Is this legal? Moving or restarting company abroad.

sarahgd

Hi,
I'm really eager to hear everyones feedback regarding a company structure that has been proposed to me.

Firstly, a bit of background. My husband and I launched an online eccomerce store 3 years ago via a ltd company. Things are going well and we've experienced good growth and are now generating a meaningful profit, I have 2 staff members. We have a small office space where we dispatch all our orders and answer customer queries via phone and email. All our tax affairs are normal inline with most UK small companies.

I'm in the process of looking for an accountant and reviewing our company structure to ensure everything is above board and as tax efficient as possible as we'll be churning out some relatively big profit figures in our next tax year. Like most people we've been affected by Covid19 since March and it's really changed the way we work and to some extent my priorities in life. Since Covid took hold both my husband and I have worked remotely from Europe and it's been a real game changer, being out of the office has been a breath of fresh air and our staff have really taken on the mantle dealing with queries and order fulfilment.

It's been proposed to me that we can restructure our business in a much more tax efficient manor, I've detailed these below:

* Set up a new company (Company A) or move our company to a lower tax jurisdiction, our website is global and we can maintain this from anywhere in the world. Launching new collections, maintaining our social presence. Everything is done remotely via laptops.

* Set up a new UK based company (Company to partner with our existing suppliers and dropship all our orders. Essentially this company will become a supplier to the new "company A" based in a low tax jurisdiction.

In the above scenario we'd benefit from a reduced corporation tax liability for company A. We'd operate Company B as per normal, charging our services to Company A, all payroll and tax would be dealt with as per normal UK guidelines and we'd both collect a nominal salary of circa £12,500 per year. As it's been explained to me this would reduce our current corporation tax and lower our income tax in line with local international rates (we haven't actually agreed upon a location yet).

I'm always cautious with anything tax related and although the above sounds completely legitimate I'd love to hear anyones thoughts? I'm all for lowering our tax if its all legal and above board. The above sounds a bit similar to how some of the big corporations operate and they have faced quite the roasting in recent years.

Many thanks for taking the time to read all the above, I'd be happy to answer any queries of needed. And yes, I'll need to speak with an accountant about this if it's remotely possible.

Sarah
x

bris

This is a bit to complex for this forum, you need expert professional help, you get advice for simple problems on here.

sarahgd

I thought that might be the case, I've got a list of potential accountants to get in touch with. I always like to do my own research though 😂

Mistral001

I am not sure about the TAX situation, but you have to bear in mind, that tax laws change.
Note, dropshipping could cause a few problems.  It was very popular about 10 years ago but not so popular now.  I believe there can be customer service problems with it, e.g. dealing with a customer who gets a faulty item.  

martindow

Mistral001 said:

I am not sure about the TAX situation, but you have to bear in mind, that tax laws change.
Note, dropshipping could cause a few problems.  It was very popular about 10 years ago but not so popular now.  I believe there can be customer service problems with it, e.g. dealing with a customer who gets a faulty item.  

The real problem with dropshipping is that you are reliant on someone outside your control.  If there are problems with quality or speed of dispatching items it is your reputation that suffers.  However, as I read it, the OP is different as they will be using their own company in the UK to fulfil orders.

I wonder whether complex set ups with chains of companies and tax havens that may work for large multi-million Pound companies may not be practical for smaller businesses.

sarahgd

Hi Martin, spot on. We'd effectively be outsourcing it to our own company so completely in control of the situation, in fact no different to how we operate now really.