Reply to post: Re: Will it work?

Re: Will it work?

@jonathonb

If it is controlled by persons resident in the UK, you need to pass an economic justification test to avoid UK corporation tax.

Correct, but that doesn't have to be as complicated as you expect it might.

I don't own any property but the house I live in, but lets use it as an example because its easier to follow. Lets say I buy a few of BTLs - one in Spain, one in Sweden, and one in the UK. Where should the holding company be registered? It doesn't follow that it must or even should be the UK.

We can complicate that further if I split the companies business up slightly such that I have a holding company, a services/facilities company, and a rental company within each jurisdiction in which I operate. Where should I base the group level entity to which they are all subsidiaries? Most of the business is not transacted in the UK. Most of the assets are not based here. Most of the income is not based here, and nor are most of the operating costs. Its further complicated if I have a property in a jurisdiction for which we don't have a double taxation treaty.

The other problem is the place of establishment test. If you are selling stuff in a shop in the UK, that is always taxable in the UK.

Also correct. However, I'd bet U2 sell more CD's in the UK than they do in the netherlands, which is where they hold their IP/rights. Purely by coincidence, Holland has the most favourable EU regime in this regard.

There's nothing to stop me having an offshore company sell things to the onshore company at a price that reduces the onshore profit margin and so tax payable, provided I use the prevailing market price or sell something that only that company owns, such as the IP rights to my corporate logo, branding etc.

Working around the tax laws isn't hard, but it is a lot of effort. Its much easier to achieve with an international corporate structure - you just need an economic reason to have one. Economies of scale make tax arbitrage work, because the costs are relatively fixed.... which is why it works better for Amazon than Billy's Newsagent.

I'd encourage everyone do their own research on tax minimization, and determine for themselves how much effort they wish to make. Don't be put off by scaremongering - they rely on fear to reduce the numbers of people taking part in the game.