UK Agent

Offshore company

An offshore company, often controlled and managed by nominee directors and shareholders, can be used for invoicing goods or services to other companies, but quite often a UK company is interposed between the offshore company and its customers to give an air of respectability.

UK Company

By using a UK registered company, which agrees to transact business on behalf of an offshore company, a structure can be put in place which gives an on-shore profile yet allows the benefits of offshore taxation.

The UK company is formed specifically to operate as a nominee for the offshore company — in effect the UK company acts as a fiduciary or agent for the offshore company. The two companies sign an agreement which specifies the terms of the agreement between them. All business is then conducted in the name of the UK company, but on behalf of the offshore company. The existence of the offshore company behind the UK company need not be apparent to customers; as far as they are concerned all they will see is the UK company.

The customer enters into a contract with the UK company, is invoiced by them and pays the invoices into the bank account of the UK company. Income is then remitted to the offshore company by the UK company after deduction of an agreed commission, which is often around 5% of the company’s turnover. The UK company is usually managed and controlled by nominee directors and shareholders and the signatory to the bank account will usually be the beneficial owners. The offshore company will usually also be owned and controlled by nominees and again the signatory to the bank account is normally the beneficial owners.

It should be noted that the UK company cannot trade within the UK or with any UK businesses. If it does then this income would be subject to UK taxation.

The benefits are:

• 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.
• Can be used for the supply of goods or services by the UK company.

Taxation

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. Annual accounts must be filed which may need to be audited depending upon the level of turnover.