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Sam, Accountant
Category: Tax
Satisfied Customers: 14165
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I am currently an owner of an online retail company in Taiwan.

Customer Question

I am currently an owner of an online retail company in Taiwan. We have been selling in eBay Australia, USA and the UK as a Taiwan company. I also own a company in Australia and that company's business is to support my Taiwanese company by collecting buyer payments and charging the Taiwanese company a fixed rate or a percentage of the transaction. In essence, the Australian company are not responsible for the GST generated by the Taiwanese company under "A NEW TAX SYSTEM (GOODS AND SERVICES TAX) ACT 1999 - SECT 83.5".
So my question is: Is this type of model legal in the UK? If you believe it is, are you able to provide a regulation that supports this type of business?
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi Thanks for your question. I am Sam and I am one of the UK tax experts here on Just Answer. This is considered false trading under Uk legislation as the subsidiary company is not trading at all, but just a ruse to charge for a service provided that does not really need to exist (thereby reducing profits) The legislation to which you refer - reverse charge - does apply in the UK but is when a company in the UK is undertaking genuine trade with one that is overseas.In the UK position all these companies are connected - as you have a hand in all of them and that would furtehr create issues in the UK Nor could we argue that you are outsourcing some of the work (which in essence you are doing) as again you are connected to both the main supplier and the company with which the outsourced work is undertaken so this falls soul of being treated as commission for the work provided as a third party agent. So based on what you advise no this is not legal in the UK - I am sorry the answer is not more favourable.Do let me know if I can assist further Thanks Sam
Customer: replied 2 years ago.
Thanks for your reply.Note that the Taiwanese company is outsourcing UK for payment collection services instead of the other way around.From the Taiwan company's perspective, the intended UK company won't be a subsidiary of the TW company as it will be in a different name (a different entity?). In addition, the eBay account is registed in Taiwan with ownership of the Taiwanese company. The merchandise will be sent from Taiwan. From a technical perspective, the UK company will charge the fees prior to disbursing the funds to the TW company. In addition, this actually reduced the cost for TW company as it enables the bypassing of heavy exchange rates from PayPal. I did some calculations, the saved PayPal fees is greater than the service charge by the UK company.Since all companies are connected due to having the same owner, will the situation change if the UK company has a different owner?
Expert:  Sam replied 2 years ago.
Yes I understood that the UK company would collect payments and whatever you call it (and the fact you will treat it as a separate company in law) the fact remains you are just doing this to save the true profit position on both the main Taiwan company and it would also seem to avoid correct charges via paypal.
Its correct how you plan to do it in law - were it not for the fact that these companies will all be connected.
Of course having a different owner would break that connection - and then you would just be liable to UK tax on the fees charged (and if less than £82000 then exempt from VAT)
Expert:  Sam replied 2 years ago.
Let me know if I can be of any further assistance