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Could setting up a UK Company benefit you?

Setting up a UK Company could save you hundreds of thousands of €'s annually.

Setting up an AGENCY COMPANY could benefit you...

  1. Where there is movement of goods or provision of services across international borders.
  2. Where such movement will result in significant gross profit.
  3. Where such profit would be subject to high amounts of taxation.
  4. Where there is a desire to save the major portion of such tax.

Setting up a HOLDING COMPANY could benefit you...

  1. Where an investment in a trading company is proposed.
  2. Where the investment will result in either (or both of):
    • A significant dividend flow, and/or
    • A significant increase in the value of the investment
  3. Where the total taxation in the investing country, both for the company and for the owners, is relatively high.
  4. Where the potential capital gains tax on sale of the investment is significant

The advantages of setting up a UK company fast cheap & easy to set up

  • UK companies are quick to form (24 hours once due diligence is completed);
  • UK companies are cheap to form (cost a few hundred £’s & £1 share capital);
  • Unless turnover or assets or employees are large ... no audit required.

Significant tax savings

  • UK corporation tax:
    • 21% on profits £0 - £300,000 (reducing to 20% from 1st April 2011 and a further 1% every year to 2014-15)
    • 28% on profits £1.5m & upwards (reducing to 27% from 1st April 2011 and a further 1% every year to 2014-15)
  • Largest double tax treaty network in the world

Specific holding company advantages

  • For EU subsidiaries - no withholding tax on dividends paid up to UK Holding Company
  • Generally no UK corporation tax dividends received by UK holding company.
  • In the UK, there is no withholding tax on dividends paid to anywhere in the world, even to a trust, tax haven holding company or foundation/anstalt.
  • On sale of the subsidiary, there will be no UK Capital Gains Tax if:
    • The holding in the subsidiary is at least 10%, and
    • The shares in the subsidiary have been held for at least 12 months in the 2 years prior to sale, and
    • The holding company is a trading company, or part of a trading group.
  • The UK has significant fiscal respectability among most nations’ tax authorities and is not perceived to have the “smell” of a tax planning device.

The advantages of setting up a UK agency (or Nominee) companies

Major Advantages

  • Only the UK Company is visible to the outside world, hence commercial and fiscal respectability
  • The beneficial owners are free to deal with the Offshore Company’s income as they wish
  • The overall effective tax rate suffered will almost certainly be something less than 1%

In this scenario, a UK Company acts as an Agent/Nominee for an Offshore Company (any non-taxed offshore company will work).

The two companies enter into an agreement whereby:

  • say 95% of income belongs to Offshore Company
  • the UK Company retains 5% as an agency fee
  • The UK Company contracts, in its name only, on behalf of the Offshore Company
  • The UK Company prepares all invoices in its name
  • UK Company receives the income into a bank account in its name
  • The UK Company then splits off 95% of the income to the Offshore Company
  • The UK Company retains its 5% fee and is taxed on this part only, less its running costs

The following areas are critical:

  • The agreement
  • Banking arrangements
  • Ownership of the companies
  • Directorships of the companies

Contact us to find out how setting up a UK company could save you money.

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We are a member firm of the Institute of Chartered Accountants of England & Wales (ICAEW). Registered to carry on audit work in the UK and Ireland. Our Insurer is Manchester Underwriting Management, Centennium Court/East St, Chesham HP5 1DG (worldwide, excluding North America). Also an independent member of GGI, a multidisciplinary worldwide association of accountants, tax consultants & solicitors.