It is obvious to industry professionals and people familiar with the matter that ultimate beneficial owners (UBOs) will have it much harder in the UK. Life is not cloudless any longer for Persons of Significant Control (PSC) in the United Kingdom, with stricter PSC reporting requirements for obliged entities set by Her Majesty’s Revenue and Customs (HMRC).
The United Kingdom is known as a law-abiding country. Tax evasion schemes are certainly not welcome here. Faced with a necessity to optimize their taxes, business people use legal methods only. Yet, the HMRC nudge letter campaign, with requests to obliged entities to report the extra income sources their PSCs had in 2021/2022, was met with little enthusiasm and caused business owners to consider relocating their companies to Belize.
The article below discusses the situation. You will find useful information about the UK Persons of Significant Control therein as well. If totally pressed for time with no opportunity to keep reading, you are welcome to take a look at the opening summary. As expected, it is all quite predictable. Business incorporation in or relocation to Belize is your choice when privacy means a lot and you are not happy about the fact your UBO info ends up in the registers after the company incorporation.
Belize CRS (Common Reporting Standards) were introduced to regulate reporting and information gathering. Belize CRS are in their nature minimum standards the correspondent competent authorities shall meet when exchanging information. Apart from Belize, CRS standards were followed by 97 other countries (as of January, 2018). When deciding on the company type to incorporate in Belize, remember that Belize LLC reporting is next to zero. Belize LLCs are not required to submit either annual tax returns or financial statements. Thus, benefits for company owners are obvious as far as Belize LLC reporting is concerned, with formalities reduced and their time and money saved to a great extent. In Belize, CRS are fully respected, and international regulatory agencies are hardly likely to have any issues with this.
HMRC nudge letters
The HMRC nudge letter campaign became public in early September 2022. It was then that specialized websites released the info on the subject. In the above letters, HMRC offered PSC taxpayers to report disposing of their shares in 2020/2021, even if they are not PSCs any longer.
Adopted in 2016, the UK tax legislation amendments as to UK businesses either fully or partially controlled by PSCs served as the primary reason therefor. Ever since January 1, 2016, UK companies shall report their PSCs, provided any such PSC holds at least 25% of the company’s shares. With annual filings made public, this is surely not inspiring for PSCs themselves and business owners.
On the formal level, the above developments were introduced to counter money laundering and prevent any legal person misuse. With the September nudge letter campaign, however, it is clear that the HMRC has shifted the emphasis. From now on, the PSC register will be used for a more mundane reason. Obviously, it is to combat tax avoidance and evasion.
The above HMRC nudge letters are drafted in the most polite and competent way, with no thinly veiled threats whatsoever. It is still clear this is a soft power policy, and ignoring the messages would be not wise at all, to say the least. They actually inform UK PSCs the latter are not on the register any longer, with a subsequent unobtrusive reminder to verify whether the submitted tax return is actually correct. This makes sense, considering the PSC in question could have partially disposed of their shares and receive some taxable income after losing their PSC status.
The potential tax liabilities are CGT-related. In case a UK PSC had sold any shares of theirs in 2020/2021, they are advised to amend the corresponding tax returns till January 31, 2023. This is actually a gentle reminder of a potential tax investigation that may be initiated against the PSC in case they disobey.
Basic information about UK UBO register
The subject of UK PSCs is a Terra Incognita for most International Wealth readers and subscribers. With this in mind, it would be unfair towards them to simply notify them of the HMRC nudge letter campaign without providing any explanations or detailing potential consequences. This is why we are providing a short summary of the UK PSCs below. The International Wealth consultants are trying to demonstrate that even with these developments the UK UBOs aren’t doomed. They may find a new hope and a potential way out in relocating their businesses to or re-registering them in Belize. This is a smart way to get rid of your worries, protect your confidentiality, and pay less in taxes. No reporting requirements for LLCs in Belize is a nice free bonus for their founders and owners.
Fifth Anti-Money Laundering Directive
The Fifth Anti-Money Laundering Directive (5MLD for short) has been legally binding in the United Kingdom since January 10, 2020. It introduces obligations for Obliged Entities to report the prescribed UBO information and data for the latter to be included in the PSC register, whereupon they become publicly available.
The regulation applies to the following business structures and categories:
- LLPs, or Limited Liability Partnerships
- SLPs, or Scottish Limited Partnerships
- SQPs, Scottish Qualifying Partnerships.
As provided for under the laws currently in force, Obliged Entities are either organizations or structures that are required to perform due diligence checks under the 5MLD.
Below, you will find the list of Obliged Entities:
- lending agencies
- financial firms
- external accountants, auditors, notaries, tax advisors, and external counsels or lawyers
- service providers and trusts
- real estate agents and intermediaries
- individuals selling goods for cash upwards of EUR 10,000
- gambling companies
- exchange service providers for virtual and fiat currencies
- custodian wallet providers
- art dealers in free ports, galleries, and auction houses
- insolvency officers.
As explained above, PSCs (Persons of Significant Control) are those exercising control over a business or a company. This is not about mandatory control, however, even a potentiality thereof is not inspiring. There may be several PSCs in a company, and it is not necessary that the PSC and the Ultimate Beneficial Owner are the same person. This is why, although UBO and PSC registers may differ, the information therein is accurate and fair.
The discovered discrepancy suggests the Obliged entity’s UBO information differs from the one the Companies House disposes of. Consequently, the Companies House details may potentially be incorrect or incomplete from the PSC classification standpoint.
Take a look at what is treated as a discrepancy in terms of PSC’s data:
- type of control
- name and birth date
- country of residence and mailing address
- notification date.
NB: neither spelling mistakes nor the fact that an entity holds any info not included in the PSC register shall be treated as a discrepancy. If discovered, the corresponding discrepancies shall be forthwith reported by the corresponding Obliged Persons.
HMRC and mandatory reporting obligations
Her Majesty’s Revenue and Customs encourages Obliged Persons to report all the discovered discrepancies.
Here’s what the information to report to the HMRC includes:
- corresponding entity’s company number
- discrepancy type or nature
- reference to the PSC registry info believed to be incorrect
- correct data to substitute the incorrect information from the PSC registry
- any other significant discrepancy info.
It takes about 10 mins to file a discrepancy report to the HMRC. As easy as it may seem, you may feel controlled by the government with such responsibilities. The matter is aggravated by the fact, the control is totally legal and the UK authorities are in their own right to do so.
With the reporting and control of the kind, the room for false accusations and misreporting is huge. Even more so, the informant’s identity is never disclosed and no liability for falsifying statements is discussed.
It goes without saying that any reported info is subject to verification. This makes false reporting rather challenging. However, the HMRC initiative to promote this kind of information acquiring methods is worrisome. This may inspire some UK business people, with International Wealth subscribers and readers among them, to relocate or re-register their businesses.
Alternative jurisdictions with the like benefits for investors are hard to find, yet hard does not equal impossible. Some of them come with at least comparable business and investment advantages.
Belize as an alternative jurisdiction to incorporate a company or relocate your UK business
Considering the above, life is no longer a walk in the park for UK UBOs. They don’t enjoy the same confidentiality benefits they used to have in the jurisdiction before.
Fortunately, business owners are free to incorporate a new company outside Great Britain, with Belize being a convenient option. Although not a full-fledged alternative to replace the UK, Belize may be an answer you are looking for. After all, Great Britain is not always the only potential or optimal option to set up a company.
Multiple reasons contribute to the jurisdiction’s popularity.
Apart from a much higher confidentiality and no UBO registry in the country, Belize comes with several other benefits and many of them will make running your offshore business easier:
- Tax benefits. With its liberal fiscal policy, Belize comes with an opportunity to legally avoid paying taxes on numerous occasions. It is the best way to implement a free-business ideology.
- Light-touch company incorporation procedures in Belize. Setting up your own business in Belize is plain and simple. So simple, in fact, it seems surreal. Some may think it is impossible in the modern world, but the facts speak for themselves.
- Asset protection. In Belize trusts, your assets are protected as much as they are in any Swiss bank. It is easier to climb Mount Everest or win the world chess crown playing against the 10-top grandmasters than to lose your Belize assets. Foreign courts stand no chance with their subpoenas.
- Flexible corporate structure. You will never have to employ several business structures to make your Belize company incorporation possible. Besides, there’s no need to fear you may be punished for doing something beyond the scope of the local company regulations. This, however, does not imply the corporate Belize is a complete chaos. It is just that the Belize authorities do their best to support businesses instead of imposing limitations on them.
- Minimum operating expenses. Life is not exactly cheap in Belize. Yet, your operating expenses will be considerably reduced, with no accompanying loss of quality, services provided, potential business opportunities, and standards of customer service.
- Confidentiality. As mentioned above, Belize offshore companies do not secure your full anonymity, and this is hardly ever possible in the modern world. However, with the privacy protection available, you will feel confident and safe no matter what.
- Flexible corporate legislation. With your Belize business, you are guaranteed to never find yourself in a situation where your business potential is limited by the rules and regulations in force in Belize. The flexibility the Belize thought-out legal framework offers makes extensive development a reality for any offshore companies.
- Simplified Belize LLC reporting. You are generally not obliged to keep and maintain your Belize LLC reporting, and it significantly reduces the drag on operations. Belize LLC reporting is only filed to confirm the company’s economic presence, with the reporting procedures simplified to the max.
- Quick and easy corporate account opening. It is normally a hard job to set up a corporate account in a mid-shore or offshore jurisdiction. Multiple prohibitions, bans, limitations, and special terms existing there are seen as an instrument to protect businesses from aggressive tax optimization practices and make money-laundering challenging or better yet, impossible. However, it is always businesses that suffer the most. In Belize, you will never come across any of the above trappings. Setting up a corporate account is quick, easy, and comfortable here.
- Minimum mandatory payments. International companies are required to pay as little as USD 150 per annum. With this in mind, it is pretty affordable to set up and run an offshore business in Belize, no strings attached. As a business owner, you won’t have to deal with any extra payments, hidden fees, or excessive mandatory costs.
- Belize CRS compliance. For some people, automatic information exchange is a huge drawback, which is not true to reality. Belize CRS make it possible for the jurisdiction to avoid significant related risks, at the same time protecting businesses from any potential claims.
For any further questions or comments, you are welcome to contact the International Wealth consultants at email@example.com and discuss whatever is bothering you at your initial consultation. Your success is guaranteed with our assistance.