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Shamus


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Company acting as an agent
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Hi,

actually the non residence can be extremely relevant and should be mentioned in the post over on Aweb. Include the number of years that you have been non resident and also how many days per year you visit the UK for. (I'm assuming you do come to the UK as it is a UK company that you are talking about).

A CIC is any closed company that is not a trading or property investment company.

The "wouldn't touch with a bargepole" referred to companies channeling funds through tax havens which even where legitimate shouts to HMRC come and investigate me and every other company that I represent in case they are doing something similar.

I have no problem with agency arrangements it was only who the agency is representing.

Also, if an agency only has one client does that not make the company a front of the organisation that it represents rather than a true agent relationship.

Intercompany accounts between related companies are quite common practice but any profit element of transfers would need to be unwound at period end as such is not real profit. Only profit from outside the group is real.

going back to the Isle of man company and you channeling funds through your company for a fee.

Do you know (I mean really know) the source of the funds that are being channelled?

You need to be careful as if the funds are the result of tax evasion (its a tax haven, don't know how I jumped to that conclusion! HMRC will jump to the same one until proven otherwise) then that is a money laundering offence.

Channelling funds is a company service provider arrangement meaning that you would need to be registered for MLR with HMRC.

As part of your MLR proceedures you would need to identify the source of the funds to ensure that such was not from criminal activities (such as tax evasion).

Failure to register for MLR carries an unlimited fine plus up to 14 years in prison. Failure to report a client or to be part of the laundering, even without your knowledge carries similar harsh penalties so I beg you to take care before entering into any arrangement that you might come to regret.

kind regards,

Shaun.



-- Edited by Shamus on Tuesday 27th of November 2012 05:24:37 PM

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Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Oleggio


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Hi all - I'm new here & am grateful for the opportunity to tap into the collective wisdom.

I have an existing company (UK Ltd) for consultancy services and prepare these accounts myself. I have recently opened a second UK company (currently dormant) to manage a separate business (investment advice & portfolio management & trading). This Newco will act as an agent for an offshore (Isle of Man) company (let's call this IOM Ltd) - the flow will be mostly one-way, with Newco drawing funds from the IOM Ltd and paying suppliers (including UK Ltd) against invoices.

My questions are;

1. Must Newco issue it's own invoices to the suppliers and then pay invoices issued to Newco by IOM, or can Newco act as an agent of IOM and simply collect on behalf of IOM and pass through the payments?

2. If the latter, how are these flows reconciled in the accounts?

3. Is there any advantage (tax, HMRC, bookeeping, liability or other legal issues) to be had by formalising some kind of agency/representative agreement (between IOM and Newco) or is this just a normal trading relationship in which Newco buys services from suppliers (including UK Ltd) and then turns around and sells a service to IOM.

I have set-up Newco to keep the new business separate and to faccilitate separate growth in the future, but in reality the consultancy work will be performed through UK Ltd to take advantage of accumulated losses & withdrawal of funds through loan repayment... so I want the structure but hopefully without a lot of extra bookeeping!

Thanks for any light you can shine..



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Shamus


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sounds as though your new company is a close investment company (CIC) in which case all profits will be taxed at the highest rate.

What is the legitimacy of the relationship with a tax haven?

You are UK resident, ordinarily resident and domiciled so your worldwide earnings even if from a tax haven are going to be taxed on the basis as though earned in the UK (but should have double taxation relief available to you).

If this is a tax avoidance measure you must get the reference number of the scheme from the Isle of man company and include that on your tax return to show HMRC how you are avoiding tax. Failure to do so would carry a penalty of £3000 per period.

As for acting as an agent for an offshore company that all depends on the true relationship. Is the final party in any way connected? (a related party such as a relative or company that you or a direct relative have contol over).

From the sound of things you need to speak to an accountant who deals in these sort of arrangements.

Perhaps post the same question over on Accountingweb which has a greater number of people who will have encountered this scenario.

At first read though I must admit that it sounds like the sort of arrangement that I personally wouldn't touch with a bargepole but I could be completely wrong about the reasoning and intent of the arrangement.

kind regards,

Shaun.



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Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Oleggio


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First of all, thanks for the reply & the pointer to accountingweb - I will try there.

Second of all... you are jumping to some wrong conclusions, presumably based on the the mention of an IOM company.

My (foreign) client uses an IOM company as an investment holding company. No relationship/control connection with me.  I am providing advisory & management services through my UK Ltd, for a performance fee.

As it happens I am non-resident, but that is quite irrelevant. 

I really don't see how the Newco is a CIC - but I will learn more about this.

Newco is simply a way of partitioning this new consulting business from the legacy business. The agency idea is just an attempt to reduce bookeeping.

If the concept of an agency is so delicate ("wouldn't touch with a bargepole") then would it perhaps be possible to achieve the bookeeping simplification objective through the use of an intercompany account between Newco and UK Ltd? I will research this latter idea as I am not familiar with the use of an intercompany account (but presumably it is similar in concept to the Directors' loan account?). Any help or advice on this would be appreciated.



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