UK Agency Companies
Winston Wambua
International Offshore Specialist
For more information please contact me on
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
For more information please contact me on
