What Offshore Company Directors Need To Know
You live in the UK and are considering setting up an offshore company.
Ever wondered what this is all about? What responsibilities do UK offshore company directors need to be aware of? How do you set one up? Would you benefit?
What is an Offshore Company?
An offshore company is one that does business away from the resident country of the jurisdiction of incorporation. The owners or 'incorporators' need to be domiciled away from the offshore location and the majority of company trading activity should also be somewhere besides the incorporation location country. So a business trading in the United Kingdom could locate its business company offshore if the business owners also lived in the UK.
What do UK Company Directors of Offshore Companies need to know?
Firstly, choosing the name of your company is one of the requirements, alongside a search in the country of desired jurisdiction. If you are incorporating in Switzerland, a check against your company name needs to be made there.
Secondly, the primary purpose anyone sets up an offshore company is to minimise taxation obligations and maximise profitability. It is wise to ensure the style of business you run is compatible with a type of offshore arrangement.
- A straightforward offshore arrangement is where your business trades in the UK, you are the company director and owner, and you live in the UK. An offshore company set up in a lower tax jurisdiction receives your accounts, and you pay corporation tax to that country. Additional fees involved include the hire of an expert offshore set-up agency to handle all the incorporation requirements where the company is incorporated. Most will also file your local tax information and monitor your obligations within the jurisdiction for a nominal fee. This arrangement is commonly seen in countries such as The Bahamas, Cayman Islands, Belize, and The Seychelles.
- Some UK entrepreneurs will take on a company directorship within a shelf company. This is a corporate entity previously established offshore, and available for purchase. When your company takes over the shelf company, you save on the time it takes to set up a new offshore company. Additionally you can start business trading and can instantly transfer and operate from the UK. The company search will reveal how long the shelf company has been incorporated and is often the most attractive feature of buying a shelf company, as it appears you've been trading for a longer time on public company search records.
- A company director may create an offshore company to support onshore arrangements through a UK Agency company. The export business model is a good example here. Let's say your business involves exporting to Russia, and this is your only business stream of revenue, and you manufacture what you export, here in the UK. Your company wants to be identified as a UK company, for quality reasons, and you can do so under UK Agency arrangements. All your accounts go to an offshore company, managed by a nominee UK Company Agent. Your UK Company can use it's name on all the goods and services it provides.
- The UK Company Agent registers the offshore company, all your revenue goes to the agent, and your contract is with them. The reason export companies find this arrangement preferable, is that a UK based export company that does not trade within the UK, or with any UK business, can use this agency offshore method legally. So they could pay taxes in Switzerland, whilst putting on the products "Made in Britain". If you are launching a product overseas, but nowhere in the UK, it is a good taxation arrangement for you.
How Will My Company Benefit?
Lastly in all offshore company arrangements there needs to be shareholders and a company director. In most jurisdictions they can be one and the same, and it is worth noting that the company director can also be another company. The variety of offshore company options means that any company director can usually find an arrangement to suit.
By far the greatest benefit to arranging a UK land based company to locate offshore is taxation minimisation. Many small businesses utilise offshore companies to give themselves the chance to become profitable, and secure a price competitive edge on their trading rivals.