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UK Agency Company Low Tax Nominee Company
Tax Structuring using a UK Agency Company as an agent for an International Company.
One of the benefits of a UK Agency Company is that it conveys a degree of respectability to other entities in which it trades. However, as the rate of UK corporation tax is 20%, for non-residents looking to legitimately mitigate chargeable tax, it is possible to incorporate a UK agency company to act as an ‘agent’ on behalf of an overseas international company (‘Principal’).
In its capacity as Agent, the UK Company is authorised to enter into transactions on behalf of its Principal. In essence, therefore, one would run a business through an international company but employ a UK company to act as an agent in all it’s dealings with customers and suppliers. This can prove to be a very attractive structure for international trading and tax planning purposes. The key issues in respect of UK tax is to ensure there is a commercial contract setting out the terms of an agency relationship and a market rate commission (say 5%-10%) for services rendered.
The UK Company enters into agreements, on behalf of the Principal, to purchase machine parts from a German manufacturer and supply the same to an Italian wholesale group.
The German company will invoice the UK Company for the market value of the machine parts, quoting their respective VAT number and reflecting the UK Company’s VAT number on their invoice, thus zero rating the supply.
The UK Company in turn will request that the goods be delivered directly to Italian warehouse from Germany.
At this time the UK Company will issue an invoice to the Italian wholesale group, again reflecting the UK Company’s VAT number and that of the Italian Company, in order to zero rate the supply for VAT purposes. The parts are thus delivered with all documentation reflecting the UK Company and not the original supplier.
Once the goods have been received and accepted in Italy, the Italian wholesale group will pay the invoice received from the UK Company direct into the bank account of the UK Company.
On receipt of the funds, the UK Company will in turn pay the invoice received from the German manufacturer.
The remaining funds, less the agreed fee for the UK Company, will be remitted to the Principal.
Points to Consider
- It is advisable that this structure is not utilised for trading in the UK, as UK sourced income would be subject to taxation.
- It is recommended that the Directors and shareholders of the UK Company and Principal are not connected, and the majority of the board of directors are not UK resident.
- Any agreements that the UK Company enters into on behalf of the Principal should be signed outside the UK by one of the non-UK resident directors.
- A certificate of tax residence may be required in order to avoid withholding taxes.
It is a requirement for all UK Private Limited Companies to file annual accounts with the Inland Revenue and the Registry.