Any experience on non UK resident investor?

Any experience on non UK resident investor?

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Current UK client who is UK resident, Mr UK has a limited company selling hair products.

To keep matters separate, Mr UK has set up a new UK Limited company with a Chinese investor who is non-UK resident Mr China. The latter is already a Director of a company manufacturing hair products in China. He wants to be able to distribute one branded hair product in UK. Current set up for UK limited company is as follows:

  2 Managing Directors Mr UK and Mr China

  Mr China owns 50,000 Ordinary Shares of £1 each

  Mr UK owns 1 Ordinary Share of £ 1 each

Mr China will put up all the money for the UK limited company.

1. Mr China wants to send the branded hair product via his Chinese factory which will still belong to the factory until sold. So we will be dealing with Consignment Stock. As I am not familiar with Chinese accounting and tax systems, I think it safer to leave it to their Chinese accountants to advise on the Consignor accounting and tax entries.

The UK limited company will therefore be the Consignee and account for the stock only when sold. Do you think that as the stock will be from the Chinese factory, commission has to be paid to the Chinese factory and not to Mr China? As such no self assessment tax return will be required.

2. No decision has yet been made about the remuneration of Mr UK, whether to pay him only salaries, or a mixture of salary and dividends. I have suggested that they change the Ordinary Shares to different classes of shares;

 Mr China Class A Ordinary shares with no rights to dividends and

 Mr UK Class B Ordinary shares with rights to dividends

Mr China will visit the UK for the first time in about 2 months' time to sign paperwork and sort out UK business bank account. As nothing would have been sold by then, is it correct that there would be no significant change in the value of the business, and no capital gains tax to account for?

3. When Mr China increases his investment to more than £ 50,000, how is it accounted for in the UK limited company books? Would the UK company shares need to be revalued?

4. What other matters to consider?

Your comments will be greatly appreciated. Thank you.

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