UK Nominee Company
One of the major benefits of utilizing UK companies flows from the very fact
that the UK is not a tax haven, not black listed, is a member of the OECD
and UN so a UK based tax planning structure would not generally attract the
same level of attention of those based in a pure tax haven country.
A UK company is incorporated and enters into an agreement with the offshore
company. Under that agreement, which is committed to writing and executed by
both parties, the UK company agrees that it will trade on behalf of the
offshore company as its nominee. All contracts of purchase and sale, all the
invoicing and all the general correspondence will be made in the name of the
UK company and the UK company receives all the revenues from such business
as nominee for the offshore principal. The agreement should state that all
monies received are received as nominee for the principal save insofar as
there will be an agreed fee which will be retained by the UK company. That
fee may either be expressed as a flat fee for all the trading done on an
annual basis (sufficient to cover the minimal costs) or, expressed as a
percentage of the gross revenues received. The standard form is that 5 or
10% of the invoice total in respect of each transaction is retained by way
of fee by the UK company.
In order to protect the trading profits from UK taxation it is essential
that no trading activity must occur within UK. What constitutes UK trading
activity would be construed by reference to the normal indicia such as the
place where the contracts of sale are executed and the place of acceptance
of an offer made outside UK. The offshore company must of course be
non-resident in UK for tax purposes itself. This means that its central
management and control must reside outside of UK.
The nominee fees received by the UK company will of course be liable to
taxation insofar as they generate a profit for the UK company.
One solution to the problem of common control is that the UK company should
be beneficially owned by a third person (our nominee). If the client has
doubts as to the safety of such an arrangement he should realize that the
contract between the two companies is enforceable and that in any event the
vast majority of monies will be immediately passed over to the offshore
company. However, even when there is common control between the two
companies, provided a commercially viable relationship exists between the
two companies and the rate of fee retained by the UK company is in line with
what might be expected of an arms-length transaction. There is no reason why
the inland revenue might make a direction adjusting the UK company's deemed
remuneration.
