Use Isle of Man to save on tax?

bobwilson

Anyone ever thought of setting up a Ltd. Company on isle of man to save on tax and living in UK?

I understand they have 0 corp tax. All you'd pay is tax on dividends here in UK.

Or how about moving to Isle of Man? All you pay then is about £1000 fixed rate on whatever you earn ! (10% on £10k, then the rest in zero rated dividends)..

anyone ever thought of doing this?

glider3560

You will need to apply for a work permit before moving to the IoM, unless you are in one of these occupations: doctors, dentists, ministers of religion or the police.

You still have to pay National Insurance too. There is a reciprocal arrangement where NI rates are roughly the same and your record can be transferred from UK to IoM and vice versa.

VAT is also charged at the same rate.

Pennywise

Loads of people have thought about it, but very few are actually willing/able to move there. Just registering a company there doesn't work - the company actually has to trade from there, i.e. be managed there, so unless you're going to pay for a management company to run the business for you, it means you have to go there!

antrobus

And it depends on what kind of business is being conducted through the limited company. You can set up a limited company in any jurisidiction you like, but it can be a lot harder to shift a business. For example, if you're in the business of retailing, then it's pretty difficult to escape paying UK tax on the profits if the retail outlets are actually in the UK.

bobwilson

Pennywise wrote: »

Just registering a company there doesn't work - the company actually has to trade from there, i.e. be managed there, so unless you're going to pay for a management company to run the business for you, it means you have to go there!

Where have you read this?

According to my research, you don't have to manage it from there.

http://www.mn-group.com/iom.htm
DIRECTORS
Private Limited Companies require two directors and they need not reside in the Isle of Man. Corporate bodies are not permitted.
MEETINGS Annual general meetings can be held anywhere in the world.

The isle of man government website does not show any requirements for residency: http://www.gov.im/ded/companies/2006actcompany.xml There is also the option to set up a company on the 1931 act (or 2006 act) which have slightly different regulations.

There is no corporation tax for companies registered at the isle of man: http://www.gov.im/treasury/incometax/sections/business/corporatetaxrates.xml (assuming you're not running a financial or property company)

If you live in Isle of Man, there is also 0% tax on dividend income: http://www.gov.im/treasury/incometax/sections/business/withholdingtax.xml

Pennywise

It's the UK HMRC ruiles you need to look at, not IOM. HMRC will want to tax you and your business profits in the UK, if you reside in the UK and manage your business in the UK. Look at http://en.wikipedia.org/wiki/Controlled_Foreign_Corporation for controlled foreign company rules.

A controlled company is a controlled foreign company if it is tax resident outside the UK and it is subject to a charge to tax less than it would have been were it a UK resident company. This is determined by comparing the actual charge to tax to a corresponding UK tax. In computing the corresponding tax, lower UK rates of tax on small companies are considered.

bobwilson

Pennywise wrote: »

It's the UK HMRC ruiles you need to look at, not IOM. HMRC will want to tax you and your business profits in the UK, if you reside in the UK and manage your business in the UK. Look at http://en.wikipedia.org/wiki/Controlled_Foreign_Corporation for controlled foreign company rules.

Sure, but what if you rent a place on Isle of Man and manage an e-business from there? It can still be managed from there whilst you spend some time in the UK.

HappyMJ

bobwilson wrote: »

Sure, but what if you rent a place on Isle of Man and manage an e-business from there? It can still be managed from there whilst you spend some time in the UK.

Sure....what does it cost to rent a place in the IOM?

youngian

If you are liable for such much tax that you need to think about transferring to the Isle of Man, you've obviously made it big time. Think about boosting your pension to lower your tax liability

olivetti

bobwilson wrote: »

Sure, but what if you rent a place on Isle of Man and manage an e-business from there? It can still be managed from there whilst you spend some time in the UK.

You are missing the point; it is the central control and management location that is the key. If you are the person who runs the company and makes the decisions and you do this in the UK through the auspices of a IoM company at an IoM address then the work is done in the UK as a branch of that IoM company; the IoM company will be liable to to UK tax.

In order for this to work you have to sever all ties with the UK ie. your whole immediate family will need to become IoM resident it is not enough for just you to move and leave your wife and kids in the UK.

If you do this without any real understanding, knowledge or advice it will cost you big time. Offshoring companies that do not fulfil the residence position are fairly easy target to spot and HMRC will eventually be in touch.