountant anyhow?

In advance, I'll admit I know very little about taxation.... :rotfl:Anyone ever done this?

TM1976

Where do you do business?

If your business is actually in the UK you are still liable for UK corporation tax regardless of where you incorporate.

NiceGuyEddie_2

Change your accountant! Find a different firm, with specialist tax accountants who should preferably be chartered tax advisors.

Get a free consultation with them to set out the position you ideally want to be in. They're unlikely to offer you actual advice until you're engaged with them, but you should know after this initial meeting whether you can proceed with them.

jimpix12

It's an internet-based business with clients from many countries, mainly Western Europe and USA. My understanding was that it was the location of the customers which dictates whether you're liable to pay corptax or not. I'd say about 5-7% of the orders are from the UK, at a guess (ballpark figure on that would be £4-5k in pre-tax profit from the UK then - is there any sort of threshold?). I run the business from home and use an Eastern European outsourcing firm so don't have any UK staff - but am looking at office space in the New Year - is that relevant?

I looked around at accountants before settling on my current one - they were all pretty, ahem, drab and uninterested. Perhaps I'm underestimating them but the chances of these firms helping with offshore tax issues seem rather slim...

TM1976

A internet based business could be offshored but the key is the business does actually have to be run from somewhere else so you would probably have to relocate with the business.

It's not enough to simply incorporate the business in another country (UK) corporate tax legislation would still tax you if the business was run from the UK.

mrkbrrws

but am looking at office space in the New Year - is that relevant?

Yes, if you manage the company from the UK, it is UK resident and subject to UK Corporation Tax.

If you are intending to set up your office overseas, then you may be able to do something about UK Corporation Tax, but I don't think this is your intention?

jimpix12

I'd be happy to set up a "virtual office" and incorporate the business in a new country, assuming I would not have to actually relocate. Is there any requirement to actually spend X amount of time in the country?

NiceGuyEddie_2

Whereabouts in the UK are you based? I could recommend a few firms who'd be more geared up to dealing with tax planning in a proactive manner, rather than just sitting back and letting the client come up with the initiative as you've encountered.

As has been said by other posters, I can't see how you would escape corp. tax in the UK from the information you've provided above. The decision making, the managing that you're doing, is all based in the UK.

However, if you find a tax specialist that you like, they'll more than likely be able to advise you about the best way to manage your tax, given that it sounds like your current accountant has been a bit rubbish at doing this.

jimpix12

Thanks NiceGuyEddie, I am based in Kent.

I'd ideally like to discuss with an accountant the pros and cons of owning a UK Ltd Company as well as right now I see little benefit besides limited liability.

Rolo_Tomasi

If you are the sole director/shareholder and you remain a UK resident then the company will be subject to UK corporation tax no matter where it is located.

jimpix12

Oh, that is annoying. I had hoped it would be easier to avoid.;)

The thing I'm struggling to understand is why anyone in my position would form a Ltd Company and then pay income tax + corporation tax (40% + 21% in my case) versus just paying the 40% as a sole trader. Even if you go down the dividends route it works out less cost-effective still.

(I appreciate these are crude figures- but again would like to discuss this with someone suitably qualified). I have just made contact with a firm suggested over PM - thanks!