Avoiding Tax by Moving Country?

bobwilson

TrickyDicky101 wrote: »

There is NO marginal rate of tax on dividend income for BASIC rate taxpayers - there is a 25% Marginal rate of (income) tax for 40% taxpayers. Hence, in the hands of a basic rate taxpayer, receipt of a dividend is tax efficient since there is no further tax to pay on the dividend received.

huh? speak english boy

do you mean basic rate tax payers don't pay tax on dividends?

John_Pierpoint

Yes that is right the company has already or will have paid its income/profit tax called Corporation Tax.

bobwilson

John_Pierpoint wrote: »

Yes that is right the company has already or will have paid its income/profit tax called Corporation Tax.

I know that already, but what if the company is in a country with no corporation tax? Such as isle of man.. it won't have to pay corporation tax then.

John_Pierpoint

But then you will be getting an untaxed foreign dividend?

bobwilson

John_Pierpoint wrote: »

But then you will be getting an untaxed foreign dividend?

No. Dividends you receive in UK are taxed in UK. You can receive up to £35,000 almost tax-free, the rest are taxed at UK dividend rates. You're benefiting from no corporation tax in Isle of Man, which reduces your tax liability massively.

heretolearn_2

If you become VAT registered then VAT ceases to be an expense for the business as you reclaim it.

The problem with the idea of moving to a tax haven is that generally they are only interested in letting the higher flyers immigrate. The flaw in your 'plan' is that you might want to go and move everything to another country, but that country might not want you. You've only got the right to do this within the EU. Everywhere else is going to want a visa for permanent settlement. Also, tax havens tend to be very expensive places to live.

Although I do know someone who runs his business in the UK from thailand. Still pays UK tax but what's left goes a lot further over there.

antrobus

bobwilson wrote: »

No. Dividends you receive in UK are taxed in UK. You can receive up to £35,000 almost tax-free, the rest are taxed at UK dividend rates. You're benefiting from no corporation tax in Isle of Man, which reduces your tax liability massively.

I believe that the taxation of dividend income received from a Manx registered company might be a little less straightforward than you think it is. You might want to read up what it says in the UK-IOM double tax treaty and research the changes announced in 2009 and what they have to say about 'tax havens'.

In any case, setting up a company in the IOM will have little effect on your overall tax position if the business itself remains in the UK and subject to UK Corporation tax.

bobwilson

heretolearn wrote: »

If you become VAT registered then VAT ceases to be an expense for the business as you reclaim it.

Not if you don't need to buy anything.

bobwilson

heretolearn wrote: »

The problem with the idea of moving to a tax haven is that generally they are only interested in letting the higher flyers immigrate.

Can you show us some specific examples of this? This thread isn't really about generalizations, it's more about specifics. Anyone in the EU can get into Andorra for example.

heretolearn wrote: »

The flaw in your 'plan' is that you might want to go and move everything to another country, but that country might not want you.

That's not a flaw in a plan, since if that were true the plan wouldn't get started in the first place. Not all tax havens are so discriminating, unless you have a criminal record which most people don't need to worry about.

Philisophical discussions about generalities of tax havens aren't really of use; tax planning is all about specifics.

All the best,

bobwilson

antrobus wrote: »

I believe that the taxation of dividend income received from a Manx registered company might be a little less straightforward than you think it is. You might want to read up what it says in the UK-IOM double tax treaty and research the changes announced in 2009 and what they have to say about 'tax havens'.

In any case, setting up a company in the IOM will have little effect on your overall tax position if the business itself remains in the UK and subject to UK Corporation tax.

In fact I have checked the UK regs on foreign dividends; if you're resident in UK, they're treated the same as UK dividends in terms of tax purposes.

If you register your Ltd. business in IOM, it will be resident in the IOM, not the UK.

However, I have come across regs that state you have to be a natural person in order to register an Ltd. in IOM. That basically means you need to be of IOM citizenship. I'm not sure how you would attain that, and rather than look that up I'm looking for other options now.

I'm learning that most people on these forums don't really know much detail about off-shore tax planning, which is a surprise for me, on moneysaving forums. I'm looking for some specialist off-shore tax advisors now and will let everyone know what I decide to do. It will be useful for many other people on these forums who run e-businesses.

Cheers