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Non resident directors want me to act

Non resident directors want me to act - anything to worry about here?

I took a call from a close relative of a current and trusted client.

H+W to be directors and ahareholders. They are resident in France and want to set up a UK company to supply consultancy services. They intend to appoint adult son in UK to have a UK address and to open the company bank account.

UK business is negligible, mostly China/Africa

If the enquiry had come from a total stranger I would dismiss it for the smell, but after being recommended by a long-standing client I need to consider it seriously.

Friends, what are your thoughts - both technical and non-technical?

 

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27th Mar 2019 13:38

From an ID POV if they are in France, you should have no trouble in getting notorised documents. Our French friends love a stamp. If they are ex-brits they should have a UK passport too.

Do ensure however that your new clients take advice in France, they might want to tax the whole thing there, irrespective of the UK company.

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By Jdopus
27th Mar 2019 14:31

Have you asked them why they favour a UK company?

Other than that I don't really see a problem, the only complexity I would be very wary of is that it's tricky to do tax planning if you can't see the full picture and you're working across two jurisdictions.

Will they be doing the work in France or is it being carried out in the UK? Depending on the VAT rules post Brexit the place of supply rules could be quite complex and potentially in a hard brexit situation it could mean dealing with French VAT rules.

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to Jdopus
27th Mar 2019 15:24

No work will be carried out in the UK.

The motive for a UK company appears to be tax-related, but I am taking the prospect's word for that. They may be right or wrong but I wouldn't be doing any research or international comparisons.

Hmmm, they'll possibly need local payroll processing . . . this could get messy.

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By Maslins
27th Mar 2019 16:51

My understanding is a UK company will always be tax resident in the UK. However if it's centrally managed and controlled from another country, then it will be tax resident there too. If the owners/directors live in France, and run the company from France, I'd suggest the company will be tax resident in France (hence French equivalent of corporation tax etc relevant).

Also the individuals will presumably be French resident, so subject to French personal taxes.

We do get a few people asking us to help with a similar situation. I believe that UK regulations are a little easier than in most of our EU counterparts, which is the appeal. Plus many of them are (ex) Brits with lots of work contacts in London who they worry wouldn't want to work with some foreign entity they don't understand. However, to my mind you can't escape the tax rules of the country they actually live in.

A couple of our clients sort of in this situation set up as the equivalent of a sole trader in their local country, and that effectively invoices for most of the profit from the UK Ltd. So UK Ltd makes naff all profit, hence not particularly important where it's resident. They make a nice big sole trader profit wherever they live, and they declare that (we have no involvement). To me it seems fair enough, the profit ends up being taxed where the work is done/the worker lives. Whether it's very strictly legally kosher or not, I don't know, but at least doesn't seem a massive tax dodge.

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to Maslins
27th Mar 2019 17:08

Yes, the French residency and therefore French personal taxes is already understood.

You raise the important point of 'corporate residency' which is what I am struggling with at present. More research for me to do, I think . . .

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27th Mar 2019 17:16

If they are performing their duties in France, then their UK co is going to have a branch if they aren't doing something else to mitigate this eg invoicing from a French entity like Maslin says. There are issues with sole trades only having one client and spouses doing the same sole trade so they def need to take proper French tax advice
We spend a lot of time unravelling messes where people move to France and think they can just keep the UK co ticking over. UK director (making decisions) helps to keep some of the profits in the UK but they definitely have French issues.

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to accountantccole
27th Mar 2019 17:53

Good points. Thank you.

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27th Mar 2019 18:02

It sounds like this work would be an "outlier" compared to your other client work. Simply from that point of view, my experience of such cases is that they tend to be less profitable as it takes more of your time to deal with the non-mainstream.

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to Red Leader
27th Mar 2019 18:03

You are right. I was running on adrenalin. It's wearing off.

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By Jdopus
to Red Leader
28th Mar 2019 10:20

They are a good way to learn new skills however!

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to Jdopus
28th Mar 2019 11:11

That makes sense only if the work then becomes part of your mainstream.

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to Red Leader
28th Mar 2019 11:57

True, there is little point in making a giant effort to be a specialist in something you have no intention of specialising in. It just isn't a commercially viable.

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By Mr_awol
28th Mar 2019 10:40

Will adult son actually do anything or is it actually as you infer - that they will appoint him purely to help ease the admin of trying to justify this being a UK company.

If they're going to milk it, why not go the whole hog and set the company up in the Isle of Man, or Andorra? Or, if they want somewhere EU based, I believe Poland were due to go down to 9% too.

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to Mr_awol
28th Mar 2019 11:49

Yes, they are motivated by milk. I suspect the son's involvement will, principally, be to get the bank account sorted.

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