Investors often ask whether they can set up an offshore company (ie, non-UK resident company) to hold assets such as property or shares. What are the tax  implications of this?

The first issue is to ascertain whether the company is truly a UK resident or offshore company. A company is regarded as UK resident if it is either:

A UK incorporated company, or
Its central management and control is in the UK.

Whether a company is centrally managed and controlled from the UK is a complex area, and you should take professional advice.

In terms of tax at stake being classed as non resident can be very beneficial as a UK resident company is subject to UK corporation tax on its worldwide income and gains. By contrast a non UK resident company is only subject to corporation tax on its UK income and is exempt from tax on gains from assets sold in the UK or overseas.

Note that there are however complex anti-avoidance provisions that also reduce the opportunities for UK residents to use offshore companies to shelter gains.

It is possible for an individual to retain cash within the company, then arrange for a dividend to be paid on becoming non resident. The non resident shareholder could avoid liability to UK tax on the dividend by ensuring that he is non resident throughout the relevant tax year of the dividend payment.

A non resident can receive UK dividends tax free. There is no higher rate liability, and the notional tax credit is regarded as satisfying any basic rate tax liability.

Of course, care must be taken to ensure that the domestic tax legislation of your new country of residence, along with any double tax agreements, do not result in you ‘jumping out of the frying pan and into the fire'.