Cross Border Trading - Package
Cross Border Trading through a UK Limited Company
A proven route for cross border trading is through a UK Limited Company, who acts as agent for a company in a low-tax jurisdiction. The Principal in a low-tax jurisdiction takes most of the profit, but only trades through its agent - the UK company.
A UK limited company is a normal onshore company, covered by multiple tax treaties. If you are based and trading outside the UK and in a country which has a double tax treaty with the UK, the Cross Border Trading package could mean that you pay minimal tax on a large volume of international trade.
This package is proven - the British tax authorities approve of it as does the US Revenue Service. The British company represents the international trading operation as agent for the company in the low-tax jurisdiction. The ultimate beneficiaries do not figure in any official documents, as nominee directors are responsible for the day-to-day running of the business. The cost of the entire package depends on the choice of low-tax company.
What could be needed
This list can be shortened depending on circumstances
| The offshore company | The UK companyw |
|---|---|
| an offshore company formation | a UK company formation |
| an offshore resident nominee director | a UK resident nominee director |
| registered office facilities | registered office facilities |
| a local tax representative | VAT registration |
| a nominee shareholder | a UK tax representative |
| a Company Secretary |
These are linked by an agency agreement. Should you choose to ask us to draft the agency agreement, this has a minimal cost. As with all our clients, we will guide you through the incorporation steps. You can trade within a few hours as the UK company will be incorporated online.
Advantages
- Ideal for use as a European trading structure where the receipt of invoices from an offshore company would not be acceptable
- Excellent for situations where an onshore profile is required but where offshore tax treatment is desired
- If linked to a discretionary trust this may prove a suitable structure for long term income/inheritance tax planning
- Can be used effectively in VAT triangulation situations
Taxation and Accounts
The UK company pays UK Corporation Tax on its commission although all allowable expenses incurred in carrying out its business will be deducted first. The ultimate success of this type of structure relies on the fact there is no UK source income. This, in conjunction with the fact that the company is being controlled and managed from outside the UK, means that the UK Inland Revenue can only assess the UK company for tax on the fees it earns by way of commission for effecting the business of the offshore company. The payments made to the offshore company by customers are therefore not subject to UK taxes. Usually a commission of between 5% and 10% would be arranged which would mean that, on average, the effective rate of tax would be around 1.2% on a total turnover of £100,000 which would reduce on turnover above this. Annual accounts must be filed which may need to be audited.
Rules of Residency
A company is resident in the UK for the purposes of the Taxes Acts if:
- it is incorporated in the UK (with certain exceptions)
- the central management and control of its business is in the UK
Since 1993 there is an additional requirement for dual resident companies. Where a company is UK resident under either of the above tests but is also resident in the country of a treaty partner, the terms of any company residence tie-breaker in the treaty must be considered.
A company which is resident in the UK should, in practice, be regarded also as ordinarily resident.