# UK Ltd Company Ownership



## citizen99 (May 3, 2012)

Hello,

Please can anyone summarize the implications, and things to consider, of a US citizen, resident in the UK, owning an interest in a UK Ltd company?

- What are the IRS reporting requirements; if any, e.g. 5471 etc?
- What are the US tax implications, beyond those around earned income, of drawing dividends from a UK company?
- Can the UK company be structured in such a way as to minimize any IRS interest? (e.g. reduced US ownership %age in the case of multiple directors)

I've seen quite a bit of information on the board and I have a feeling this could get complicated..

Many thanks!


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## Bevdeforges (Nov 16, 2007)

Yup, it could easily get complicated.

This is the IRS page on form 5471 Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations

You'll note that the instructions, and even the title of the form refers to "certain foreign corporations." What you need to do is to determine whether or not you fall under the "certain" category. 

This page may help: Internal Revenue Manual - 4.61.5 Entity Classification

To answer your third question, if you can keep the US ownership below 10% you should be able to escape the hassle. As to the other two questions, I leave those to people with experience in this area.
Cheers,
Bev


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## citizen99 (May 3, 2012)

*Irs*

Ok, so I thought I'd contact the IRS:

"Your Question Was:
What is the IRS definition of a Corporation for the purposes of Form 5471? Does this extend to small business and the self-employed...? There is no guidance provided for this but it could be interpreted either way.

Form 8832 provides a definition of Corporation which would exclude small business and self-employment.

Please clarify"

I received the following response a couple of weeks later:


"The Answer To Your Question Is:

Thank you for your inquiry. Unfortunately, questions regarding the Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, are beyond the scope of this service we provide due to their highly complex nature. You may want to consider seeking the services of a tax attorney, certified public accountant (CPA), or other tax professional. You may also find assistance on our website at [************]Internal Revenue Service. We're sorry for the inconvenience. Our goal is to provide complete and accurate responses to as many taxpayers as possible. With that goal in mind and to maximize our resources, we are unable to provide assistance on highly technical and complex issues that involve lengthy research. If you are a tax practitioner and have performed extensive research and still need assistance: write a letter stating the question and outlining/listing the research performed and send the letter to the campus where the client's return is normally filed. Also, you may request a private letter ruling for issues the IRS has not yet taken a position. The IRS is required to charge a fee for this service. Information on how and where to submit such a request (including applicable fee) in 2013 may be found in Internal Revenue Bulletin 2013-1. We cannot provide legal opinions, private letter rulings, or determinations of the taxability of complex transactions via this service. Information on how and where to submit such a request (including applicable fee) is updated annually and is found in the first Internal Revenue Bulletin (IRB) of the year in which the request is made (IRB 2013-1 for requests made in 2013). IRBs are available on the IRS website at *****Internal Revenue Service. In addition, taxpayers may view the Internal Revenue Code (Title) 26, at the U. S. House of Representatives web site at **** and the Code of Federal Regulations 26, at the U. S. National Archives and Records Administration web site at ******U.S. Government Printing Office Home Page. Thank you for using this service and we apologize for any inconvenience."

I find it odd that the IRS cannot seem to be able to clarify their own regulations; but I guess that's what lawyers are for..

As an aside, it seems a UK company could potentially be formed in such a way as to avoid any notification requirements under IRS rules. This would involve a US citizen being awarded a different share class than other shareholders which has no voting power and less than 10% of the value of the company. It should then be possible to declare any level of dividend for any specific share class; so the US citizen could still take any level of income out of the company. The point of this approach is to avoid the administrative overhead associated with 5471 et al.

Note this is all subject to HMRC and accountant approval of course. 

If anyone has any comments on any of this I should be pleased to hear them.


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