Solomon

Hello Thanks for your reply. I’d like to state for the record that I have a professional, qualified opinion. The opinion is the HK company should not register for Corporation Tax in the UK. I do believe that HMRC has a responsibility to answer this query and either confirm or reject this opinion.

Hello HMRC. Would anyone be able to respond to my query ?

Considering my drop shipping model, the UK consumer owns the goods when they come into the UK. I would not take ownership at all. I now understand that I would own the goods if I warehoused these and then distributed. Thank you once again. Your assistance is greatly appreciated. I cannot applaud this service enough.

Dear HMRC A foreign limited company, incorporated in Hong Kong, has two directors. Director A is a permanent UK resident and citizen Director B is a permanent Chinese resident and citizen Director A is 100% shareholder of the HK company. Directors A & B have a long-term personal relationship and both actively participate in the business on a daily basis. Please note this is not a "nominee director" situation, but rather a genuine business relationship between two people. Director A is responsible for the company website and marketing activities. They also attend to company matters in the UK and some logistics for UK customer orders. Director B on the other hand is responsible for sourcing products, concluding agreements with manufacturers and fulfilling customer orders globally. Director A has been diagnosed with a dread illness, and at times cannot work at all during periods of poor heath. Sometimes, Director B has to assume all of Director A's responsibilities also. This explanation is to demonstrate a genuine partnership between both directors. Director B earns commissions outside of the limited company for sourcing of products, logistics, etc and has therefore not bothered to ask for shareholding in the limited company as yet. This is of course beyond the scope of my query to HMRC. Clearly, effective management and total responsibility for effective management take place abroad, whilst some duties are carried out in the UK. It should also be pointed out the business has a global customer base, mainly in the United States, Australia, EU & UK. Considering the detailed explanation above, kindly consider if this business has a corporation tax liability in the UK. A detailed explanation would be greatly appreciated.

Thank you. I would like to paraphrase your response to ensure I understand it. All stock the HK company imports to the UK and then proceeds to sell, regardless of the location of the customer (and final destination of the stock), be it a UK customer or one in the USA, will count towards the 85K VAT registration threshold. Please confirm if this statement is correct ? Next … If stock is not imported to the UK, but sent directly to a the customer from China, then it would only count towards the 85K VAT registration threshold if both of these points are true: 1. If the HK company is the importer 2. The customer is in the UK This means that if the customer is in the USA and the stock is drop shipped directly to them from China by the HK company (never imported to the UK), the sale would not count towards the VAT registration threshold. Please confirm if this statement is correct ? Questions: 1. Considering the UK customer buys the product from the website of the HK company, but the manufacturer of the product fulfills the order and sends it to the customer .. who is the importer in this dropshipping model ?

I do hope that HMRC have seen my follow up query above regarding local UK stock and are able to respond.

Dear Jason, Thanks for your comment but it does not make sense to me. Please read my original post and then visit the link posted by HMRC. Clearly, both these points apply to me and I do not understand your basis for ignoring it. Perhaps you could explain your thoughts? I have pasted an important extract from text (link) for expedience. 9.2 UK establishment: definition A UK establishment exists if either the: place where essential management decisions are made and the business’s central administration is carried out is in the UK business has a permanent physical presence with the human and technical resources to make or receive taxable supplies in the UK

That you so very much for the helpful insight. I would like to further my question with the following information: We have confirmed the business is established in the UK and in accordance with your advice, the 85K VAT registration threshold will be considered. My next question is to discover sales that will contribute towards this 85K annual threshold. Let us pretend that annual global sales for the Hong Kong company is as follows: 1. £20 000 to UK customers 2. 35,000 EUR to customers in the EU 3. $70,000 USD to customers in the United States Which of these annual sales amounts will count towards the 85K VAT registration threshold in the UK .. if 1. All stock is imported from China to UK and then distributed from the UK to customers globally. 2. Stock is Drop shipped from China Kindly consider options 1 & 2 above separately and let me have your advice Thanks once again for your time and consideration

Hello. Please consider the following scenario: There is a limited company registered in Hong Kong and this company operates it’s own e-commerce website that sells its products to a global customer base. It does not make use of any online marketplaces. The company has one director who is also the only shareholder. They are a permanent UK resident and citizen. When sales are made to UK customers via the website, orders are fulfilled in one of two ways: 1. Dropshipping: the manufacturer of the goods fulfils the order and sends it to customer in the UK directly. 2. The HK company makes use of a UK warehouse where a small amount of stock is kept in order to quickly fulfil orders to UK customers. Please advise the VAT liability for the HK company in each of the two instances explained above. If there is a VAT liability: Has the director created a fixed establishment in the UK for the purposes of VAT? Does the 85K threshold apply to the HK company as a result? Does the company report its UK sales only for the purposes of VAT Please provide as much detailed information as possible, citing the two scenarios Thank you so much for your help