Where to base an online software company?
Discussion
I'm broadly UK based and am working on a project with a chap in Sri Lanka. I am a minority share holder in a company over here and he used to work for us and now does a bit of work for me directly on the side.
System will be web/cloud based (SaaS) and can be hosted anywhere within reason.
It's b2b with a solid paid userbase and a 'reasonable' expected income. It's not going to be worth billions or be the next facebook or anything silly like that. With that in mind not looking for any expensive tax avoidance schemes or anything that will be stupid expensive to run.
Anyway to the point of the question - we'll need a vehicle for the IP and to run the company. At the moment my hunch is it'll be easiest to just run it via a UK Ltd company as I'm familiar with the procedures, it's safe, simple, we can all be shareholders and we can get banking facilities without much issue.
But just wondered if anyone has experience with non-UK companies Delaware companies for example? More headache then they're worth? Banking facilities easy to come by? I know Sri Lanka won't be the place to base it anyway!
Obviously proper advice would be taken if we move forward in that way (to be honest we'll likely incubate things within an existing UK Ltd company first anyway until it's proved itself) but PH is often good for throwing up more 'independent' advice then an accountant who might be after fees!
System will be web/cloud based (SaaS) and can be hosted anywhere within reason.
It's b2b with a solid paid userbase and a 'reasonable' expected income. It's not going to be worth billions or be the next facebook or anything silly like that. With that in mind not looking for any expensive tax avoidance schemes or anything that will be stupid expensive to run.
Anyway to the point of the question - we'll need a vehicle for the IP and to run the company. At the moment my hunch is it'll be easiest to just run it via a UK Ltd company as I'm familiar with the procedures, it's safe, simple, we can all be shareholders and we can get banking facilities without much issue.
But just wondered if anyone has experience with non-UK companies Delaware companies for example? More headache then they're worth? Banking facilities easy to come by? I know Sri Lanka won't be the place to base it anyway!
Obviously proper advice would be taken if we move forward in that way (to be honest we'll likely incubate things within an existing UK Ltd company first anyway until it's proved itself) but PH is often good for throwing up more 'independent' advice then an accountant who might be after fees!
Edited by rpguk on Tuesday 13th May 18:37
Are you talking a tax dodge, or actually based where you're registered? If the latter, then Delaware is going to be pointless as you're going to owe tax in the place the company is run, not the place you pretend its run from.
Where do you actually want to live/work? I'd just do it from there, unless the tax / red tape is particularly horrific in that location...
Where do you actually want to live/work? I'd just do it from there, unless the tax / red tape is particularly horrific in that location...
Well two main shareholders are me and the other guy. I pay tax in the UK and him in Sri Lanka. The development work will be outsourced and we'll do the rest of the work between us (if/when there needs to be a support team it'll be outsourced too).
Not looking for a tax dodge at all and as mentioned my hunch is the UK is a pretty open place to do business so default choice. But as the company won't have any ties to the UK beyond myself we're open to ideas.
Not looking for a tax dodge at all and as mentioned my hunch is the UK is a pretty open place to do business so default choice. But as the company won't have any ties to the UK beyond myself we're open to ideas.
mikef said:
For Ireland you just need a company formation then annual filings. An accountant that can do that isn't going to cost more than in the UK.
What's the turnover? Six figures, could be worthwhile. Four figures, probably not worth setting up anywhere
Its not going to help you around the fact its actually owned/controlled from UK though is it? It doesn't sound like the OP is planning something big enough to legitimately be able to get around this with an actual irish office / control there.What's the turnover? Six figures, could be worthwhile. Four figures, probably not worth setting up anywhere
You can't just say 'my company is registered in XYZ country' and decide to pay tax there while living in Liverpool or wherever.
OP - stick with UK or go pay for proper advice... anything you get on here is going to be crap if we go from the tax advice replies on every other thread here in the last year...
mikef said:
KFC - you're right. I've clearly never run an SAAS company registered in Ireland, don't know what it costs and don't know what I'm talking about.
Feel free to answer the question then - how does a 2 man band get around the fact the company clearly isn't controlled from Ireland?He's effectively setting up a business from a bedroom.... he's not a Google is he??
I'm not saying you can't do it and get away with it for a while, but there doesn't seem to be a legitimate way to do it with such a small company.
Ireland don't actually care - our directors/investors were UK, India and Europe based, no-one Irish needed. Low corporation tax (and SAAS tends to incur relatively few actual costs, it's largely the software development that the offshore partner contributes in lieu of a cash investment). Hopefully there will come a point where you need to worry about the tax implications of taking out profits.
This is just a pointer, based on what worked for us with very similar parameters to the OP, who should take professional advice before committing to any given location.
This is just a pointer, based on what worked for us with very similar parameters to the OP, who should take professional advice before committing to any given location.
No worries. There are two issues - where to base the company, which was the OP's question, and how to get income out of it.
One consideration that makes it easier to base in the UK is likely to be company banking. The company will need to pay ongoing local fees (accounting, legal) and international fees (hosting, patent attorneys if IP is involved) and will probably be advised to set up a company account for that purpose. They are likely to be asked to show much higher working capital and revenue projections outside the UK. If I recall correctly Bank of Ireland wanted €100K funds to open a business account. A good local accountant and a solid business plan should be able to help. But much simpler to get business banking in the UK.
One consideration that makes it easier to base in the UK is likely to be company banking. The company will need to pay ongoing local fees (accounting, legal) and international fees (hosting, patent attorneys if IP is involved) and will probably be advised to set up a company account for that purpose. They are likely to be asked to show much higher working capital and revenue projections outside the UK. If I recall correctly Bank of Ireland wanted €100K funds to open a business account. A good local accountant and a solid business plan should be able to help. But much simpler to get business banking in the UK.
Yes as mentioned I'm not after anything for tax avoidance and personal income would of course be declared via SA. Just exploring options. It seems that the UK is a fairly simple and decent place to do business though and most other countries do seem a bit of a faff!
KFC said:
Obviously Ireland won't care - its not them being deprived of tax, the OP presumably isn't an Irish citizen. The UK tax man would certainly care...
It's funny you should say that actually - as a result of this thread I found out I am an Irish citizen. My father is Irish and I always thought I'd have to apply for dual nationality but it seems I get it by default. Well you learn something new every day!Edited by rpguk on Wednesday 14th May 10:51
The UK is the best place to start - you can set up other vehicles at a later date if required, transfer IP and license abroad, but the great thing about the UK is the current 225% rebate you get against CT if you have legitimate R&D expenses, which an outsourced development vehicle can provide.
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This scheme has higher rates of relief. From 1 April 2012, the tax relief on allowable R&D costs is 225% - that is, for each £100 of qualifying costs, your company or organisation could have the income on which CT is paid reduced by an additional £125 on top of the £100 spent. It also includes a payable credit in some circumstances.
http://www.hmrc.gov.uk/ct/forms-rates/claims/randd...
Therefore, you can make profits, get a rebate, re-invest in the company. Good luck
---
This scheme has higher rates of relief. From 1 April 2012, the tax relief on allowable R&D costs is 225% - that is, for each £100 of qualifying costs, your company or organisation could have the income on which CT is paid reduced by an additional £125 on top of the £100 spent. It also includes a payable credit in some circumstances.
http://www.hmrc.gov.uk/ct/forms-rates/claims/randd...
Therefore, you can make profits, get a rebate, re-invest in the company. Good luck
Lots of online companies are incorporated in the Isle of Man (Pokerstars being one). www.gov.im
Not part of EU, legal system is very similar to UK (most laws are UK laws that are eventually adopted). Lots of lawyers and accountants in the IoM! Several high quality datacentres to choose from (Netcetera, Continent8, WiManx, Manx Telecom, Domicilium).
IoM is part of the VAT system though so you can claim VAT back.
Some companies use local corporate service providers to run things, I know some have a small office in the IoM and convene board meetings there. 30 minutes away by plane from London or Liverpool. 3.5h by ferry with car/motorbike.
While your business may be in the Isle of Man and pay no corp tax, you may be tax resident in the UK and so may have to pay income tax at UK rates. If you live in the Isle of Man yourself then the maximum income tax liability, the ‘tax cap’, is £120,000.
Not part of EU, legal system is very similar to UK (most laws are UK laws that are eventually adopted). Lots of lawyers and accountants in the IoM! Several high quality datacentres to choose from (Netcetera, Continent8, WiManx, Manx Telecom, Domicilium).
IoM is part of the VAT system though so you can claim VAT back.
Some companies use local corporate service providers to run things, I know some have a small office in the IoM and convene board meetings there. 30 minutes away by plane from London or Liverpool. 3.5h by ferry with car/motorbike.
While your business may be in the Isle of Man and pay no corp tax, you may be tax resident in the UK and so may have to pay income tax at UK rates. If you live in the Isle of Man yourself then the maximum income tax liability, the ‘tax cap’, is £120,000.
therealpigdog said:
SaaS = European based to make life easier for data protection, and keep hosting servers in eu as well.
This 100x over. Except being pedantic it's EEA (EU + Iceland, Liechtenstein and Norway) that's important.Depending on what you're doing and who your customers are you may also want to consider the VAT implications for electronically delivered services.
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