Anyone setting up a business in Germany has a few problems to overcome. High taxation, high social charges, and high cost of company formation to name just three. That’s why more and more Germans are setting up companies in the United Kingdom.

Believe it or not, the UK remains very business friendly. Anyone can set up a company for a few pounds, business taxes are lower than in most other EU countries, and if the company doesn’t employ staff in the UK it doesn’t need to pay the massive “social charges” (what we would call Employers National Insurance Contributions) that a German company does. Neither does a UK company have to comply with the capital requirements that a German company has to have, nor with the accounting and reporting regulations.

So, if you are a German consultant – for example – you can trade using a UK company and save a lot of money. All quite legally – well that might be arguable sometimes.

So, was Mrs Merkel having a go at the UK when she attacked offshore tax havens? Probably, but as EU law enshrines the “right of establishment” and the “right of movement of capital” there really is nothing she can do about it unless she overhauls the German tax law.

Unfortunately, the ease with which German (and other EU nationals) can establish UK companies doesn’t just attract business owners trying to legally avoid tax, it also attracts crooks and shady characters who by avoiding close inspection in their own countries can operate scams and frauds, usually internet based.

Doesn’t it strike you as rather two-faced that whilst attacking places like the Isle of Man the UK is so poorly regulated that anyone who can supply a copy of their passport and a utility bill can set up a UK company with a mailing address or “virtual office” and then just disappear when things go wrong. The UK supplier of a registered office address doesn’t need or want to get involved in what the client company is doing. You couldn’t do that in the Isle of Man or most other so-called tax havens. Here the local agent has to be licensed and has to have control or oversight of the bank accounts and accounting records of client companies.

Isn’t it time that the UK introduced laws requiring the same level of oversight?

See this post for a list of uncooperative tax havens.

Category: International Taxation


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