United Kingdom is a merger one with the most prestigious business locations with opportunities considered typical of offshore jurisdictions such as Seychelles, Bahamas or British Virgin Islands.
The most commonly used UK structures include limited liability partnerships, which, despite having their registered office in the UK, are considered transparent tax and thus pay taxes at the level of their shareholders. As a general rule, shareholders of such British companies are two offshore companies based in Seychelles, for example.
These companies are strictly exempt from any taxes, so that the entire business activity of the British company is free of any tax.
Another type of tax-effective UK structures are agency companies (equivalent to the Polish limited liability company), trading or providing services acquired at an earlier stage from a related company from offshore jurisdiction.
Services or goods acquired by a British unit may be further resold to companies from other EU countries or from outside the EU. The nominal taxation of the UK agency company is 24%, but due to the market level of profit left in it usually does not exceed several percent.
These and a number of other opportunities provided by UK legislation make UK companies increasingly selected to optimise international business taxation.
Limited Liability Partnership (LLP)
The nominal taxation of the UK agency company is 24%, but due to the market level of profit left in it usually does not exceed several percent.
A limited liability British company may be set up by at least 2 natural or legal persons, both resident and non-tax residents in the United Kingdom. UK LLP operation is based on 2 basic legal acts, i.e. The Limited Liability Partnership Act and The Limited Liability Partnership Regulation of years 2000 – 2001.
This category of UK companies allows for tax-free international business both in the EU and outside the EU. If the UK LLP's shareholders are non-residents and there is no source of income in the UK or income from assets located in the UK, UK LLP's income will not be taxed in the UK, as only the partners will be taxed.
If the shareholders are offshore companies, UK LLP's income will not be taxed at the level of shareholders either.
The UK LLP is considered to be a non-tax resident in the UK and cannot therefore receive a tax residence certificate from the British authorities. Therefore, the payment of funds to the UK LLP will, in principle, be subject to withholding tax for services). UK LLP is therefore inappropriate for advisory and other services.
If UK LLP founded by non-residents (e.g. 2 companies in Seychelles) have an activity which is eligible for VAT, which may apply for registration for VAT purposes. However, VAT registration for UK LLP may be problematic due to the need to provide the so-called "substance".
The condition for VAT registration is to have an office in the UK confirming the presence of UK LLP in the UK, which does not entail a tax liability in income tax. It is important to confirm that UK LLP is actually a functioning and reliable company.
For the purposes of effective VAT registration, it is important to have evidence of the intention to carry out commercial activities, such as copies (projects) of contracts, pro-form invoices, brochures, correspondence with suppliers and recipients, or bills / receipts confirming acquisitions.
The UK LLP must have a bank account in the UK prior to VAT registration, as it is required that the UK LLP enter its own bank account number in the UK in the VAT registration form.
Limited Company (LTD)
British limited liability capital companies (equivalent to Polish companies from O.o.) are most often used as agency companies or companies intermediary in the transfer of capital to offshore jurisdiction,
UK LTD as an agency company
These companies formally act in their own name and on their own account. The entity purchasing the goods or services from the UK agency company does not know that it is dealing with an agent. The power of the agency company, which is usually a offshore company, remains undisclosed.
However, the agent acts only with the consent of the Force. The commercial activities of this agency must be carried out outside the UK. These companies are used especially in the field of trade in goods, advice and professional services (e.g. architects, engineers).
The functioning of this agency structure is based on an agency agreement with the powerholder, which is of a confidential nature. UK LTD is taxable 24% income tax on all of its income, having tax resident status in the UK. VAT registration for UK LTD does not give rise to any problems.
Accounting and audit for this company must be carried out in the UK. The level of the agent's commission should be market-based and the Agency's remuneration at the level of 5%.
Only the above part of the profit will be deducted from the UK 24% the income tax (CIT), while the remainder of the profit from the agency’s activities will be transferred to the power-maker, an offshore company.
UK LTD as subcontractor
Another type of tax optimization based on UK companies is the use of a British company acting as a subcontractor of an offshore company. This business model allows to tax only the profit margin of the UK company, which in principle does not exceed 5%, and thus effective taxation in the UK will not exceed 1.25%.
The remaining part of the profit will be transferred to the company – the powerholders established in offshore jurisdiction. Since the UK company has tax resident status in the UK, it can be used for service activities.