The ownership of non-UK companies by UK-based shareholders can create tax problems – a main one being keeping the company’s tax residency outside the UK. Failure to do so will leave it subject to UK corporation tax on worldwide profits.
Business tax residence
Under UK tax rules, a company can be considered to be UK tax resident:
- If it is incorporated in the UK
- If it is incorporated outside the UK but central management and control is deemed to be in the UK.
Central management and control refers to the highest level of power and influence in a company – typically decisions taken at board level. Examples would be decisions on employing executives, expansion or contraction of business activities, borrowing, material contracts and transactions.