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Sam
Sam, Accountant
Category: Tax
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Madam, Whereas in an Agency Agreement between an

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Dear Sir / Madam, Whereas in an Agency Agreement between an UK resident individual which is the principal, and an offshore company which is the agent, is stated: ‘’all revenue from sale of shares by the agent, can be transferred and held on principals’
bank account, as well as principal can make use of agent’s commission of 90% of total revenue, disregards ***** ***** amount and for what purposes’’, than, will that commission of 90% be liable of any tax in UK? Normally, those 90% commission has to be transferred
to agents’ offshore company’s bank account, and thus no tax should be payed. And it is legal to draft an agency agreement considering information above?
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.
Hi Thanks for your question Yes the commission would fall to be liable to UK tax because it is both earned through performance undertaken IN the UK and furthermore aid to an individual living (resident) in the UK so would have a remaining UK liability. Do let me know if I can be of any further assistance ThanksSam
Customer: replied 1 year ago.
Thank you for your answer. But the company of which commission belongs, is non- UK resident, thus it doesn't need to pay tax in UK?
Expert:  Sam replied 1 year ago.
Hi Thanks for your response But the individual who will be paid the commission (or its conversion to wage/salary) will have to pay tax as they are UK resident and carry out those duties in the UK ThanksSam
Customer: replied 1 year ago.
Thanks. The situation is next: after selling shares within UK ltd, the principal(UK citizen) will receive all the money to his UK account, but that doesn't mean he is the owner of all sum. He will need to transfer 90% of the amount to the agent (which is an offshore company), as commission for the help of finding a buyer. If thereafter 90% is transferred to the agent, than does the principal need to pay UK tax on it? Also being stated that in the Agency Agreement, that the principal will own only 10% of the total sum.
Expert:  Sam replied 1 year ago.
Hi Thanks for your responseIf he is the names director of the limited company - and selling the shares - then he will be treated as liable to the tax arising - if he was selling the shares for the named director of the limited company and just acting as broker then he would just be liable to tax on his commission for the duty undertaken but you seemed to suggest that the Uk individual was the director of this company based offshore - have I read this wrong? ThanksSam
Customer: replied 1 year ago.
Thanks. ***** individual is not the director of offshore company, he is just a shareholder and director of the UK ltd. He basically sells his UK company/shares, but uses offshore agent that helps him to find a buyer.
Expert:  Sam replied 1 year ago.
Then he is fully liable to the sale of HIS shares as already advised but - as if he were a director - but can claim the costs charged for the agent to sell his shares. There may be scope for entrepreneurs relief if the company has been trading (this allows just a 10% charge on the shares profits)- I have added a link here to see if this would be a qualifying sale.https://www.gov.uk/entrepreneurs-relief/eligibility Can I say the position seems to change each time I respond - so please ensure you are taking the right answer for the right situation Thanks Sam .
Customer: replied 1 year ago.
Thanks. But if the country in which offshore company is located, has tax treaty with UK of avoiding double taxation, than the company has to pay tax on the commission in home country?
Expert:  Sam replied 1 year ago.
Hi
This has nothing to do with double taxation - this is tax arising on an individual who is located in the UK
Thanks
Sam
Customer: replied 1 year ago.
Thanks, ***** ***** after the sale of shares in UK, a part of money is transferred directly to the agent in the offshore jurisdiction, than agent has to pay tax only in his country of residence?
Expert:  Sam replied 1 year ago.
Hi
But the individual during after and before the sale of said shares lives in the UK so has a UK tax position arising - its irrelevant what you then transfer to the agent - that's just a transaction which has no bearing at all on the UK tax position.
Company is offshore - so all trade income is considered abroad but you as a shareholder, if any element of the profits are made available to you then you as a resident in the Uk are considered liable to tax if any of this is remitted to the UK (if non domicile) and always liable if a UK domicile
Then you have sale of shares - the money will be remitted to the Uk so whether non domicile or not - you have a UK liability as you are selling (as a UK resident) shares which have a UK tax consideration
Its that simple - you are mixing up your company and individual taxation positions - and bringing double taxation treaties into play where they do not get considered - this would only apply IF you suffered tax in that countries jurisdiction on the sale of the shares, then could against your UK tax position ask for that foreign tax to be offset against your UK tax liability - that's what double taxation means, not an exemption from your country of residence in favour of the country where the sale takes place.
Thanks
Sam
Customer: replied 1 year ago.
Thank you very much for the information. But what is agent's tax liability, if the individual selling shares is non-resudent in UK?Regards
Mathew
Expert:  Sam replied 1 year ago.
Hi
This is the UK tax forum and I can only offer advise that's relevant to the shareholder who is UK resident (so you have advised)
You would need to consult with a specialist in the tax regime for the agents country of residence for furtehr advise
Thanks
Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13778
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
Sam and 2 other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Dear *****, in the case, were a non-uk company which owns an uk company, sells the shares from UK ltd, does it need to pay tax in UK?
Customer: replied 1 year ago.
Dear *****, in the case, were a non-uk company which owns an uk company, sells the shares from UK ltd, does it need to pay tax in UK?
Expert:  Sam replied 1 year ago.
Hi
Yes you would as the liability would arise on the Uk position
Thanks
Sam
Customer: replied 1 year ago.
Thanks.Even if the non-UK company is located in a tax heaven, and that country has tax treaty with UK of avoiding double taxation on capital gains?
Expert:  Sam replied 1 year ago.
Hi
But as you have a UK entity and its the UK that the shares are being sold from - then it makes no difference where the agent is as iys a UK liability arising.
Thanks
Sam
Customer: replied 1 year ago.
Thank you Sam. Thus we are a little confused, on how do people use offshore compsnies and agency agreements for paying lower or no tax in UK.
Expert:  Sam replied 1 year ago.
In honesty - they dont - as there is no such thing as tax havens as all countries share their information now, and double taxation treaties only allow a credit for foreign tax where tax has been suffered - it never actually renders anything tax free !
Thanks
Sam

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