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bigduckontax, Accountant
Category: Tax
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I am a UK resident. I have done business years as a

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I am a UK resident.
I have done business for 6 years as a sales commission agent with a Hong Kong Company who are a Trading Company purchasing mainly from China, and then my orders are sold to companies around the world, USA, Australia, Europe, and some to UK.
My supplier, the Hong Kong Trading Company, have asked me if I am interested in buying their business in Hong Kong for a modest sum.
I work from UK, and do not want to move to Hong Kong.
If I bought the business and I worked and run the business from UK, and kept the Registered Office and accountancy staff in Hong Kong, I have been told there is no taxes I need to pay in Hong Kong as my business is 100% export. So my question is do I fall fowl of any UK HMRC taxes by me living in UK but operating an export business from Hong Kong?
Or do I have to advise HMRC and pay any form of Corporation Tax or any other taxes?
I declare my income and pay tax on my existing commission agent income, but if I become the owner of the Hong Kong Company I need to know how this would affect my position.
Thank you in advance
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. The only problem I see is that if you derive any income from the HK business is that you will have to declare it for UK taxation on your annual self assessment tax return. When you finally dispose of the HK company you will be liable for UK Capital Gains Tax (CGT) on any gain made. The UK and HK have a Double Taxation Treaty covering the HK equivalent of Income Tax and CGT which precludes the same income of gains stream being taxed in both jurisdictions. This is achieved by means of tax credits, the tax pain in one country being allowed as a tax credit against the liability in the other. The Treaty does not, however, protect you from differences in rates of taxation. I do hope that my reply has been of assistance.
Customer: replied 1 year ago.
Hello Keith,
Thank you for your reply. Please can you clarify:
1. With a Company incorporated in Hong Kong I would not be liable for UK Corporation Tax on the Company profits, (currently 20%). Is this correct?
2. You advise: "if you derive any income from the HK business you will have to declare it for UK taxation on your annual self assessment tax return". Do I understand correctly if I made £300,000 P/A profit in HK trading but only transferred £100,000 to myself as commission / salary, I would only have to declare to HMRC the £100,000 transferred from HK to my UK bank and thus pay tax on the £100,000 ?
3. In above example, the balance £200,000 the Company in HK made would just roll over as working capital into the next tax year and thus not be liable for any UK tax. Am I understanding this correctly or not?Thank you in advanceDennis
1. No, it is a HK resident company and thus not within HMRC's parameters to apply corporation tax. 2. You are correct, if you were paid 100K then that would be liable to UK taxation. Above 100K pa you loose your personal allowance at a rate of one pound for every two quid over and, of course, if your aggregate income exceeds 150K the you will pay the additional rate of 45%. 3. Your understanding is correct, but my answer takes no account of any HK taxation due. You can, of course, reduce your tax liabilities by making contributions to a pension fund. These contributions are allowable at the highest rates of tax. The aggregate of contributions by you and your employer may not exceed 45K in 15/16 and 40K in 16/17. If you are in the 45% tax bracket the 40K limit is tapered in 16/17.
Customer: replied 1 year ago.
Thank you.My main concern, is I would be living and working in UK, selling & buying the products and channelling all my orders through a HK Company, so could I be accused of evading UK tax, because in theory, I could be doing it through a UK Company and paying UK Corporation Tax on the profits? But I would be keeping bulk of profits in HK to roll over, and just paying UK tax on whatever income I deem to pay myself in UK. Is this legal from HMRC point of view?
Thank you Keith.
At the moment it is legal. For how much longer the big boys like Vodafone, Starbucks and Amazon, not to mention Google, will be allowed to squirrel profits away in tax havens is a moot point. You will have seen the furore over the PM's investment in an offshore company, run by his Father in the Bahamas. This loophole may well be closed in the future. Please be so kind as to rate me before you leave the just Answer site.
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