Advice on tax structure for owner-managed business (UK resident)?

[Roamer]

How would HMRC view the following setup for corporation tax purposes?

• LTD in Cyprus, Gibraltar, or Malta
• Income from online affiliate marketing and ad networks (mostly from US)
• Yearly profits of ~GBP/EUR 150,000
• Single shareholder, single director
• That owner/director is a UK resident
• S/he will fly weekly there for two days to work on the business
• Rest of the week spent in the UK working on something else
• Contractors running day-to-day of the LTD (VA, writers, marketers)
• Contractors are based in Philippines, Pakistan, UK, US, etc.

The point of this setup is:

1. Remain in the UK for most of the time (which I need to)
2. Have the central control and management actually where the company is incorporated
3. Save on corporation tax

What this setup is not solving:

• Income tax when profit extraction occurs

Thoughts?

Thank you!

 

[singlelady90]

I think if you stay in the UK you will need to build some "substances" in those places (Cyprus, Malta etc)

 

[Sols]

Absolutely pointless to incorporate in GI, CY, or MT in this case. Just stick with a UK company and pay the 19% CIT.

All you're doing by having a foreign company in this structure is adding paperwork, sorting out dual tax residence and leveraging tax treaties.

If we were looking at 10x or 100x that profit, you might have been able to justify having one or a few FTEs in Malta or Cyprus to establish tax residence there (and only there) but along with all the extra paperwork, those salary and payroll/overheads cost much more than the tax savings.

150,000 GBP annual profit is a good one-person business, but it's not a business with much room for any creative tax planning.

If you're in that range of profit, the only legal, sustainable, and sensible way to save on tax would be to relocate away from UK to the likes of Malta, Cyprus, Gib, or UAE.

You could maybe do something with a proper nominee structure in IOM but be very, very careful.

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This is the probably the answer to your question.

 

[Roamer]

The thing is, the £150,000 of profits increase every year. I am currently basically paying myself £60k (12.5 salary + 50k dividends) per year and leaving the rest in the business. It truly makes me feel shitty to know that paying myself any more and I'll be paying tens of thousands in taxes (lots of accumulated/retained profits in the LTD).

My initial goal was indeed to relocate to save on both income and corporate taxes. My other half is not keen at all about relocating. Hence I am trying to save some money from corporation tax with the outlined strategy, but it would be a lot of hassle (flights, accommodation, paperwork, stress) for a thin saving (although Gibraltar would be nearly tax-free as income is foreign).

@Sols ”“ so, your suggestion is, if I must remain in the UK, to basically swallow the bullet and pay these taxes and that's that?

 

[Sols]

Roamer said:
@Sols ”“ so, your suggestion is, if I must remain in the UK, to basically swallow the bullet and pay these taxes and that's that?
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Without venturing into illegalities or having costs that far exceed potential tax savings, your best option is indeed to just accept the situation.

You have a good business. Focusing on growing it rather than shooting yourself in the foot with some half-baked Tax Evasion 101 scheme that lands you hot water with the HMRC.

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This is the probably the answer to your question.

 

[polonieth]

Roamer said:
My other half is not keen at all about relocating.
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Tell her to like it or lump it?

I agree with @Sols there's no point looking at complex offshore structures if you are staying in the UK indefinitely for your woman, just have to take the UK tax regime on the chin / try to further reduce your tax burden in the UK.

 

[Roamer]

Alright, that's what I thought. Quite sad and frustrating but I guess, that's what staying in the UK cost.

Thank you to all.

 

[Fazoule]

You should be happy as well, 19% is more than faire. Imagine you were in France or Spain...

 

[polonieth]

Fazoule said:
You should be happy as well, 19% is more than faire. Imagine you were in France or Spain...
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I think 19% is outrageous. Of course, it will look 'good' next to countries where it's higher.

You make £100. So £80 when you knock off VAT, claim £10 back. £90. 19% corp tax, national insurance, income tax. It's a crap deal really when you look at what ends up in your pocket.

 

[Roamer]

It is a bad deal. Not that fussed with corporation tax, but very much bothered with income tax (salary and dividends). Bit too much.

 

[Mr Gus]

I don't know how savage the British tax authorities are but in general the tax authorities in western countries are savage so I wouldn't recommend going 'offshore'.

If you are actually looking to save taxes just move away to a low/no tax country. In reality most people will end up with either Malta (5%) or UAE (0%). In my opinion just the most attractive options because both english speaking, great quality of living and a lot of value for money.