Hi,
So how does the Agent of Undisclosed Principal work and can it be substituted by an LLP with a UK partner owning a 5% share and the non UK partner/s owning the rest?
Let's start with the directors and shareholders: How does their place of residence affect the operation of this structure? Need they all be UK resident, non UK resident or does it not matter?
If the agent does not "carry on a trade in" the UK (which means sells into the UK as far as I can fathom, am I right?) the principal is not taxed in the UK. What if the principal is not from a jurisdiction with a UK DTT?
The LLP is fiscally transparent it is claimed. Does that mean that (assuming not trading in UK) a single uk corporate partner would pay CT on its share of the profits only and the offshore partner(s) would not, or would they have to pay CT and offset it against tax in their home jurisdiction and if that is lower how can that be recovered if at all?
Replies (20)
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mmm
i would have thought it would be preferable not to be in an undisclosed situation because of the potential of taking on unintended liabilities.
more than that it is difficult to say because your question is unclear - you mention a LTD co is that the UP?
companies are normally resident where theyre are registered and the position/ residence of the directors can be entirely different.
all will depend on how the profits , if any , arise - is there a transfer prciing issue here
Why use a UK structure at all?
If only 5% of the ownership is UK, and the business trades elsewhere why make any part of the structure UK based? As carnmores mentions, this kind of structure can have unintended consequences unless properly thought through, and with current UK "anti avoidance" fever in high gear, I would be inclined to look elsewhere.
Two possible alternatives: -
1. If an EU "presence" is required, Cyprus (as agent) has only 10% Corporate tax (and DTT's all over the place) and the undisclosed principal could be (say) a non EU entity with zero tax.
2. If an EU presence is not required, the same thing but using HK or Singapore.
Either way the UK based partner can openly declare his dividend/remuneration as received.
Cyprus v IE v IoM
wildgoose - You'll make your own choice, and I'm not trying to influence you ... but I feel I must correct one or two of the comments made.
(1) Cyprus. Where did you get the idea it is bureaucratic? Au contraire, we find it one of the easiest jurisdictions to get on with anywhere eg
VAT registration - always in a week or two,
Accounts, most things allowable (including, for example consultancy fees from BVI companies, salaries paid to non resident employees) and not filed at the registry!
Audit - think UK c. 1985 and you have the idea
... I can only think you must have been tied up with a crappy local accounting firm who were trying to generate fees because the Cyprus IR is a dream to deal with for the simple reason they know 90% of their corporate tax payers are ultimately foreign and will leave if pushed too hard.
(2) IE & IoM
(a) IE - cost of the bond for a non resident director is pushing €3k and IE is very close to home (in terms of information exchange) - nothing to do with EU, this dates back to the days of the "lump" (building trades) but does make IE a bit too close for my taste. However if this is not an issue, yes IE is fine.
(b) IoM - Is and is perceived as a tax haven pure and simple, but with a VAT system that is effectively a satellite of HMRC (Revenue sharing arrangements). Very little privacy for the last few years so I tend to avoid it. However if 0% tax appeals (as well it might) and privacy is not an issue, go for it.
re LLP
why use an LLP as disclsoure of members is required you may be better off with a limited partnership - the UP must be declared to HMRC somwehere alomg the line - why the secrecy anyway it always invites questions
Cyprus Branch & LLP/Agency
1. Cyprus.
Yes, with a "fiscal representative" it is always possible to register for VAT in any other EU country without having a presence there (indeed you are theoretically obliged to once certain t/o thresholds are reached when selling B2C). However, I don't see the advantage in simply having a CY VAT number. It might be better to register a branch as all profit originating in Cyprus (less costs of doing business) would be taxed at 10%. Although I'm familiar with establishing a Cyprus branch of a UK Ltd company, I'd need to double check the rules for an LLP. As this is going beyond the general nature of these forums, I'll continue this by PM.
2. LLP and undisclosed agency agreement
I begin to lose the plot on this. The UK end (the LLP) would typically be retaining (say) 10% of the gross with 90% going back to the principal as being the principals funds. Why would you therefore expect the UK end to have anything more than (UK) administrative expenses to offset against UK declared profit? I completely fail to understand the references to foreign companies. We have used undisclosed agency agreements for years (albeit with companies not LLPs) and have never come across this. Again, this is perhaps getting to be more than a forum response and I will continue this by PM.
VAT As an aside, if you advise HMRC that you are neither going to buy or sell in the UK, I doubt whether they will allow VAT registration, the same applies to the IoM (being effectively UK VAT) ... Not sure about IE but they take their cue from the UK in many areas.
Time for Hans to send a bill?
This discussion is all very well but without looking at the particular detail of this clients needs and aspirations I think it would be difficult to give more specific advice.
It would however be interesting if Wildegoose could feed back in general terms how this works out in the end.
specialist advice in a general forum?
... but without looking at the particular detail of this clients needs and aspirations I think it would be difficult to give more specific advice....
I agree with Chris Small, I suspect that this is about as far as we can go in a general accountancy forum. Wildgoose probably needs to instruct a specialist and provide that specialist with the full details of the who, why, and what.
Goose. It all depends on what you mean by...
Wildgoose, there are too many underlying assumptions that need to be clarified at this stage for any discussion to be meaningful. Each country has their own thresholds and criteria.
it certainly is of general interest
and we are commenting perhaps without full detail of all the facts - i cannot understand your reluctance to go to a tax professional which appears to be the most appropraite route for you now that you are better informed :-)