UK Ltd or LLP what's the best and how to pay less tax?

[erni]

I want to setup a UK LTD but also read a little about the LLP - as I understand LLP was used to be anonymous back in time but isn't that any longer because of the new rules where everyone owning more than 5% shares have to be registerd!

Now I wonder, how easy is it to manage a UK company from abroad? What I'm lookin at to get answered is, company registration and VAT is clear, but how much tax does a foreign owned UK LTD pay in taxes and is it better to setup a UK LLP?

Any help would be great!

 

[CaptK]

UK LTD is tax resident on its own so therefore liable for tax. There are exceptions if it's a subsidiary but that becomes complicated.

LLP can be used as a tax free entity so long as the directors are not UK residents and no income is derived from the UK.

 

[Perry8]

A UK Ltd pays normal corporate tax. The tax rate in the UK is currently 19%

A UK LLP is a tax transparent entity, so it is not taxed as such in the UK. Instead, the partners are taxed on their share of the income/surplus according to the partnership agreement. If the partners are foreigners they are, as a general rule - but not always, not taxed in the UK but rather in their country of residence.

You are correct that it is not very suitable if privacy is important, because an LLP has to file its UBOs to the Companies House.

The interesting part with the LLP is that in many ways it is a hybrid between a company and a partnership, so it opens up a couple of great tax planning options. The simple version is that many countries regards a LLP as a company/corporation tax wise since it has limited liability. If you combine this with structuring your LLP in such a way that it resembles a corporation in the UK, local tax authorities in some countries can - under certain conditions - accept that payments from the LLP to a (company) partner is classefied as dividends.

 

[CaLViN]

LTD pays taxes at a rate of %19.
LLP pays no taxes with foreign shareholder companies located in banana islands BUT then you will not be able to open a proper bank/emi account for an LLP which means it is useless.
Noone wants to work with shady companies anymore..

 

[Perry8]

CaLViN said:
LTD pays taxes at a rate of %19.
LLP pays no taxes with foreign shareholder companies located in banana islands BUT then you will not be able to open a proper bank/emi account for an LLP which means it is useless.
Noone wants to work with shady companies anymore..
Click to expand...

Agree. But, that is, of course, not how you structure it. The secret is in the partnership agreement and which countries the partner companies are in. An LLP setup is not good for privacy though, so if that is a major concern use some other jurisdiction than the UK.

 

[Marzio]

Perry8 said:
local tax authorities in some countries can - under certain conditions - accept that payments from the LLP to a (company) partner is classefied as dividends
Click to expand...

Can you name some of those countries?

 

[Fajosst]

Ok, a UK LLP with an offshore company as a member is not a good idea to get a bank...but what about a UK LLP with two members (normal people) from countries outside the EU? Wouldn't it be easier to get a bank account while avoiding taxes?

 

[JohnLocke]

Fajosst said:
Wouldn't it be easier to get a bank account while avoiding taxes?
Click to expand...

Interesting questions, let's get some input from the experts, I don't believe you can avoid taxes if you insert yourself as members, you will be taxed in your home country at some point!

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[Perry8]

marzio said:
Can you name some of those countries?
Click to expand...

Denmark, Sweden, Norway, Germany, to name some high taxed countries. But, note that this do not mean that payments will always be classefied as dividends to partners in these countries. It will depend on the situation.

 

[Perry8]

Fajosst said:
Ok, a UK LLP with an offshore company as a member is not a good idea to get a bank...but what about a UK LLP with two members (normal people) from countries outside the EU? Wouldn't it be easier to get a bank account while avoiding taxes?
Click to expand...

In general, as long as the LLP does not have a UK resident partner (person or if the partner is a company then a UK resident director of that company), you will struggle with a UK bank account.

A UK LLP with offshore companies as partners will get an EMI account in Europe. The same applies if the partners are individuals based ouside of the EU - unless you are based in a restricted country.

Admin said:
I don't believe you can avoid taxes if you insert yourself as members, you will be taxed in your home country at some point!
Click to expand...

True. An individual member will be taxed in their country of residency. But, if you live in a country with a territorial tax system like Thailand, Panama, Costa Rica to name a few, you will not be taxed.

 

[Fajosst]

Admin said:
Interesting questions, let's get some input from the experts, I don't believe you can avoid taxes if you insert yourself as members, you will be taxed in your home country at some point!
Click to expand...

Yes, but particularly in my case I do not pay taxes (legally) in my country. brazilians who do not live in Brazil and inform this situation to the IRS do not pay taxes to Brazil. And I am currently not resident in any country, I live traveling and depending on tourist visas...

About bank account I believe Swissquote, Dukascopy and some digital banks/EMI like Revolut (maybe not this one) or TW can consider an LLP application with non-resident members. Traditional banks really should not accept me.

 

[Skipper]

CaLViN said:
LTD pays taxes at a rate of %19.
LLP pays no taxes with foreign shareholder companies located in banana islands BUT then you will not be able to open a proper bank/emi account for an LLP which means it is useless.
Noone wants to work with shady companies anymore..
Click to expand...

You can get a TW account with an LLP, right? I believe that's still the case.

 

[CaLViN]

Who cares about TW ? You can get a TW account even with fake dark documents so it is not the case here.

 

[Skipper]

CaLViN said:
Who cares about TW ? You can get a TW account even with fake dark documents so it is not the case here.
Click to expand...

Most people care lol. For third-world foreigners like myself not raking in big bucks (several thousand a month) and running a US LLC or UK LLP, TW and Mercury are basically our only two choices depending on where you decide to incorporate. Nothing wrong with that either, plenty of people on here from what I've read that make high five or six figure amounts every month through either of them. And I don't know where you read you can open a TW account with fake documents, because you can't. Their process is strict now, to the point where they verify you with ITIN or SSN if it's a US LLC (or even personal IDs and what not if they have a suspicion). Even if you somehow manage to open one, you'll get shut down rather quick if you're not legit.

 

[Fajosst]

Skipper said:
You can get a TW account with an LLP, right? I believe that's still the case.
Click to expand...

About TW, it's possible for a US LLC, so I suppose it's also possible for a UK LLP

 

[Perry8]

Skipper said:
You can get a TW account with an LLP, right? I believe that's still the case.
Click to expand...

Yes, TW accepts UK LLPs, also with foreign partnes.

 

[coq]

Skipper said:
and running a US LLC or UK LLP, TW and Mercury are basically our only two choices
Click to expand...

How did you manage to open an account with Mercury? Are you an "US Person"?
I opened a foreign-owned US LLC, and Mercury didn't like that my business wasn't performed in the US nor for US markets.

 

[Skipper]

coq said:
How did you manage to open an account with Mercury? Are you an "US Person"?
I opened a foreign-owned US LLC, and Mercury didn't like that my business wasn't performed in the US nor for US markets.
Click to expand...

Still haven't opened one, will do so at the beginning of 2021. Still undecided whether to go for US LLC or UK LLP. Most of my customers will be from the US, which I suspect is the reason Mercury rejected you since they felt you'd just be using their services without having any serious US involvement.

 

[coq]

Skipper said:
which I suspect is the reason Mercury rejected you since they felt you'd just be using their services without having any serious US involvement.
Click to expand...

That seems to be one of the main reasons. But if I do get US involvement, then I must pay US taxes.

 

[D0naldDuck]

Perry8 said:
In general, as long as the LLP does not have a UK resident partner (person or if the partner is a company then a UK resident director of that company), you will struggle with a UK bank account.

A UK LLP with offshore companies as partners will get an EMI account in Europe. The same applies if the partners are individuals based ouside of the EU - unless you are based in a restricted country.


True. An individual member will be taxed in their country of residency. But, if you live in a country with a territorial tax system like Thailand, Panama, Costa Rica to name a few, you will not be taxed.
Click to expand...

What if the UK LLP's partners are US LLCs? How hard is it to get proper banking then?