Non dom, remittance basis and foreign company - USERNAME: Casio - 23/04/2014

Tax Question:

Hi

French person [non-dom] has become UK resident from 31 Dec 2013 and will be taxed on remittance basis.

He has Panama company - of which he is a majority shareholder BUT NOT director.

The above company has cash, etc.

Can the CFC rule apply and if so how?

Thank you for your advise.

Answer:

The first issue would be to consider the management and control of the Panama company. If you can establish this as overseas the company would be non UK resident.

The CFC rules wouldn't be relevant as these apply to foreign subsidiaries. However, the transfer of asset rules could apply. The fact that he is not a director wouldn't prevent these rules applying as he would have the power to enjoy the income of the company as a shareholder.

There is a motive exemption which may be available where there was no UK tax avoidance motive for the set up of the company. This could be considered and may prevent the transfer of asset provisions applying.

In addition if he is taxed on the remittance basis he may be able to avoid the transfer of asset provisions by avoiding any remittance of company profits back to the UK.