The basic idea is for the UK company to agree to transact business on behalf of an undisclosed offshore company. The company normally used is a British Virgin Island Company or a Gibraltar Company.
This agreement must be in writing. Business will then be contracted for by the UK company on behalf of the offshore company. Gross income of the offshore company will be received in the bank account of the UK company and subsequently remitted to the offshore company, less a commission for the use of its services, normally 5% of turnover. The UK company only pays corporation tax on its own income, the commission received; the remainder of the income passes to the offshore company free of corporation tax.It is preferable that the offshore company is managed and controlled outside the UK and it is also preferable that the UK company’s directors reside outside the UK. There should be no trading in the UK and all contracts signed by the UK company on behalf of the offshore company must be signed outside the UK.