Despite economic, political and social challenges across the globe, expanding overseas remains high on the agenda of UK businesses. Where a UK business has plans for expanding overseas, tax issues and opportunities are almost certainly going to arise.
As more and more individuals are looking to relocate overseas, so to are many businesses. This may be because the business owner is leaving the UK, or because the owners want to expand and/or set up a regional centre overseas.
The way the company operates in a new country will be critical in determining its tax liability. Usually, a company will have a taxable base if it is resident in a country in which it is doing business or, instead, has a permanent establishment in the country.
There are many tax considerations including an analysis of double tax treaties, VAT, transfer pricing and extraction and/or repatriation of profits, and it is critical to seek expert advice. We can assist in all aspects of setting up a business overseas.
There are many reasons why someone might set up a company or business overseas, and overseas structures have been particularly popular with UK property investors. However, there are also many reasons why someone may want to “move” that business back to the UK, not least because many of the tax advantages which existed when the business or company (or trust) was set up may no longer exist; and the costs of operating that structure may be prohibitive. We have significant experience in assisting clients with winding up overseas structures (including trusts) and “repatriating” them to the UK if appropriate.
Our client owns three UK companies and recently moved abroad for the foreseeable future. Our client intends to run their companies from another country and wants to understand any UK corporation tax consequences of doing so.
It is possible for a company to be resident in more than one country and if this is the case, we need to review the double tax agreement (DTA) which should allocate treaty residence to one of the jurisdiction. If a company does lose it’s UK tax residence status, there will be a deemed disposal of its assets for UK tax purposes.
We provided an analysis of the UK tax consequences of our client’s companies losing their UK tax residence status and advised on the steps our client would need to take to ensure that this does not arise. We also advised on how the DTA would impact our client’s companies if they do remain UK tax resident and any associated reporting requirements.
Our client was able to understand the steps necessary for their companies to remain UK tax residences and avoid any adverse UK tax implications. Without this planning, our client may not have been aware of the deemed disposal rules for a company losing it’s UK tax residence status and could have faced a large disposal for tax purposes.
You’ll need to review potential permanent establishment risks, local corporate tax rules, VAT, transfer pricing, and the application of any double tax treaties. Each country has its own rules, so it’s essential to get specialist advice early.
A permanent establishment (PE) is a fixed place of business in another country that may create a taxable presence there. If your activities fall within the PE rules, you may owe local tax even if your company is based in the UK.
Double tax treaties prevent the same income from being taxed twice by allocating taxing rights between countries. They are crucial when managing cross-border operations and determining tax residency.
Yes, and in many cases, it may be a sensible move, especially if the original tax advantages no longer apply. We can help unwind offshore structures and ensure a smooth and compliant transition back to the UK.
Running a UK company from abroad may create dual tax residency, potentially triggering complex reporting and tax liabilities. We can review the relevant double tax agreement and advise on steps to mitigate any unintended consequences.
