One of the chief characteristics of a tax haven is that it provides a secrecy space - an opportunity for something to happen about which it is almost impossible for anyone, including tax authorities to ask questions.
The UK is particularly good at this. I've already mentioned that it allows bearer shares, and allows nominees to be used as shareholders, directors and company secretary and for the company to be run from an accommodation address. But there's another thing you need never do with a UK company. You need never file a set of accounts.
The reality is that a UK company can be incorporated by a formation agent, run by nominees and then after it's been in operation for a period of 21 months or so be due to file its first accounts but can, instead, simply file a form with the Registrar of Companies to ask to be struck off instead. Being struck off means that the company is dissolved without the need for a formal liquidation. As if by magic the company simply disappears instead.
All that the directors have to state in making this application is:
I/We as DIRECTOR(S) apply for this company to be struck off the register.
In the past three months the company has not:
- traded or otherwise carried on business, or changed its name;
- disposed of for value any property or rights which it would have disposed of for value in the normal course of trading or carrying on business; or
- engaged in any other activity except for the purpose of making this application, settling its affairs or meeting a statutory requirement.
Note that there's nothing there that requires them to say if they've ever traded, if they've paid their tax, or of they've settled all their obligations to file accounts.
So what does a director of a company that wants to disclose no information do? They stop it trading after 18 months and they can then honestly sign this form after 21 months when the accounts are due to be filed with the Registrar. It costs £10 to file and the company is usually dissolved within a few months. Companies House never asks for the accounts in that case.
HM Revenue & Customs can object. But in practice they almost never do, especially if they know nothing about the company (and the director in question will have ensured that is the case).
As a result anyone can run a limited company in the UK behind a charade of nominees and quite simply no-one will ever know what it does because it will never file accounts. And no one seems to care. There is, of course, nothing to stop them then starting the process all over again.
That's all part of the structure of tax haven UK. Amazing, isn't it?
PS No one has ever researched how common this is. If anyone wants to join with me in doing so - please get in touch.
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This is a very serious issue indeed and one which HMRC tries to address by way of a special memo that is supposed to come to them every time an application has been made to have a company struck off the register. I guess that the government would need to pass primary legislation to substitute the words ‘in the last three months’ for ‘ever’ on the Companies House form.
However, I do believe that there will be moves made in the future to share the filed accounts data in a common database between CH and HMRC. Accountants should be aware by now that it will be compulsory for them to file company financial accounts over the internet by April 2011 in XBRL format. I anticipate this will be the data used in the proposed shared environment between CH and HMRC.
I think this one warrants the creation of a petition on the Number 10 website.
There may be an audit trail via the bank accounts ??? 😯 Prima facie. Unless there is a way round this?
Company bank accounts gets closed after a company ceases to exist.
Company bank accounts get closed after a company ceases to exist and I’m not sure if this data is traceable either. However, I’m sure the really sharp operators could open bank accounts offshore, say in Jersey, which for chequeing purposes sits within the UK bank clearing system.
How easy would it be for the authorities to access that information:?:
i think you are being too simplistic!
you can keep a uk company on file for far longer than you say without filing tax returns or accounts. And this also means incidentally you can trade for 2-3 years, empty the bank, then do actually nothing for 4 months, and then apply to strike off with a 652, and no one sees the real pix. Coho fines disappear when a co. is struck off even when defaulting. as noted elsewhere hmrc regulating is poor in this area. the only thing you need comply with is the Annual return at £15.
i could raise 10 times what i charged if i worked for hmrc in tax evasion!