Depending on the where this can be very easy indeed ,but don't forget that you still have to consider the local taxation structure and annual accounting costs although the latter don't have to be that significant ..to me the over riding consideration should be forward planning to ensure you do not repatriate profits from such a vehicle back into the UK and get sledgehammered for doing so. That means paying close attention to what you drawdown in current salary terms and in the future where you intend to be resident. Hope that gives you some lines of thought to follow through with.
donaldduke
Experienced member
- Messages
- 1,665
- Likes
- 259
spc,
Do you really need an offshore company?
If you swing trade or trade long term you can just spread bet, its tax free.
You only need an offshore company for daytrading stocks or futures as this is not viable via SB.
I plan to start an Offshore company some day but first i have to make an enough money for it to be
worthwhile (over a 100K a year in my opinion).
Do you really need an offshore company?
If you swing trade or trade long term you can just spread bet, its tax free.
You only need an offshore company for daytrading stocks or futures as this is not viable via SB.
I plan to start an Offshore company some day but first i have to make an enough money for it to be
worthwhile (over a 100K a year in my opinion).
Unless you are making in excess of £50,000 a year it is not worth the hassle, besides, you can do your trading via a spreadbetting company. Before you pay tax on the profits made on non spreadbet trades, you have your capital gains allowance and other things that you can claim; this all adds up to a few thousand pounds.
SPC,
Assuming you are Uk resident for tax you will be subject to the usual suspects for income (call it what you will salary/management fee), but the issue will be if you are fortunate enough to roll up profits in your offshore how do you intend to realise these at a future point in time.... are you going to take them has dividends , capital gain on winding up ? etc etc .... how then will these be treated in whichever host country you are in at the time is the major issue ? It is not that this type of arrangement is necessarily an hassle it is however something that should be undertaken according to a plan which accounts for the taxation issues ...
Assuming you are Uk resident for tax you will be subject to the usual suspects for income (call it what you will salary/management fee), but the issue will be if you are fortunate enough to roll up profits in your offshore how do you intend to realise these at a future point in time.... are you going to take them has dividends , capital gain on winding up ? etc etc .... how then will these be treated in whichever host country you are in at the time is the major issue ? It is not that this type of arrangement is necessarily an hassle it is however something that should be undertaken according to a plan which accounts for the taxation issues ...
I don't know much in this area but I'm sure the Inland Revenue would be very interested in knowing WHERE the trades are planned and executed.
If done onshore then you may well find you're in for a nasty shock even if you bring no profits back to the country. Remember they aren't fools and unless you take very solid advice which is usually very expensive it's not worth it.
Donald Duke - Yes, I think using spread bets to trade longer term is the correct way to do it.
If done onshore then you may well find you're in for a nasty shock even if you bring no profits back to the country. Remember they aren't fools and unless you take very solid advice which is usually very expensive it's not worth it.
Donald Duke - Yes, I think using spread bets to trade longer term is the correct way to do it.
Anley,
the principle of the Ltd company is that it is a separate legal entity to the the individual(s) who own it and as such if it is the Ltd company that is responsible for the trading activity then it is the Ltd company that is liable for the corporate taxation that arises from that activity.
the principle of the Ltd company is that it is a separate legal entity to the the individual(s) who own it and as such if it is the Ltd company that is responsible for the trading activity then it is the Ltd company that is liable for the corporate taxation that arises from that activity.
No need to worry about where the trades are placed or executed it is the company's domicile that matters as far as the Inland Revenue are concerned. The Inland Revenue will only charge tax on money that is brought back to the UK in the form of dividends or wages/fees (they all have different tax rates). As long as the profits remain outside the UK you only have to pay taxes in the country that the company is registered in. In most cases, this would be nil and the only thing you will need to worry about is filing the annual returns.
Thinking of bringing the money back to the UK, what for? To buy a house? Not a problem, the company buys the house and you live in it as a tenant paying rent. No tax. Buying a car? Same scenario but slightly different.
Regardless of how nice this all seems, we must remember that it is the level of profits that determine the route one needs to go down otherwise, you will only end up lining the pockets of legal and financial advisers.
Thinking of bringing the money back to the UK, what for? To buy a house? Not a problem, the company buys the house and you live in it as a tenant paying rent. No tax. Buying a car? Same scenario but slightly different.
Regardless of how nice this all seems, we must remember that it is the level of profits that determine the route one needs to go down otherwise, you will only end up lining the pockets of legal and financial advisers.
donaldduke
Experienced member
- Messages
- 1,665
- Likes
- 259
chump,
Its not that simple, the IR has powers to tax Ltd companies like individuals, have you heard of IR35??
However if you have an offshore company that doesnt do any business in the UK (i only trade futures in
the US), then the inland revenue wont have a leg to stand on.
Its not that simple, the IR has powers to tax Ltd companies like individuals, have you heard of IR35??
However if you have an offshore company that doesnt do any business in the UK (i only trade futures in
the US), then the inland revenue wont have a leg to stand on.
TheBramble
Legendary member
- Messages
- 8,394
- Likes
- 1,170
Not so. The IR has a list of offshore banks (and I mean Ch. Islands, IOM etc - not BVI etc.) that they are alerted to when any UK domiciled entity (individual or corporate entity) opens an account.donaldduke said:
No I am not going to say which banks.
This is nothing to do with IR35 which relates to self-governed or client-governed work.
If you live in the UK and are domiciled here, opening an offshore account/company is going to draw attention TO YOU.
Stick to the rules. It ain't worth it.
LOL...So many 'experts'....... IR35 applies to your activity if you own more than 5% of the equity of a UK Ltd company AND if your activity meets certain criteria laid down theirin..it's got absolutely nothing to do with the question posited ......... under statutory regulations UK Ltd banks that operate offshore have a mandate to comply with reporting account holders within the UK and have had for a long time , it was also ignored for a long time until The Bank of Ireland broke that precedent..... but you will find most banks operating in those climes are not UK Ltd , they may be called shall we B....lays Int , but you will find that they are separate legal entities to their UK Ltd equivalents and as such they are not bound by the reporting regulations mentioned above...on top of which there are many banks operating there that have no connection whatsoever to do with the UK.... the most crucial issue other than the ones I mentioned in earlier posts do actually concern the place in which the activity takes place in the sense that that activity must not be able to be construed as establishing a presence here in the UK ... if it were construed in that way then it would be invited to set up a bona fide Ltd subsidiary here in the UK upon which corporation tax would be levied.....
What is being proposed here is NOT an illegal activity in its' own right , it only becomes so if it is not planned and executed correctly....
What is being proposed here is NOT an illegal activity in its' own right , it only becomes so if it is not planned and executed correctly....
It is and should be a simple process if you have the basics right, if one is not aware of the full implications it is much better to hire the services of a professional. Their services do not come cheap as this is a specialised area. Very few individuals require offshore companies to limit or eliminate their tax liabilities, there are simpler ways.
Spare a moment to consider the following:
You have made £75,000 profits (after deduction of all expenses etc.) for the financial year ended 5 April 2004, of this the Inland Revenue want 40% (it might not be but, we will assume it is). Your tax bill is £30,000 and assuming your accountant files your Return between August and September 2004, the Inland Revenue will send you a bill within two months. The tax is not paid until 2005; in effect, you have been given an interest free loan by the Inland Revenue. You can either keep the money in the bank or use it to trade etc. pending payment. Let us assume that one chooses to trade with the £30,000 and makes a return of 2.5% (£750) per week on the money; it means that one has doubled the money by the time the payment is due.
On this basis, one would have paid the rather large tax bill without any hassle and made money in the process. Not bad.
Spare a moment to consider the following:
You have made £75,000 profits (after deduction of all expenses etc.) for the financial year ended 5 April 2004, of this the Inland Revenue want 40% (it might not be but, we will assume it is). Your tax bill is £30,000 and assuming your accountant files your Return between August and September 2004, the Inland Revenue will send you a bill within two months. The tax is not paid until 2005; in effect, you have been given an interest free loan by the Inland Revenue. You can either keep the money in the bank or use it to trade etc. pending payment. Let us assume that one chooses to trade with the £30,000 and makes a return of 2.5% (£750) per week on the money; it means that one has doubled the money by the time the payment is due.
On this basis, one would have paid the rather large tax bill without any hassle and made money in the process. Not bad.
donaldduke
Experienced member
- Messages
- 1,665
- Likes
- 259
chump,
The point of quoting IR35 was to show that a Ltd company is not always a seperate entity as you stated.
The point of quoting IR35 was to show that a Ltd company is not always a seperate entity as you stated.
donaldduke
Experienced member
- Messages
- 1,665
- Likes
- 259
TheBramble said:
The bank account is opened by a non UK domiciled entity (the offshore company).
Lion,
in your examination of alternative returns meant to highlight the returns of two different approaches to the tax problem faced you seem to have completely overlooked the fact that the proposed employment of the capital is available to both options onshore and offshore and therefore has no monetary effect whatsoever on the ultimate revenue stream
DD,
The Ltd company is at all times a separate legal identity and IR35 does not overturn that... what IR35 does is to create a particular set of circumstances which when met allows the IRS to tax the individual owning the equity as though the individual and the Ltd company were in fact one and the same. However, the Ltd company is at all times a separate legal identity..
In fairness IR35 is possibly the most misunderstood piece of tax law created in recent years. There are a few IT guys around here so I'll give you a free grasp of the essentials.
The IT industry created quite a few earners who basically made there money working on an hourly/daily basis working for one , or perhaps just two clients.... as a part of this process they were rightly advised to become Ltd , drawdown a modest salary and take the residual through dividends drip fed across tax years.... the biggest impact of this was it took a lot of their earnings outside the National Insurance net...
The IRS was not overjoyed...consequently they argued that the contractual relationship of a person working in the above manner was simply the same as that of an employer and his employee and in that case they argued the 'employee' contractor should be taxed in all respects like the normal 'employee' allowing just a small % of gross billing to cover the cost of running a Ltd company . Their argument brought into play all sorts of issues..such as could the contractor be said to be different from an employee in the sense he could actually make a loss just as he could make a profit.... could the contractor be said to enjoy much more autonomy in the way he carried out his work as opposed to that enjoyed by an employee....could the contractor be said to supply his own tools (computers etc).....could the contractor be said to be supplying a service rather than simply his labour...and this latter one is very important.... and so on and so forth...... it is a real minefield of criteria which are assessable ....... but this does not mean that the Ltd company is not still a separate legal entity to the person who owns the equity....
Cheers
in your examination of alternative returns meant to highlight the returns of two different approaches to the tax problem faced you seem to have completely overlooked the fact that the proposed employment of the capital is available to both options onshore and offshore and therefore has no monetary effect whatsoever on the ultimate revenue stream
DD,
The Ltd company is at all times a separate legal identity and IR35 does not overturn that... what IR35 does is to create a particular set of circumstances which when met allows the IRS to tax the individual owning the equity as though the individual and the Ltd company were in fact one and the same. However, the Ltd company is at all times a separate legal identity..
In fairness IR35 is possibly the most misunderstood piece of tax law created in recent years. There are a few IT guys around here so I'll give you a free grasp of the essentials.
The IT industry created quite a few earners who basically made there money working on an hourly/daily basis working for one , or perhaps just two clients.... as a part of this process they were rightly advised to become Ltd , drawdown a modest salary and take the residual through dividends drip fed across tax years.... the biggest impact of this was it took a lot of their earnings outside the National Insurance net...
The IRS was not overjoyed...consequently they argued that the contractual relationship of a person working in the above manner was simply the same as that of an employer and his employee and in that case they argued the 'employee' contractor should be taxed in all respects like the normal 'employee' allowing just a small % of gross billing to cover the cost of running a Ltd company . Their argument brought into play all sorts of issues..such as could the contractor be said to be different from an employee in the sense he could actually make a loss just as he could make a profit.... could the contractor be said to enjoy much more autonomy in the way he carried out his work as opposed to that enjoyed by an employee....could the contractor be said to supply his own tools (computers etc).....could the contractor be said to be supplying a service rather than simply his labour...and this latter one is very important.... and so on and so forth...... it is a real minefield of criteria which are assessable ....... but this does not mean that the Ltd company is not still a separate legal entity to the person who owns the equity....
Cheers
Well I still say it's not as easy as everyone thinks.
I just can't see how the IR would let someone run a multimillion pound trading and property empire from onshore but keep all the money and profits offshore (only taking a small amount back to live etc).
Surely they'd challenge you that because ALL the business decisions are made onshore you are infact doing business onshore even though the accounts are held offshore.
I just can't see how the IR would let someone run a multimillion pound trading and property empire from onshore but keep all the money and profits offshore (only taking a small amount back to live etc).
Surely they'd challenge you that because ALL the business decisions are made onshore you are infact doing business onshore even though the accounts are held offshore.
"Well I still say it's not as easy as everyone thinks. " .....Anley ,maybe you wish to highlight for me where anyone above has said "it is easy" ? ..... the process of setting up an offshore company can be easy ...the rest has someone kindly pointed out requires specialist experience if you don't wish to 'fall on your face'... and to the rubbernecks waiting to pounce I NO LONGER do this .... I am NOT interested in SELLING my skills.... do NOT pm me ... I am moving to the arctic wastes to ensure all of the above...... LOL ..... multinics chump alias GIZYERMONEY......LUCREPUMP......WATCHYERBACK
