Reducing UK company profits with a non resident salary/bonus

If you're non resident and operate a UK company one of the simplest ways to reduce UK corporation tax is to pay salary/bonuses to employees/directors. The salary/bonus would not be subject to UK income tax or NIC provided the directors were non resident and carried out the duties of employment overseas (aside from any incidental UK duties). The company is permitted a tax deduction for all expenses incurred "wholly and exclusively" for the purposes of the trade. Therefore in order for the company to substantiate a tax deduction for salary or bonus payments it would need to be linked to a benefit received by the company and for the purposes of its trade. This usually means that the salary/bonus payments need to be related to: • Genuine services provided by the employees/directors to the company, and • Calculated at an arms length rate for those services. Essentially you would want to be able to argue that the company would make payments even if the employees/directors were otherwise unconnected with the company (ie not shareholders). You could for instance look at paying both a market value salary for the duties undertaken by non resident directors as well as a bonus arrangement related to their specific fields of responsibility. If you wanted to extend the scope of the tax benefit you'd be looking at an offshore services company or potentially an offshore holding company.