The UK company – a tax efficient vehicle
Sovereign UK is currently working with a China-based agency that assists Chinese families that wish to send their children to school or university in the UK. This might also involve one or both parents re-locating to the UK and taking advantage of one of the UK’s immigration by investment programmes – the Tier 1 (Entrepreneur) visa or the Tier 1 (Investor) visa.
Sovereign, through its specialist partners, is able to deliver educational consultancy, assistance with immigration by investment programme selection and application, and a variety of UK relocation services such as sourcing suitable residential property for rental and/or purchase.
A further reason to relocate to the UK is to take advantage of the attractive fiscal options that the UK offers to non-UK domiciled persons, especially those individuals that are seeking to become resident in the UK and those that have not yet been resident in the UK for at least 15 of the last 20 tax years.
Sovereign UK can also assist with incorporating a UK company for the setting up of any new business. This could be as part of the Tier 1 (Entrepreneur) visa programme, but a UK company is also a highly tax efficient investment holding vehicle for the receipt of foreign dividends.
All UK companies are UK resident for tax purposes under the ‘incorporation rule’, which results in liability to UK corporation tax on worldwide income and gains, subject to double taxation relief. The current rate of UK corporation tax is 19%, although this will fall to 17% in 2020. However, there are important qualifications.
Since 2009 foreign dividends received by a UK company have generally been exempt from UK corporation tax in order to place the UK tax treatment of foreign dividends on the same footing as UK dividends.
In this respect UK companies can substantially replicate the efficiency of ‘offshore’ companies in paying no corporation tax on various income streams in their domicile of incorporation but, by utilising the UK’s network of over 100 double tax treaties, UK companies can provide the additional benefit of mitigating source withholding tax on the overseas dividend.
Last year’s changes to the Substantial Shareholdings Exemption (SSE) rules, which provide an exemption from capital gains (and a disallowance of capital losses) for disposals of shares by companies that meet certain conditions, should also allow more gains to be exempted.
These factors, together with the high status in which the UK company is perceived, represent compelling reasons for using a UK company for market entry, trading, holding or investment. Sovereign UK anticipates a greater flow of business from China and we are ready to be of service.
If you require any further information, please contact Simon Denton.