payments to offshore supplier tax deductible in UK?

[ironwood]

A question has come up from a client and i' ve advised it isn't my‌ area of expertise but made me curious as to the answer....

"As a UK company‍ with all our staff and operations in the UK, can we fully expense the suppliers⁠ invoices against our corporation tax bill as the supplier is a seychelles company, based in⁤ the Seychelles but their bank is in Hong Kong? They have offered to invoice for⁣ the project through a Hong Kong company but again, can we then deduct the expense?"⁢

As far as I understand it at a very simple level, Seychelles in on the︀ naughty list with EU and therefore any payments my client sends them from a uk︁ bank account may not be tax deductible if the uk bank will even send them.︂ What is the actual case here practically? My client is keen to use them as︃ they were personally recommended and do good work but doesn't want to suffer tax penalties︄

 

[Sols]

There is no simple yes or no answer to this because it depends on what‌ the invoice is for and how big it is.

In principle, an invoice whether from‍ a Seychelles or Hong Kong company can be considered a valid expense for a UK⁠ company. However, just like any other invoice, it must meet certain criteria such as being⁤ entirely for business purposes and relevant to the business and a permitted type of expense.⁣ That the invoicing entity is in Seychelles or Hong Kong does by itself not make⁢ a difference, although it can draw greater scrutiny if questioned in audit.

 

[James Turner]

@Sols has summed this up perfectly. I would add that while you may experience issues‌ with banks in the UK being willing to make payments to this type of location,‍ you can simply use an fx company to make the payment and then settle from⁠ the UK account to the fx company, thus avoiding the bank taking issue with your⁤ payment.

 

[ironwood]

Thank you Sols, so the seychelles incorporated supplier invoicing directly from the company︀ actually doing the work for my client should in principle be able to be expensed︁ correctly by the client? The invoices will be monthly for a project building a website,︂ seo then an ongoing marketing campaign so there will be something tangible in an audit︃ to show for the seychelles invoices and they are not connected to my client just︄ a supplier recommended to them.

 

[ironwood]

Thank you James, when you say an FX⁣ company do you have any recommendations for a good FX company to settle payments such⁢ as these?