Why Pay Corporation Tax If You Can Set Up Offshore?

In the offshore jurisdictions of Guernsey and Jersey in the Channel Islands, no tax is payable on any income generated outside of the Islands. In other words there is no income tax payable on non Jersey or non Guernsey income. In addition, there is no corporation tax, no capital gains tax, no vat, no inheritance tax or gift tax.

Corporation tax is payable by UK companies on its profits in the UK. It is payable on all their income sources for income tax and capital gains purposes. It's also payable on their worldwide profits regardless of where they arise.

Non UK resident companies pays corporation tax only on their UK source income but only if the company both trade through a UK branch or permanent establishment and derive its UK source profits through that branch or permanent establishment. UK and international Companies can be restructured offshore in such a way to benefit from this.

The current corporation tax rate in the UK is 28%. For small companies with profits up to £300 000, the rate is 21%. Setting up or restructuring offshore would enable a saving on these taxes. The benefit of no vat would in addition allow your business to compete with competitors at a better price as no vat would be chargeable on products or services to clients. In the UK this would mean a discount to clients of 20% on products or services which is the current rate of vat payable in the UK.

If you are a UK company conducting business locally or internationally you should look at ways of restructuring your business or part of it offshore to benefit from non corporation tax and vat.

New businesses or companies who intend to do business in the UK and or globally should also consider such an option to benefit from the saving.

Structuring offshore also allows for other tax benefits like no capital gains tax, inheritance tax or gift tax.

Many well known large, recognised and reputable UK and international companies are incorporated in the Channel Islands or have a Channel Islands element/presence and make use of offshore tax benefits.

The question you have to ask yourself is, if large companies and organizations make use of the tax advantages offshore, why shouldn't your business also benefit from that. Every one is entitled to structure their affairs in such a way to pay less tax. There is a huge difference between evading tax and structuring for tax efficiency.

A number of companies listed on the London Stock Exchange, the Alternative Investment Market or other recognised stock exchanges have their incorporation in either Guernsey or Jersey.

Everyone's needs and tax consequences are different and should always take professional advice. The information provided in this article is for information purposes only and advice should be taken on each and every proposed transaction or structure.