Home Working in the UK Self-Employment Offshore companies in the UK
Last update on May 01, 2020

Consider the benefits of setting up a UK offshore company by registering, establishing, or incorporating your business outside your country of residence.

Offshore companies are businesses that have been registered, established or incorporated outside of the country of residence. Offshore incorporation is a straightforward process in all of the popular offshore financial centres and tax havens and can provide a wide range of benefits to the company and company principal(s). Offshore company registration is undertaken by individuals primarily for the following reasons:

  • Privacy
  • Asset protection
  • Reduced tax liability
  • Protection against lawsuits
  • Flexible business laws
  • Ease of operation
  • Confidentiality

Advantages of offshore companies

An offshore company offers numerous benefits to an existing business or to an individual on a multitude of levels: offshore asset protection, confidentiality, enhanced privacy, tax savings or simply grow your business outside of the UK / EU.

Conducting business and undertaking banking transactions in the name of a legal entity, such as an offshore corporation, provide significant privacy and confidentiality benefits. The names of the officers, directors and shareholders can be excluded from the company’s documentation in many jurisdictions e.g. the Caribbean and Belize. Most offshore financial centres will not divulge the responsible individuals within the offshore corporations, specifically the owners’ names, to a third party or foreign government. However, exceptions will be made in the event that an act of terrorism or a criminal atrocity has taken place and is being investigated.

Asset protection

The placing of assets into offshore corporations and overseas legal structures can provide a strong layer of protection from future liabilities. By having trusts, investments or bank accounts and other assets owned by your offshore corporation, it makes tracking them down via an asset search difficult. Offshore companies provide highly effective asset protection and effectively screen your finances from public view.

Legal protection through incorporating offshore

If a legal opponent is pursuing a legal action against you, it typically involves an asset search to make sure there will be money to pay out, in the event a judgment is awarded against you. Forming offshore companies and having assets held by the overseas company mean they are no longer associated with your name. Therefore your assets can be effectively shielded from legal opponents, judges and court rulings simply by incorporating offshore.

An additional benefit is simplicity and ease of operation. Most overseas jurisdictions make it simple for anyone who is interested in offshore incorporation as they appreciate that time is a valuable commodity. The statutory obligations in the running of the offshore entity have also been simplified.

Disadvantages of offshore companies

One of the main drawbacks is in the area of remittance and distribution of the assets and income of the offshore company. Once monies are transferred to the resident country, they become subject to taxation, which can negate the benefits of the initial tax-free environment.

Due to the absence of detailed publicly maintained registers, proving ownership of an offshore company can be difficult. While anonymity can be an advantage for offshore companies, when it becomes in the owner’s interests to declare themselves as the beneficial shareholder, this might be a difficult and time-consuming exercise.

Having a company registered outside the UK cannot protect an individual from UK tax legislation surrounding IR35 (legislation surrounding the taxation of contractors). According to HM Revenues and Customs (HMRC), it does not matter where a company is incorporated when investigating whether a contractor is subject to IR35.

Risks related to an offshore company

The main risk in relation to a company not registered in the UK is falling foul of HMRC taxation rules. The HMRC never approves tax schemes, although any tax avoidance scheme must be registered with them. Retrospective legislation can be used to declare a scheme that was legal some years ago as no longer legal now. In this case, substantial back taxes plus interest and penalties may become payable that would eliminate all the benefits of the non-UK registered company.

Some offshore jurisdictions are more stable than others, whether from a political or economic perspective. It is worth bearing in mind that the physical distance, lack of knowledge of local customers, government and social attributes can increase the risks of financial loss occurring in some countries.

Renowned offshore locations

The following locations are well-known offshore locations:

  • Belize
  • The Caribbean
  • Nevis
  • Bahamas
  • The British Virgin Islands