There are a number of features which pertain specifically to offshore companies as opposed to standard UK limited entities. Whilst some of these attributes may be classed as benefits and advantages, it should be made clear from the outset that this does not suggest that offshore company formations are in any way better or superior to other types of incorporation.
Depending on the given set of circumstances, the criteria used to judge each option and the weighting placed on individual characteristics, offshore companies might be seen to have some or all of the benefits and advantages discussed in this article.
Taxation of Offshore Companies vs. UK Companies
One of the most attractive components of an offshore company formation package is the tax-free status which it enjoys. UK Companies are taxed on their total profit and a great many schemes and provisions have been introduced in order to try to minimise this figure.
In many cases, provided some basic rules are followed, offshore companies do not suffer a charge of taxation in the jurisdiction in which they are registered and resident. For UK residents, provided no amounts are remitted to the United Kingdom, the capital and income earned by the offshore company remain tax-free.
Incorporation Times
Offshore company formation is usually a slightly longer process than for UK incorporations mainly because of the levels of technology which separate the two main methods of registering each type of company.
UK company formations are often carried out online using electronic communication between the set-up agents and the registrar. On the other hand, offshore incorporations involve a far greater manual process and require human intervention at several stages of the registration, and hence the setting up times are generally longer.
Areas of Operation
Offshore companies are usually prohibited from trading in the jurisdiction in which they are registered. UK companies have no such restrictions placed on them and are free to conduct business locally or in any other country they choose (subject to local laws and permits where necessary).
The restriction as applied to offshore companies is not usually significant as most of the jurisdictions where such entities can be registered are not themselves major trading areas on the world stage.
The limitation should be borne in mind however, as local commercial opportunities could exist either presently or become available at some stage in the future.
Public Disclosure Requirements
The burden of public disclosure is very much lighter for offshore companies than it is for UK equivalents. In many offshore countries statutory books requirements mean that only a few or no records have to be maintained.
Most changes made within the offshore company do not therefore have to be reported or disclosed to a centrally maintained register such as Companies House which exists in the UK.
UK Companies must send appropriate notification to the Registrar, normally within fourteen days of the change taking place and include the salient details of the event on the prescribed form.
Degree of Anonymity
Offshore Companies are capable of providing a large degree of anonymity towards their owners and thus provide a shield between them, their business and the outside world.
The absence of public records and disclosure requirements can male it difficult, if not impossible for a third party to associate a particular individual with an offshore company, if that person wishes it to be so.
UK Companies can for the time being obtain a similar level of identity protection by engaging nominees as the officers. This availability type of anonymity is likely to diminish towards the latter half of 2008 as the Companies Act 2006 provisions requiring nominees to be named individuals instead of companies (as is currently widespread practice) comes in to effect.
The offshore company formation option is therefore expected to become more attractive to those seeking anonymity in their commercial dealings.
Conclusions
Offshore companies have a number of distinguishing features, some of which could be seen as benefits and advantages over UK limited entities. However it should always be borne in mind that the two types of businesses are essentially different species and as with any comparison, looking at non similar items will result in a long list of unique attributes.
The ownership of both an offshore and a UK company are not mutually exclusive events and it is common for one or more individuals who own an offshore business to also control or be involved with one or more UK incorporated entities.
