The UK Agency Company
An agency contract between the two entities is drafted which records that the British company acts on behalf of the offshore company but that all trade will be conducted in the agent’s name. Therefore it is the company based in the United Kingdom that will be in contact with clients, issue invoices and receive payments but the offshore is the controlling party.
Under this arrangement income is deemed to arise on the offshore company and therefore taxed according to the legislation of the country of destination, usually at 0%. It is important to clarify that the UK onshore company may not exercise an activity in the United Kingdom or conduct any trade in its own name otherwise it will become subject to British tax law.
The UK Agency Company therefore enjoys the positive reputation and ease of commerce offered by the United Kingdom while also taking advantage of the offshore company’s tax benefits, as the offshore company receives all revenue.
Diagram of the UK Agency Company
Caution: Caution: the term “offshore setup” may in some cases be considered tax fraud, tax evasion or an abuse of rights. The diagram above may be illegal in some countries, and while it gives a quick overview of international practices, it cannot be considered definitive or applicable on the basis of the illustration presented. If you are interested in such a setup, you must consult a qualified advisor.