Bringing the group onshore

Question

My clients are UK tax residents and jointly hold a profitable UK trading company (TradeCo) via a holding company resident in the British Virgin Islands (BVI HoldCo). They are now keen to replace the BVI company with a UK holding company. How can this be achieved in a tax efficient manner?

Answer

Your clients are right to want to seek to eliminate the BVI company. Notwithstanding the current political climate concerning (perceived) tax avoidance it is questionable whether the use of such an offshore entity achieves any tax advantages.

In particular HMRC may look closely at where the BVI company is tax resident: if it is no more than a sham company under the control of the UK directors it is likely to also be considered UK tax resident as discussed further below.

And even if the above issue can be overcome...