It is again possible to have a UK registered company, which is not taxable in the UK, if the company can demonstrate residency in a country with which the UK has a double tax treaty. The existence of a double tax treaty is essential because the problem of dual residence can only be solved by reference to the provisions of a treaty.

In practice, any UK company which has its "place of effective management" in a country such as Cyprus, and which is not centrally managed and controlled in the UK, will be non-resident for UK tax purposes. Such a UK company will only be liable to pay UK tax if it receives UK source income, although even this income may be protected from UK tax by virtue of the relevant treaty.

The treaty must contain a tie breaker clause which determines the residency of a corporate body by reference to the place of effective management of the company.

Not all treaties concluded by the UK contain this particular provision. Therefore the choice of location of a UK non-resident company is narrowed down. This choice is further narrowed down by the fact that naturally the company will be looking for a location with favorable tax system and financial infrastructure.

Such a choice of location should satisfy the following basic requirements.
• Low rate of tax;
• Availability of double tax treaties with other countries;
• Freedom from exchange controls.

The UK registration of any particular company derives substantial commercial advantages. The shareholders of such companies enjoy the benefits; prestige and reputation associated with UK registered companies. However, when the nature of the business activities of this UK registered company can be carried out from outside the UK then the company can become non-resident for tax purposes as already described.

The double tax treaty that exists between Cyprus and the UK incorporates the appropriate tie breaker clause. It also satisfies the above three basic requirements. These, coupled with the fact that English is essentially the business language and the legal system including company law are modeled on the English system, make Cyprus the ideal residence location for a UK non-resident company.

The Cyprus residency of the UK non-resident company can be easily achieved through the registration in Cyprus of a branch of the UK Company, which is managed and controlled in Cyprus.