Corporation tax question

[arabianights]

If I created a UK LTD company wholey owned by one in the British Virgin Isles how do I make sure that all the profit is taxed under the latter's more reasonable tax rules? In addition can the parent company claim back VAT on purchases that it makes in the UK?

 

[donaldduke]

Didnt you take legal advice when forming this dodgy company structure?

 

[arabianights]

I haven't done it! I'm just exploring possibilities. There's an obvious disadvantage in seeking legal advice.

 

[ns1000]

If I created a UK LTD company wholey owned by one in the British Virgin Isles how do I make sure that all the profit is taxed under the latter's more reasonable tax rules? In addition can the parent company claim back VAT on purchases that it makes in the UK?

I'm not an accountant, but could the UK company hedge all its trades (assuming we're talking about a trading company) with the BVI entity? The UK company will have no p&l therefore, as every gain will be offset by an identical hedge position.You may want to rebate it some money from the BVI so it has some return to keep the taxman from looking too closely at a wholly unprofitable company.

 

[arabianights]

If I can get the BVI company to be doing those trades otc and settled daily that sounds like an interesting proposal, I'll look into. One problem I see is that overnight positions will make the margin position complicated (I can't really offset the position so will need the uk company to post twice the margin and the bvi company to post margin as well, although presumably I don't need to meet LCH standards between the two)... I'll investigate that.

 

[ns1000]

If I can get the BVI company to be doing those trades otc and settled daily that sounds like an interesting proposal, I'll look into. One problem I see is that overnight positions will make the margin position complicated (I can't really offset the position so will need the uk company to post twice the margin and the bvi company to post margin as well, although presumably I don't need to meet LCH standards between the two)... I'll investigate that.

No doubt a stupid question, but why not just open the account in the name of the BVI company?

 

[arabianights]

No doubt a stupid question, but why not just open the account in the name of the BVI company?

Basically if I open the account using a BVI company then my clearer (de facto employer) may have a legal obligation to report that as suspect activity. If it's done through a UK company then there shouldn't be a problem.

Or at least that's my logic...

Edited to add: Obviously I don't intend to break the law, but I still don't want an audit!

 

[tfg]

To the same subject, I am thinking of using my BVI company to open an account with a UK forex broker.

Would my BVI company be subject to UK corporate tax and scrutiny? I intend to do all my trading physically in UK....

Any input or pointer to related info greatly appreciated.

tfg

 

[ns1000]

Your BVI company would be subject to taxation in the BVI. You wouldn't pay tax on the profits unless you brought them back into the UK. As soon as you bring your earnings home, they would be subject to UK tax at you normal rate.

 

[tfg]

thanks, ns1000.

I have no intention to bring the income back in UK at the moment. I am more concerned about if the BVI company would incure UK corporation tax because trading activities are happening in UK with a UK broker.

Recently, Inland Revenue has been making a few splashes in the media about clamping down "tax avoidance" using off-shore corporation to scare people off.

tfg

 

[wildkactus]

Hi guys,
I have been looking into doing somthing similar. (mainly for US / Asia)
What i have found is that the offshore company can open the account and hold all the assets.
The on-shore company is just a manager of such assets, would get a fee for such, so the only taxable income on-shore is the management fee. all gains are still held by the offshore entity, and would only ever be taxed when brought back on-shore (don't Know why you would)

If anyone can varify this for me for the uk as well that would be good.

"This is only my opinion, I'am not an accountant or solicitor, please do your own research."

 

[stochastic]

thanks, ns1000.

I have no intention to bring the income back in UK at the moment. I am more concerned about if the BVI company would incure UK corporation tax because trading activities are happening in UK with a UK broker.
tfg

Panamanian corporations are exempt from taxes in Panama when all income is earned overseas. You can trade with a Panama corporation and keep your profits outside Panama and the UK.

 

[stochastic]

Change brokers