Thinking about spending a few years in the UK and am wondering if there is any way I can set myself up with an offshore company/trading account so I will only have to pay tax on gains remitted to the UK. From research so far, my understanding is that if I fully control and operate an offshore company from within the UK I will be liable to pay tax on worldwide profits. If anyone has been through this and found a solution, your feedback would be appreciated.
I'd find somewhere with sunshine. It is grey and wet most of the time here. Going to check out Gran Canaria in January. Here you can get a deal on real estate in South beach these days.
just21 - I lived in a sunny place and got sick of it after awhile. fluttrader - thanks for the link, I'll follow it up with them.
Non dom have to pay £30,000 a year after seven years residency. This is a new rule taht has just been announced. There was meant to be an exodus but they cannot sell their houses!
Non-domiciles do not have to pay tax on overseas earnings. So if you setup an offshore account you will pay 0% if it's kept out of the UK. But companies that have "management and control" - such as you trading while you live here - in the UK usually will be classed as UK companies. There are two ways to avoid this - trade under your personal name, through a non-UK broker and trading mostly in non-UK markets. You'll then qualify for the non-dom overseas exemption. Or, use an offshore tax-haven management company to set up a virtual office, hold board meetings overseas etc. As a non-UK citizen this would usually de facto be enough to establish non-UK management and control over your company. Technically you might get taxed but the real world chances are almost zero unless you become a long-term (e.g. 5-10 years+ UK resident), even then it's unlikely. Also, the liability even if you lost a tax case would be corporate, not personal, so you would not face personal tax debts. However, a recent change in the law means that to claim the non-dom loophole, if you reside here long enough (can't remember exactly but it's several years IIRC) you have to pay a £30k per annum tax (similar to Switzerland which will let you pay 50k Euros and then no tax above that - good for high earners), OR pay normal UK tax rates on remitted earnings. So, if you plan to trade under your own name, and live here long enough, you need to be earning a reasonable income in dollar terms to justify trying to claim the loophole. This is to avoid any foreigner just paying no tax at all while living here long-term and using public services etc. Thus the "offshore managed" non-UK company may be the more attractive approach. Up to about £32k sterling, tax rates are not onerous (somewhere in the high teens % if I recall) but above that it gets to 40% on each marginal pound earned, so pretty high. If you have savings then just live off those (which is tax-free) to supplement the 32k you remit each year, if necessary. You can work out the equilibrium remitted income per annum at which you would be better off paying the £30k flat tax than normal UK tax rates. E.g. if you are a big spender and remit £200k, your tax liability would be about £74k - the flat tax of £30k for non-doms would be vastly superior. At £90k ($175k) it's roughly equal. Remember this is only if you stay here long-term. First few years you can claim it and pay zero income tax. Obviously you should take all advice on ET with a pinch of salt and speak to a tax barrister specialising in non-dom stuff if you are serious about this. However, I did just that a few years ago and this is basically the advice I got.
If you are only going to be in the UK for a few years, you could probably get away with not registering for taxes at all. Obviously I don't reccommend it but the UK's IR is so inefficient -it doesn't compare with the IRS -so you would probably get away with it. I know a few traders that set up "tax free" companies in Gibraltar. Avoid this with a barge pole -the gibbo lawyers and banks will bleed you dry with their expenses. Also bear in mind that wire transfers from the shit hole take weeks to arrive, if they arrive at all...
Thanks Cutten for your detailed reply. The offshore tax-haven company sounds like the way to go for me if it is all legal (don't want to take any chances). I will get several opinions on this before I go ahead. I'm only looking at a 2-3 year stint in London so 30k tax charge won't be applicable. I could just live off savings in this period, but it would probably look better to remit at least some earnings so no one will get too suspicious.
I'm not an expert on this but... If you are a US citizen, then when you set up the offshore account or corporation you are perhaps still going to have to provide your American passport and tax ID. (you won't have British ID will you?) Therefore, I don't see any advantage in doing this from the UK or the USA. The IRS is cracking down harder every year on these offshore corps/accounts. Although it is my understanding that you can still hide a corporation in many offshore countries, this is changing rapidly. As for opening the account in the UK, my understanding is that all your info is reported straight to the IRS (only Americans have this problem because the US govt is able to put so much pressure on other countries to report). If you were from some nation besides "the land of the free" it wouldn't be a problem.