United Kingdom

International tax planners are finding the use of companies registered in traditional low-tax centres impractical in some circumstances and have therefore had to look for more innovative solutions.

UK entities have a respectable international image and can be used tax efficiently for cross border trading and as international holding companies. Some examples of how UK entities can be used are set out below.

• Non-Resident Companies
  
  A UK non-resident company is one that is incorporated within the UK but is deemed to be resident in another country. This occurs when the effective management and control of a company is carried out in another country which has a Double Tax Agreement with the UK specifying that the country of residence of the company is that in which the effective management and control takes place.
  
  Valuable tax planning opportunities are presented where there are treaties with countries offering low corporate tax rates such as Cyprus, Israel, Mauritius, The Netherlands, Portugal and Switzerland.
  
  UK companies which are able to obtain a Certificate of Residence from a competent authority in one of these countries are not liable to UK tax other than that due on UK sourced income.
  
  The UK non-resident company, therefore, offers a respectable and reliable legal personality, together with low taxation, depending on the treaty country used.



• UK Companies as Nominees
  
  A UK registered company can be used as nominee and intermediary to transact business on behalf of an undisclosed international company and thereby solve some of the problems created in dealing with international companies.
  
  Trading operations are entered into by the UK company on behalf of the international company with an agency agreement in place between the two parties. The agency agreement should be in writing and executed outside the UK as should all trading contracts entered into by the UK company.
  
  It is essential that no trading occurs within the UK.
  
  Under the agreement, the international company will pay a commission to the UK company for its services. This commission rate should be set at a commercial level.
  
  Income on the trading activities of the international company will be received into the bank account of the UK company and then remitted to the international company. The UK company will be subject to corporation tax on its commission.



• UK Limited Liability Partnerships (UK LLP)
  
  A UK limited liability partnership is a separate registered legal entity with an address in the United Kingdom. No personal liability falls on a member of a LLP for the contracts or debts of the LLP.
  
  If the UK LLP operates in a commercially oriented manner, e.g. carries on a business with a view to generate profit, the members will be treated for tax purposes as if they are partners. A non-resident partner of a UK partnership is not liable to UK tax on non-UK source income.
  
  Therefore if a UK LLP has non-UK partners, and a non-UK trade that is carried out entirely outside the UK, there will be no UK taxation on its members.



• UK Holding Companies
  
  These companies are liable to UK corporation tax on their profits, including foreign dividends receivable. Tax on these foreign dividends will, in practice, be cancelled by foreign tax credits underlying those profits as long as the foreign corporation tax rate is 30% or more. No tax is payable on dividends received from UK companies.
  
  There is no capital gains tax on the disposal of the trading company by a member of the trading group, subject to minimum holding requirements. This relates to disposal of all or part of a substantial shareholding in another trading company, or the disposal of the holding company of a trading group or sub-group.

The four UK company structures mentioned above make the UK an important gateway into Europe for multinational companies.

General features of UK Companies

• Shares can be registered or bearer.
• A single shareholder is permitted.
• Shares without par value are not permitted.
• Minimum of one director. Corporate directors are allowed as long as the company has at least one natural person holding office as director.
• Maximum disclosure to authorities.
• Nominee shareholders permitted.
• No restriction on location of meetings.
• The registered office must be in the UK.
• Quick incorporation and shelf companies are available.
• Company names may be in any language but must have the suffix "Limited" or, in the case of a public company, "Plc".

Article - International Holding Companies

Article - Tax Efficient Use of UK Companies for International Trading Purposes

Article - The UK Limited Liability Partnership - a Tax Efficient Vehicle for UK Trade

For more detailed information on this jurisdiction, click on the link below.

UK Jurisdiction Note