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Shifting company funds between UK & Euro LTDs

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bofh
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Shifting company funds between UK & Euro LTDs

#401857

Postby bofh » April 5th, 2021, 1:13 pm

Hi,

I am sole Director of a UK LTD (IT consulting). To spend more time with family, I will likely register a Hungarian LTD and would like to transfer retained profits from the UK LTD to the new LTD. After that, I would likely dissolve the UK LTD as I can't really see any material benefits to justify paying to keep it running (assume my clients are fine and ready to effectively "switch" suppliers). Both companies would be solely controlled by myself. The other route to take the cash out of he business - a Members Voluntary Liquidation - might appear attractive on the surface as I would likely qualify for 10% enterpreneurs tax. But I've read that MVL process typically takes 6-12 months during which time I would likely already be a non-UK tax resident. Consequently, I suspect I'd get caned for taxes on the company cash-out by the Hungarian NAV (tax office). This is why I am exploring a company to company payment. The obvious next question is how to extract that money from the HUN LTD (over time) since dividends are paid from profits and I guess this payment would not be considered a profit...

Is there a standard type of inter-company transaction that would enable this transfer to happen; i.e. funds dispersed with no expectation of repayment? If so, does it require any particular corporate structure or can they be unrelated companies but with common control?

I'm in the process of asking my accountants in both countries, but would value hearing what the norms are in this regard and in particular what questions I should be asking my accountants (they are generally good at answering the questions I ask them, but as with many things, it's knowing the right questions to ask).

Thanks in advance

-b

bofh
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Re: Shifting company funds between UK & Euro LTDs

#402048

Postby bofh » April 6th, 2021, 2:45 pm

From what I can glean, a transfer of assets between unrelated companies (whether with the same beneficial owner or not) would be considered an asset disposal and thus attract corporation tax at the receiving company. However, if the companies are within a group structure, the transfer of assets is without charge. But the more I read, the more I think a members voluntary liquidation is appropriate (too much "pass the parcel" and unnecessary structuring to achieve the result). Consequently, now focusing more on how split year treatment is handled for UK residence (oh joy!)...

pochisoldi
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Re: Shifting company funds between UK & Euro LTDs

#406619

Postby pochisoldi » April 24th, 2021, 10:44 am

UK Company buys assets, and Hungarian company leases those assets?

That way the UK company effectively provides capital to the Hungarian company.
Set up the arrangement correctly, and you can legitimately "import" profit from the overseas company to be taxed in the UK. (and do the reverse - undercharge overseas company to manufacture a loss/reduced profit in the UK, and increase profit/decrease losses overseas.)

Or if you want to be more basic, loan the money to the Hungarian company.
If you charge interest, then that can be used to import profit made overseas.

In both cases, the UK company still has the same capital, just in the form of ownership of assets, or a promise to repay the loan, instead of cash.

PochiSoldi
(i am not a lawyer/accountant/entrepreneur disclaimer applies)


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