Hi everyone I'm Kitti. I really value advice!
This is a business that gets 50% of clients from the US the rest from Europe, Asia Pacific. Only 10% from UK. So I wonder why start in the UK? I initally called this post
British Global Tiny Business Startup UK or Delaware?
but renamed it to the main question:
Start a LTD but taking no wage or div. Tax Avoidance?
If I set-up a company and make money inside the LTD company (US or UK) but DO NOT TAKE MONEY OUT (no salary or dividends) would I be classed as tax avoidance crafty babe by HMRC or Europe? Does that answer change if I am UK ltd or Delaware?
WHY? - I want to defer income to when I am living overseas and volunteering with a children's NGO. Not that the tax man cares for reasons and motives.
Background to this...
I have started a couple of tour services and business picked up very fast, we got some famous VIP's and since it was mainly in China I just took cash or personal Paypal.
I do not need China or Asia certification or travel company as Chinese offical local travel agencies provide ground service there, I don't want to start a business in China as realistically you have to give half to a local to succeed. I currently am doing everything global online, all are freelance, writers, marketing, so I am really creating a brand, service level, and telling the local operator what I want. Now I need a LTD to gain trust, join some travel societies, prof. memberships, no need for ATOL as no flights sold. We focus on destination products. We do not sell flights and do not sell any destination or service inside Europe, only have Europe customers come outside europe with us. So now I need to form a business. So I am selling services in Asia but I only hold a British passport, I was born in lovely England. This is still small fry, less than 250,000 turn over, more like 10's of thousands at the moment as we mainly just charge guide or consulting fees. I live in Scandinavia at the moment, but understand the UK business system, so prefer that and tax is less compared to Finland.
Since most of my customers are US based, and that is where the high-value clients normally come from it makes sense maybe to consider starting over there. Also American's like 'US Company', builds trust. I do not need to draw money from the business, got money, so I want to put it back into growth of just let cash build in the company and when we go and do NGO work (living outside EUROZONE for 3-5 years) we draw income from the company then. Since I am not a US citizen I have no need to pay tax there. Is this a go? Thanks all!
Replies (16)
Please login or register to join the discussion.
We're not trying to duck out of giving advice.
But your situation is a minefield.
Income in all sorts of countries. Tour income - TOMS and VAT (which even VAT specialists don't always know about).
Residency situation?
Any advice on Trip advisor will only be as good as the sort of person that uses it?
No idea
Can a limited company make and keep it's (sic) own money?
Absolutely no idea. HMRC will not know. Sounds like you are stuck.
Any thoughts on train travel from Paddington to Rome and a reasonably priced hotel within walking distance of The Vatican?
But seriously, your question raises so many issues that concise guidance is difficult to give.
1000 questions
The short answer is Yes.
But there are a thousand other questions that you need to ask before you get to that stage. As HMM said, you're walking through a minefield.
You won't be avoiding tax
I'm not really sure what you are driving at but you seem to think that the company money won't be taxed if you don't take it out as salary. The company will pay corporation tax on all its profits. If you do not take out money as salary (which would be allowable as a deduction) then that money would be taxed at corporate tax rates. When you eventually take the money when you are non-resident (paying yourself dividends) then it is not going to be taxed in the UK, but then it wouldn't anyway if you kept payments within the basic rate band, since the dividends come with a notional tax credit. Foreign countries that do not recognise the UK notional tax credit may want to tax you on any distributions, so you could effectively end up being taxed twice.
If the company earns money that stays in the bank, it will pay corporation tax from that money and then, presumably, the remaining money in the bank will earn interest. That too will be taxed on the company.
Just be careful that while abroad you remember to keep filing your company accounts annually, or your company may be wound up in your absence, the company's assets will become bona vacantia and Her Majesty's Government will empty the company's bank account into its own coffers.
Early concerns
1. What is the connection with the UK?
2. If the company is trading why are you pocketing the sales receipts?
You should have sought professional advice much sooner than this
finland
Kitti currently resides in Finland.
Finland's equivalent of HMRC will take a dim view of a business registered in UK ( or US) but trading from Finland.
Keep things simple
Since you live in Finland, set up a company in Finland, hire a Finnish accountant and pay your taxes in Finland. If you can't afford to do this, then you really haven't got a business.
If you try and set up a company in another country then you have international tax issues to deal with, which would prove extremely expensive in professional fees and (if you don't do things correctly) you will pay lots more tax than you need to.
Would i get a free holiday
i was thinking about it for 5 minutes than asked why am i thinking about this I won't get a free holiday would i and even if i do taxman not going to be happy for leaving him behind.
Mmm...
As a sole trader, you can't opt to be taxed in the UK unless you work in the UK or your normal business base is in the UK. A limited company has its 'nationality' defined by its registered office location so a company in the UK needs a UK address. This then opens up all sorts of international tax complications if most of the income is earned abroad.
You may feel you can't afford professional advice, but you need it.