What is a UK Agency Company?

UK Agency Companies

A UK Agency Company is one that trades as an agent (or nominee) on behalf of another party, its principal. This relationship between the agent and the principal is a contractual one, governed by an agency agreement that the parties would enter into on a private basis.

Normally the Agency Company will act as an undisclosed agent, meaning that it enters into all contracts in its own name, bank accounts will be opened and operated in its own name, and correspondence and other communications with vendors and purchasers or with the recipients of services will be in the name of the Agent. However, all of these activities will be carried on under the instruction of and for the account of the Principal. The nominee is able to do nothing without the consent of the Principal.

In return for the services provided by the nominee, the Principal agrees to pay a fee which may be stipulated as a fixed fee or as a percentage of the income generated by the Principal through the Agent’s intermediation. Where the Principal and the Agent are under common control, it is important to establish such a fee at a commercial level, bearing in mind the limited nature of the Agent’s activities and the fact that it is able to offload on to the Principal any risk which it undertakes in the course of its trading activities by disclosing to any creditor or other claimant the nature of its relationship with the principal.

Any profit made by the Agent out of the fee which it receives from the Principal will be subject to UK corporation tax. However, provided the Agent is not regarded as ‘trading in the UK’ on behalf of its Principal, then the profits of the Principal are free of UK corporation tax. Careful management of the UK Agency company is required to ensure that there is no such ‘trading in the UK’ and in particular it is a useful precaution in this type of arrangement that the directors of the nominee should be resident outside of the UK  (they  may  even  be  the  same  persons  who  are  directors  of  the  principal). Furthermore, all the Agent’s services should be provided outside the UK. This would include the execution of all agreements and trading contracts. However, it is still possible to have; for example, UK directors that would do some work for the Agent provided that the extent of their activities would not constitute ‘trading in the UK’.

The Agent should also avoid deriving any non-trading UK source income (e.g. bank interest). It should also generally avoid owning UK assets.

Winston Wambua

International Offshore Specialist
 
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