Setting Up An Offshore Company in the UK

Establishing an offshore company in the UK offers numerous advantages, from favourable tax regimes to robust legal frameworks and a prestigious international reputation. The UK’s stable economic environment and well-developed corporate infrastructure make it an attractive destination for entrepreneurs and investors seeking to expand their global footprint.

So, why set up an offshore corporation? There’s a range of benefits, and the incorporation process of setting up in an offshore region like the UK is pretty straightforward.

What Is an Offshore Company?

An offshore company is a company incorporated or registered away from the country of its investors and the region of its main operation and offices. Usually, it operates outside the country where it is formed. Knowing how to set up an offshore entity can help you get on your way to achieving your business goals or growing your assets.

Offshore jurisdictions offer a range of benefits to foreign owners looking to reduce their tax burden and enjoy less stringent regulations and policies.

Why Set Up an Offshore Company in the UK?

These are some of the benefits of offshore corporations:

1. Tax treaty network

One of the reasons why the set up of an offshore entity is compelling for savvy business owners is the UK’s largest network of double tax treaties. With this tax treaty network of 100+ globally, UK companies can be a very efficient vehicle for minimising withholding taxes on dividends received. Better yet, the offshore company setup is pretty straightforward, so there’s a lot to gain and very little pain.

2. Low cost of maintenance of a UK company

The cost of maintenance of a UK company is among the lowest in developed jurisdictions such as Norway and New Zealand, with comparable reputation, international respectability and protection.

3. Share capital

If you’re considering setting up an offshore company and considering the cost requirements for getting started, you’ll be glad to know that there’s no minimum paid-up share capital requirement and no capital tax on authorised or issued shares.

4. Audit of accounts

There are no audit requirements to set up an offshore structure if you meet the following criteria:

• Turnover below £1,000,000
• Net assets of less than £1,400,000 (unless of course, the offshore company you want to set up is part of a larger qualifying group).

5. Ease of establishment

What if you could set up an offshore company in the UK within just 24 hours? With off-the-shelf companies available, you can set up a tailor-made company based on your specific requirements and do exactly that.

6. International respectability and protection

UK companies are often used to acquire assets in certain foreign locations to minimise risks of property dispossession by foreign governments.

Characteristics of a UK Offshore Company

When setting up an offshore corporation and going through the incorporation process, the names of your company officers as well as director and shareholder information, will appear on public record. Once you’ve selected the type of company you want to set up offshore and chosen an approved name, it’s then on to the registration set up process and submission of relevant documentation. Let’s take a look at the features of a LTD offshore firm opened in the UK to unpack these characteristics:

Features of UK Offshore Company (Private Limited Company – Ltd):

*You need to pay the local taxes on profits made in other countries, too.

Choosing a Company Structure: IBC, LLC, PTE, LTD

Your company structure often comes down to your chosen jurisdiction and the business structure you expect based on your key operations and strategic business roadmap. Normally, there are three offshore company structures widely chosen by business players moving offshore. We’ve unpacked each in more detail, but below is a snapshot of what to consider when setting up offshore and jurisdiction recommendations for each company structure.

Company Structures

LLC

Recommended offshore jurisdictions: Belize, Cook Islands, Nevis, St. Vincent & Grenadine

IBC/BC

Recommended offshore jurisdictions: Belize, BVI, Seychelles, Marshall Islands, UAE

Pte. Ltd

Recommended offshore jurisdictions: Hong Kong, Singapore

Private Limited Company (Pte Ltd)

• Privately held business entity;
• Number of shareholders cannot exceed 50;
• Shareholders are restricted from public share trading;
• Offer limited liability to shareholders;
• Able to acquire assets and enter into contracts;
• Able to sue or be sued under its own name;
• Income earned outside territory of incorporation subject to lower tax rates & possible tax exemption;
• Reporting requirements are stringent.

International Business Company/Business Company (IBC/BC)

• At least one director and one shareholder required (can be the same individual);
• Speedy incorporation process;
• Low tax rates or local corporate tax exemption (if no business is conducted within the territory of incorporation);
• Offer corporation privacy and bank accounts;
• Reporting requirements are minimal;
• Can engage in international business activities, i.e. trade or investment.

Limited Liability Company (LLC)

• In place of shareholders and directors, an LLC only has members;
• An LLC requires at least one member;
• Can be a hybrid of the partnership and the corporation;
• Local corporate tax exemption on assets or income earned outside the territory of incorporation;
• Company members are personally protected from being liable for debts or liabilities incurred as a result of the business;
• Reporting requirements are minimal.

Deciding on an Appropriate Offshore Jurisdiction

The offshore structures across different jurisdictions may have a lot of similarities, but they’re not all set up and run the same. That’s why it’s essential to know how to set up an offshore company in a jurisdiction that makes the most sense.

There are a few considerations that will come in handy when deciding on the right place for your offshore business set up to kick off.

If you plan to visit regularly or have easy geographical access, you’ll want to factor in proximity when establishing an offshore company.

Wherever you decide to set up an offshore entity, make sure you stay up to date with the regularly-changing policies and industry regulations. This is why you want to make sure you set up in a jurisdiction that’s complementary to your chosen company structure and suits the nature of your business.

You also need to take the reputation of the jurisdiction into consideration, as it may affect the growth of your business and your future potential. Seek to establish an offshore business in a place that boasts a sound and stable reputation for business owners. Tax minimisation, favourable rates and low taxation on foreign-sourced income will also benefit your business.

Make sure to check whether or not your chosen place of incorporation is on the non-cooperative list by the EU Council. If you plan to trade or even expand to the EU this is an important element in your decision-making.

Offshore Companies in the UK: Liability to Income Tax, Capital Gains Tax, and VAT

Once you have set up your offshore company, the HM Revenue and Customs (HMRC) will issue you a Unique Taxpayer Reference number (UTR). Your UTR is sent to your registered address along with instructions on company registration, accounts filing, and corporate tax payments.

UK Tax and Capital Gains Tax (CGT) for offshore companies

When setting up offshore companies as a non-resident in the UK, you are generally not expected to pay CGT. The reach of CGT depends on the taxpayer’s residence, not on where an asset is situated. There’s usually no CGT arising from the disposal of UK assets for an offshore company (unless the gain is caught by the corporation tax charge).

Every rule has an exception. If your offshore entity trades or invests in UK property, it may be liable to pay corporation tax or income tax on income gained through UK real estate. Where corporation tax applies, capital gains are also brought within the charge.

UK VAT – what is the VAT rate in the UK?

VAT, or Value Added Tax, is levied on selling goods and services in the UK. The Standard VAT rate in the UK is 20%. The VAT Reduced rate of 5% applies to some goods and services, such as children’s car seats and home energy.

If you have set up an offshore company that does not have an annual turnover of more than £90,000, then Registration of VAT is not required. A Company that does register can collect a number of benefits through registration, such as the ability to reclaim input tax and collect VAT from customers. Companies register through the HMRC website.

Some things are exempt from UK VAT, such as postage stamps, financial transactions, and property transactions. The VAT rate which businesses charge registration depends on their goods and services.

Advantages of Setting Up an Offshore Company

1. Privacy

There are many confidentiality and privacy benefits to setting up offshore companies, as you’re conducting your business operations and financial transactions in the name of a legal entity — in this case, your offshore corporation.

This is because the details of the individuals who are linked to companies set up offshore are not divulged by most financial centres (unless required as part of a criminal investigation).

2. Asset protection

Asset protection from future liabilities is made possible when assets are placed into overseas legal structures and offshore corporations. Tracking them down via an asset search is tricky when investments, trusts, and bank accounts are in possession of your offshore corporation. This screens your finances from public view, providing effective asset protection for the company you set up offshore.

3. Legal protection

Legal action pursuits typically involve an asset search to ensure that any negative judgements made against you can be covered financially. Establishing an offshore corporation and assigning asset ownership to the business means it’s associated with your name. By incorporating offshore, you can legally shield your assets from court rulings or legal opponents.

Disadvantages of Offshore Companies

1. Difficulty proving ownership

If you already have a registered offshore company, proving ownership can prove to be tricky. This is often linked to the absence of public registers to be able to refer to. If something comes up and you need to prove that you’re the company’s beneficial shareholder (in your interests), the anonymity aspect of registering offshore can prove to be a disadvantage.

2. Monies are subject to taxation in the resident countryp

The income and assets of the company you set up offshore are distributed according to taxation policies. While the initial tax-free benefits of offshore incorporation are advantageous, the monies will ultimately be subject to tax when they reach the resident country.

Ready To Take Your Business Offshore?

Knowing how to set up an offshore business can lead your business down a path to success. But consider every aspect of the process, from your company structure to understanding the local jurisdiction and your liability to taxation policies. If you’re considering registering an offshore corporation, we’ll gladly take the admin off your hands so you can get down to business.

FAQ

Is it legal to have an offshore company?

Yes, it is legal to have an offshore business as long as it complies with the laws of both the home country and the jurisdiction where the company is registered. Many businesses and individuals use offshore companies to benefit from the financial advantages offered by tax havens, such as reduced taxes and enhanced privacy, provided they adhere to all regulatory requirements.

Is it worth having an offshore company?

Having an offshore company can be worth it for those looking to capitalise on the financial benefits provided by tax havens. By operating through an offshore entity, businesses and individuals can often enjoy lower tax liabilities, greater asset protection, and access to international markets. Additionally, maintaining an offshore bank account can simplify global financial management, making it an attractive option for many.

Do offshore companies pay tax in the UK?

Offshore companies generally do not pay tax in the UK if they are structured correctly and do not conduct business within the UK. However, the tax liability depends on various factors, including the company's activities and the residency status of its owners. Even though tax havens and popular offshore financial centres offer favorable tax conditions, it is crucial to ensure compliance with UK tax laws to avoid legal complications.