Hi I am a EEA National, but an UK resident. I work in the UK (and I am a Director of a UK company, and a EU company, and an EEA company), and pay my PAYE there. I have not filed a tax return and don't plan to unless requested. I am wondering, how I will be affected if I open up a BVI company, which will be owned by me personally, which will charge my other companies management fees. I plan to take dividends out of the BVI, and perhaps use it to pay certain expenses like travel etc.
I'm Rachel, and I’m a moderator for this topic. I sent your requested professional a message to follow up with you here, when they are back online.
If I can help further, please let me know. Thank you for your continued patience.
However if indeed the BVI company is operating outside UK and you still want to set it up, there are ways around this. However you will need to comply with the key tests that HMRC looks at when evaluating an offshore structure. Basically HMRC would want to see to it that you do not control or manage the company from UK - this is normally done by appointing offshore directors. In addition the operations of the entity should be done outside UK. If you meet these two, (plus a few other minor requirements) you can go ahead and set up a BVI entity without much worry from UK tax office. You can then pay yourself a dividend which is generally taxed at a lower rate than income tax rates.
Hope this helps. If you have any further comments or questions please let me know.
1) Yes, I am tax resident in the UK, as I spent majority of my time here, and I have transferred my residency to the UK. I think it is best to keep it as that, and not have two tax residencies. I am working in a consultancy job in the UK, so I pay may PAYE and NI as I should of my salaries
For the Tax return: I transferred my residency to the UK in Dec 12. I spend about 65% of the year in the UK. I used to pay tax to my EEA country, as I was a resident there both tax wise and non tax wise.
As for the penalties and tax charges, as I have no other income at the moment then salaries, I beleive that should not be the case? Do they regularly check for tax returns of foreigners?
2) The BVI company would issue management invoices to another company in the EU that is charging other EU and EEA companies fees.
The BVI was also planned to own a stake in the UK company, is that then not advised?
So If I appoint an offshore director, and use the EU company to do business, I should be fine?
Then for the dividend, I would pay regular UK tax rates on those?
"The BVI was also planned to own a stake in the UK company, is that then not advised?" - there is nothing significantly negative about this arrangmenet as a number of UK firms are owned by foreign firms. There are however a couple issues to take note of and these include: relationship between UK and BVI company need to be clear so that the BVI is not seen as trading in UK through its UK subsidiary. In addition transactiions between these two should be done at an arm's length.
Hello again :)
1) Okay, I will however also issue myself dividends from the BVI company. So that will be another means of income.
2) For the management fees: The fees in question would be to EU and EEA companies, not UK companies, so the HMRC is not a worry in regards XXXXX XXXXX They will be a mixture of selling intangible assets such as brand name, logo, royalties, director services, and management fees
For the UK company ownership: As it will be an investment (35%) into a company, with other investors, I believe all transactions would be determined to be at Arms length?
If I pay dividends into my personal account, based in another EU or EEA country, would they be outside the UK Tax scope? Am I not supposed to declare them to the HMRC anyway?
Sorry for the lengthy questions :)
So are these issues only related to such services, but if it is dividend, equity, loans and ownership or such, there are no queries or problems?
I also see that you missed out on the last question?
Apologies for forgetting to answer the last part and thanks for the rating.
“If I pay dividends into my personal account, based in another EU or EEA country, would they be outside the UK Tax scope? Am I not supposed to declare them to the HMRC anyway?”
If you become a UK tax resident, you are taxed on your worldwide income/gains hence you declare such income/gains even if not in UK. However as non-domiciled person, you can elect to be taxed on remittance basis ie to have your non-UK income and gains taxed in the UK only to the extent that they are brought into or enjoyed in the UK. In the case you only concerned with dividends you bring back to UK.
HMRC would be concerned with all transactions that would result in you paying less tax in UK as a UK resident. These include management fees that you may charging UK firms; loans borrowed from UK companies; dividends declared from UK firms etc.
What I would recommend if you are seriously considering these offshore structures is to hire an offshore tax expert to help you structuring the whole arrangement. The fee can range from as low as £100 but it all depends with the expert and the level of advice you want to get. Try sites like HERE and HERE or simply google.