Should we move our business offshore

A hot topic around UK boardrooms right now is ‘Do we move offshore?’
Many high-profile UK Companies including HSBC’s CEO moving to Hong Kong, WPP’s board heading to Ireland, Ineos moving its HQ to Switzerland and Regus migrating to Luxembourg. And Wolseley has just announced plans to move to Switzerland, citing tax savings of around £27 million.
But this is not just restricted to the large multinationals; many smaller AIM-listed or privately held businesses are also relocating. In reality it is far easier for SMEs to move as they are more flexible and moving offshore can offer substantial commercial, administrative and tax advantages for a business.

• Better proximity to markets-with emerging markets still growing fast, prospects in Asia are particularly strong at the moment and Singapore and Hong Kong are favoured hubs for trading in the region.
• Accessing local talent pools- many offshore locations offer large pools of expertise, for example, Switzerland and Ireland for pharmaceutical companies.
• Reducing the burden of compliance-compared to company administration in the UK, countries such as Luxembourg or the Netherlands may offer greater simplicity, transparency and certainty.
• Improve cash flow-There are some very favourable tax incentives on offer, with effective tax rates potentially around or below 10%. into the commercial, tax and legal issues to consider in each jurisdiction.

One thing is certain, there will need to be real business substance in the chosen location, both to obtain the commercial benefits and to ensure that the structure is tax-effective. Determining the right location is about piecing together your businesses needs like a complex jigsaw and there are many key factors that need to be taken into consideration,
• proximity to markets, suppliers and labour
• operational benefits
• compliance savings
• taxation
• impact on business culture
• costs of relocation
• willingness of relevant personnel to relocate
• short-term operational disruption.

The options are endless, from simple relocation of a single business unit to full migration of the group.
As a first step, it is important to map the components of the supply chain and identify the key value drivers in the business. Each component should then be considered in isolation to determine its optimal location before bringing the whole together. Some of the options to consider include:
• Centralised hubs-these can be set up for support services, such as a centralised buying hub to generate purchasing synergies. Transfers of this nature should be achievable with limited disruption to the wider business, and while savings are primarily operational, there may also be tax benefits. Centralised sales hubs (such as regional hubs in Dubai or Singapore) can offer more significant commercial and tax benefits, although the impact on the business is much greater.
• Intellectual property centres-for many businesses, much of the value lies with their intellectual property; from patents and trademarks to customer relationships and technical know-how. Some companies have transferred their research functions to locations to benefit from tax reliefs or incentives. Others are managing their intellectual property from a centralised global hub. Tax and legal benefits can be very significant. However, care is needed not to fall foul of tax anti-avoidance rules, especially when transferring intellectual property abroad.
• Full migration -various high-profile cases in the press have involved migration. This typically entails ‘inverting’ – setting up a new overall holding company in a favourable jurisdiction – and relocating the board and key decision-makers offshore. This offers maximum flexibility and potential benefits, but there needs to be a strong appetite for change at board level and a good commercial reason.

There is no magical juridcition where to locate depends on business requirements, locations include:
• Ireland
• Switzerland
• Luxembourg
• Netherlands
• Malta
• Cyprus
• United Arab Emirates
• Singapore
• Hong Kong
You next step to consult a specialist team who can guide you through the maze of offshore jurisdiction and work with you to find the solution right for your business. Contact the team at Henderson Morgan who can guide you through the maze advisor@henderson-morgan.com

Why incorporate offshore?

The definition of an offshore company is a company which rarely conducts business in its country of incorporation and one which is incorporated in a country where taxation is lower and reporting restrictions are more flexible than the country in which you reside.
Other common names for this type of company are ‘non-resident company’ or ‘IBC’.
IBC stands for ‘International Business Company’ or ‘International Business Corporation’
There are many features and benefits associated with the establishment of a non-resident company, and different individuals and organisations have their own specific reasons for incorporating in this way.

However, five main benefits are,

1) Reduced Taxation Liability - Offshore companies can be established in low or no tax jurisdictions.
If you do not derive a profit from the country in which the company is incorporated you may be able to reduce your taxation burden significantly.
In fact, some businesses can be structured in such a way that that any profits generated are realised in ways that minimise or negate overall taxation liability.

2) Simplicity of Operation - apart from certain types of business - like financial services companies and banks for example which are internationally regulated - certain jurisdictions make it very simple and highly attractive for all other types of company to operate.
It does depend a lot on the jurisdiction you favour, but you’ll find that when it comes to business reporting, account auditing, filing of financial records etc., the restrictions are likely to be far less than you would experience if you incorporated ‘onshore’, or ‘back home’.

3) Fewer Reporting Requirements - not only are the restrictions actually far less restrictive, you’ll generally find that the extent to which company information is required to be reported is generally far lower in most offshore jurisdictions as well.

4) General Asset protection - it’s possible to manage assets and business transactions in such a way that assets are shielded from any form of liability.

5) Greater Degrees of Anonymity - by conducting business through the offshore company and carrying out all transactions in the name of the private company, the name of the underlying principal of the company can be kept out of certain key documentation.

While there are many companies offering complete company formation services there are few that provide customers with the professional support they need to find the company structure that is right for their individual and business needs. The Wealth management team at Henderson Morgan, with over 20 years of experience can provide a comprehensive wealth management service to clients wishing to form an IBC. Please contact us at advisor@henderson-morgan.com for a free initial consultation.