Limited Company Returns
British contractors can now get limited company returns of 85% to 90% returns on their income – or even higher. We have one company which offers 92% returns.
Those British contractors who paid the IR35 Tax are the worst off of all contractors as they pay tax as if they were a permanent employee.
Onshore Umbrella Company Contractors
Onshore umbrella company contractors are next worse off. They were able to claim up to 5% of their expenses against tax and so were able to save a little.
However, the Chancellor intends to take away their ability to offset expenses such as travel and subsistence against tax. He intends taking this away in April 2016. He is currently in consultations as to the best way to do this.
British Limited Company Contractors
A bit better off are the standard limited company contractors. It is reckoned that they pay £10,000 a year less tax than umbrella company contractors, on average.
Better still, are offshore umbrella company contractors who can get 84% to 90% returns on their money earned.
They are able to do this because of three British laws which explain, also, why the Government doesn’t stop offshore tax avoidance :-
Money Sent Offshore Not Taxable
1. Money sent offshore is not taxable. It used to be but that was one of the first laws that Mrs Thatcher brought in when she won the 1979 election.
Tory Grandees, like Lord Ashcroft, the Tory party’s biggest donor, Ian Cameron, David Cameron’s father, and Lord Astor, his father-in-law, took advantage of this.
They set up schemes that would save them a fortune in tax, and, in Ian Cameron’s case, to allow others to save a fortune in tax.
Loans Not Taxable
2. The second law that makes this feasible is that loans are not taxable.
So, what happens is that British contractors pay their money to an offshore company who invest it for them.
The scheme pays the contractor the equivalent amount in loans.
Supposedly the contractor will pay the full amount of tax on that money when it comes back onshore. Of course it never does for reason.
Contractor Loans Not Inherited
3. The third law that makes it feasible is that you don’t inherit loans. The loan debts of one generation do not pass to the next. Your loans die with you. This means that the loans you took out in lieu of your income will eventually pass away with you.
The Conservatives won’t change law as so many of their own make use of this to save themselves a fortune. The big hedge funds, who are such big donors to the Conservative party, would lose out if this was changed.
They won’t change the second law, i.e. they wouldn’t make loans taxable, as this would cause chaos in the banking sector. This is so lucrative worldwide for the UK, which has a dominant position in Europe in it.
They wouldn’t change the 3rd law, either, to pass on one persons loan debts to the next generation.
Can you imagination the outcry that would cause among Tory supporters if they did that?
So, that is why offshore umbrella companies work for British contractors.
Onshore Limited Companies
There is an alternative, now, however.
There are onshore limited company solutions which take advantage of efficient tax planning to give contractors similar returns that they can get from using offshore umbrella companies. However, all of the money stays onshore.
British contractors can get limited company returns in the same 85% to 90% bracket as they would for using offshore umbrella companies. However, all of the money stays onshore and passes through their own limited companies in the UK.
Companies Offering High Limited Company Returns
Those solutions have saved British contractors a fortune for years.