Dear Valued Clients,

Our company has undergone a consolidation with OCH Ltd. (www.offshore-companies.co.uk).

We will continue to serve you with the usual high standard, and same competitive prices.

UK Limited Company as a Holding company

UK company registration is popular with clients who need a holding company. UK remains a leading jurisdiction for holding companies, and new tax changes in Corporation Tax (22% by 2014) in particular makes it even more attractive in comparison with other traditional European countries (like Netherlands, Austria, Ireland, Luxemburg) for registering a holding company.

The process for UK Holding Company formation is the same as UK limited company formation. Holding company is an ordinary UK Ltd company, with the same applicable taxes. UK Ltd companies do not pay withholding tax on dividend payments even if the recipient shareholder is overseas. It also benefits from the double taxation treaties with more than 100 countries and the European tax directives.

The EU Parent-Subsidiary Directive (90/435/EEC) eliminated double taxation of dividends as a way of profit distribution between EU member states. The member state where the subsidiary is located has to waive withholding tax, whilst the parent company member state must exempt the dividends from tax or offset it against tax paid in another EU member country against their own tax.

Example 1: UK Ltd as a Holding company

For example, a UK Holding Company owns 100% shares in a company registered in Germany. The German company pays effective corporation tax between 30-33%(2012), before paying a dividend to its UK parent company. According to Parent-Subsidiary Directive, German tax authorities will not withhold tax on dividends (usually 25%) paid to UK Holding Company.

The UK Company will not pay any tax on incoming dividends remitted by the German company, as there is no withholding tax on incoming dividends in the UK. As Corporation Tax in Germany is higher than in the UK, there will be no Corporation Tax payable in the UK (the double taxation treaty covers that).

As there is no withholding tax on outgoing dividends in the UK irrespective of shareholder’s residence, dividend payment can be made from the UK Company to an offshore companies say in Dominica or Anguilla. Therefore, Dominican or Anguillan offshore companies can save your 25% withholding tax that could have been paid in Germany.

UK limited company registration is popular with non UK residents for not only this reason.

UK Limited Company as an Agent company

Another popular way to use a UK Limited Company in an international business structure is to use it as an Agent of an offshore company. One of the advantages of trading through a UK registered company is its respectability and reputability which offshore companies can not always convey. Some of your customers might insist or prefer to work with UK or EU registered companies only.

In effect, a UK Company acts as an agent for the offshore company. A UK limited company can be formed with the purpose of acting as a sales agent at an agreed market rate commission (say5-10%from turnover or income).

It is important to meet the following criteria:

  1. Sales Agent must not be involved in UK trade (i.e. no UK source of income)
  2. It is essential that the UK Company signs a contractually legally binding agency agreement with the offshore company which defines the terms of the agency co-operation. The commission (fee) must be at the market rate
  3. The Beneficial Owner of the Offshore company should not be UK resident (i.e. not subject to UK taxes)
  4. It is not advisable to have the same shareholder and director of two companies and it is best if they have never traded before.

A UK limited company will receive and make payments on behalf of an offshore company, only keeping its own commission.

Example 2: UK Ltd as an Offshore Company Agent

An offshore company registered in Dominica buys goods in India and sells them in Germany and France through a UK limited company acting as their Selling Agent. The UK Company does not trade within the UK or with any UK business. They have a legally binding commercial agreement in place, which states a commission of 5%, which is similar to other agents trading in similar goods.

The UK Company signs the contract with the offshore company clients in its own name (the name of the offshore company does not need to be disclosed). Payments from the clients come to UK company bank account and the UK Company pays money to the offshore company less agreed 5% commission.

As a result, the income generated through the offshore company, stays offshore. The UK limited company only pays corporation tax on 5% commission received and can offset expenses incurred during the trade (such as accountancy fees, payroll, advertising costs, etc) to minimise its tax liability.

You can buy this structure (one UK Ltd Company and one offshore company) as a UK Low Tax Business Structure from £ (GBP) 882 or $ (USD) 1,532 as it is also more cost efficient to buy as a structure rather than order individual companies.

Investing in the UK Commercial property using offshore companies structures remain tax beneficial as opposed to residential properties. There will be no tax charge on remittances of foreign income and gains to the UK for the purposes of commercial investment in UK businesses for non-domiciles. There is no upper or lower limits to the level of inward investment and the following conditions must be met: the trading activity businesses or undertaking the development of commercial property (not residential). Also the investment must be in actual companies, not in sole traders or partnerships.

A very viable alternative to businesses trading outside the UK is to use LLP as part of their international business structure, providing there is no trade in the UK and LLP members are not UK residents. This is because UK LLP is a “pass through” entity for tax purposes and there is no corporation tax to pay. Please visit this page UK LLP — 100% Tax free UK Business Structure for further details.

UK ltd company registration remains one of the most affordable in Europe. Also, UK limited company formation can be completed within hours.