England-agency scheme Offshore


The offshore company instructs British company, acting as agent to conduct a transaction for the purchase and sale of goods and funds the transaction. British company operates on its own behalf but on behalf of and for the money offshore company. These calculations are carried through by a British company, but her income is only the sum of the agency (commission) fees.

For example:

* ════════ (1) Receipts from customers per year - 1.000.000

* ════════ (2) Payments to suppliers for delivery, etc. - 900.000

* ════════ (3) Income (1) - (2) = 100.000

* ════════ (4) specified by the contract the commission, 5% of the profits of the principal = 0.05 x 100.000 = 5.000

* ════════ (5) Other own expenses English company (office phone) - 2.500

* ════════ (6) Income tax 20% (or 30% depending on the amount of taxable income) 0.2 x 2500 = 500.

Thus, the resulting effective tax on profits from the trade deal could amount to 0.5% (if the tax rate on income agent 20%) to 1,5% (if the tax rate on income agent 30%). ═══════

If income is derived not from trade but from the provision of services (for which profit is the gross revenue of the company), income is 5% of gross income of the principal. Foreign companies are not residents of England, the British imposed a tax only on profits from British sources of income.

What to consider when using British companies in the agency scheme?

If you are using British companies in the agency scheme should take into account the demands made by the tax service to British companies involved in the schemes of agency and agent scheme as a whole. Non-compliance with these requirements may lead to the recognition of revenue income of the principal UK company (agent) and the corresponding tax.

English Partnerships (LLP) with our structure is not a tax resident of England. Since the requirements of tax authorities apply only to the agency scheme, which involved actors (companies) taxation in England, and the partnership can not be considered tax resident in England as a result of its use in agency scheme, these requirements do not apply to the use of English LLP in agency scheme.

Requirement for agency scheme are Company Limited, as they are formally, not depending on whether the activities conducted in England, are tax residents of England and are in the field of view of tax authorities. In order to ascertain whether the British company of this agency company or a continuation of the principal, Tax office can check the activities of British companies involved in the agency scheme, for the following conditions:

1) The company must be fully independent economic structure. Between the agent's company and the principal should not exist nor what connection, which could be substituted into question the independence of the agent. Ie, the principal can not be a shareholder of the company, the principal director and director of the Limited can not be the same person, and principal shareholder of the company should not have the same address and so on.

2) The provision of agency services should be the main and "normal" activity of the company and agency services should be provided on a permanent and independent basis. Ie British company can not provide the agency services only one principal, as it can be recognized as a violation of the terms "normal" activities on a permanent and independent basis and as a proof of the company's dependence on the principal. We therefore recommend that instead of one of the principal use multiple principals and split agent scheme for several schemes, where there are different principals that agency services are provided by a British company.

3) between the principal and the British company should be concluded and signed an agency agreement, which clearly indicate to whom and to sell any goods will be provided agency services. Transactions can be carried out only with those companies and on such goods as specified in agency contracts.

Application of treaties on avoidance of double taxation

Based on the fact that the income of a UK company always comes from the agent activity, it is impossible to assert that the entire amount of income refers to income British firm. Hence, in this case, the tax agreement can not be applied.

The Office of English nominal company should be from outside the UK, and the directors can not reside in its territory. There should be no trade with British companies, a source of income should not be in the UK, and all contracts entered into by the British company on behalf of non-resident company must be signed outside the UK. Location of bank accounts has no special meaning.