Category Archives: Avoiding UK Tax

Avoiding UK Tax
Many contractors are using offshore umbrella companies avoiding UK tax and it is all perfectly legal. It is tax avoidance rather than tax evasion. Contractors can keep 85% to 90% of their money.

Too many contractors just go along with what their accountants say.

They would be much better getting tax experts to suggest ways that they can pay less tax.
Government Schemes
The Government has set up a number of schemes to encourage activity that they think is good for the country.

Tax experts, therefore, can advise contractors of the best ways to utlise these to keep more of eir hard earned income.

They can make their own limited companies much more tax efficient.

Alternatively they can also set up a limited partnership.

David Cameron’s Dad’s Offshore Money – Where Did it Go?

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David Cameron's Dad

David Cameron’s Dad’s Offshore Money

What happened to the offshore money built up by David Cameron’s Dad?

One of the first things that Mrs Thatcher did, when she came to office in 1979, was to change the laws so that money leaving the UK was untaxed.

This set off a whole load of offshore money-making schemes for Tory Grandees and party contributors such as Lord Ashcroft, who was the Tory party’s main contributor, and Lord Astor, David Cameron’s father-in-law.

Another of these was David Cameron’s father Ian using his Blairmore vehicle.

Offshore Umbrella Companies for contractors

Offshore Umbrella Companies for contractors to save tax

Ian Cameron – No UK Tax

For 30 years Ian Cameron was setting up offshore schemes that meant his customers would not pay UK tax.

He also invested his own money in tax havens.

In all that 30 years he never paid any UK tax on the offshore money.

You would have thought that he had many millions.

Ian Cameron’s Worth

How much do you think that someone, who had spent 30 years helping people shelter from UK tax, and paying no UK tax for 30 years on his own offshore income, would be worth?

I would have guessed he would be worth many millions, perhaps in the tens of millions and maybe even in the hundreds of millions.

So what did he leave in his will?

David Cameron’s brother got a house out of it. David Cameron, himself, got £300,000 and his sister got some money as well.

That strikes me as being a piffling amount of money for a guy who had been helping others avoid UK tax for 30 years and who had paid no UK tax on his own offshore money for 30 years.

Ian Cameron’s Money

So, what happened to all the money that he must have made?

Paying UK Tax

Paying UK Tax

It’s possible that he gave it to his children to avoid death duty before he died.

It’s also possible that it is still out there in offshore funds in places like Panama, Jersey, the Bahamas etc.

As there is no revelation, no one would ever know.

We only know, because of a firm of lawyers being hacked in Panama, that David Cameron sold shares in an offshore trust in 2010, before he became Prime Minister, for £31,500 – a profit of £19,000.

No Capital Gains Tax on Offshore Profits

Although he paid dividend tax in the income he got from it, he didn’t have to pay any capital gains tax.

It’s now been discovered that there were another couple of companies in which he had shares that were held offshore.

None of this would have been known without the Panama lawyers being hacked.

Downing Street Statement

Downing Street first said that Cameron had “no shares, no offshore trusts, no offshore funds”.

Later this was clarified to: “The prime minister, his wife and their children do not benefit from any offshore funds.”

Later again Downing St said that there were “no offshore funds or trusts the family would benefit from in future.”

That left wiggle room about the past.

Contractor Tax Avoidance sches on Isle of Man

Contractor Tax Avoidance schemes

Where’s the Money?

So, what did happen to all the millions that David Cameron’s dad must have made?

Why did he leave such a relatively small amount of money to his children?

Did he manage to give them it before he died?

Was he spectacularly unsuccessful over 30 years in a field where making heaps of money seems to be easy?

Or are there other offshore trusts out there, in other tax havens, that only David Cameron and his family know how to get hold of?

In recent years UK contractors have been taking advantage of measures, both offshore and onshore, to minimise their taxes, just like David  Cameron’s dad Ian, David Cameron, George Osborne, Lord Ashcroft and Lord Astor.

What’s sauce for the goose is now sauce for the gander.

For an explanation of those tax minimization opportunities for contractors, where they can keep up to 90% of their money, see Onshore and Offshore Umbrella Companies List.

Offshore Tax Avoidance – Why the Government doesn’t Stop it

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Offshore Tax Avoidance

Offshore Tax Avoidance

Many people, including contractors are bemused by the fact that the Government doesn’t just stop Offshore Tax Avoidance schemes completely.

“Why don’t they just shut them all down?” they ask. Why don’t they just get in touch with the people and say “You owe us a whole load of tax?”

The answer is that they can’t.

Don’t Break UK Tax Law

Top Umbrella Companies offshore and onshore

Top Umbrella Companies for returns

They don’t break UK laws. Indeed the offshore umbrella company schemes are designed to fit in with UK law. It may not be in a way that the Government intended, or wanted,  but they do comply with UK tax law.

That’s why it is legal tax avoidance rather than tax evasion.

According to HMRC’s Commissioner and Director General for Enforcement and Compliance, Jennie Granger, “There is nothing illegal about an international structure, especially in a globally integrated economy and these arrangements may be particularly legitimate”.

Legal Tax Avoidance

International tax law expert, barrister Jonathan Schwartz said “All laws influence and tax laws are no different. The tax behaviour of companies is largely driven by the tax systems they engage with.

“Tax administrators must apply the law as it exists rather than what they, or anyone else, might think it ought to be”.

That’s exactly correct. Those who run offshore tax avoidance schemes design their solutions to fit in with current UK law.

Change Tax Laws Back

Of course, the Government could change the laws back to where they were before – but they don’t want to do that.

They make those laws for a purpose. They may want to bring more film companies to Britain or to support the burgeoning UK music industry. They give tax incentives for film makers or music producers to operate from the UK.

Offshore Schemes for UK contractors to save tax

Offshore Schemes for UK contractors to save tax

It does do that – but it also opens the door to those who want to use this for tax avoidance.

Offshore Umbrella Company Loans

Then there is the fact that, in many offshore tax avoidance schemes like offshore umbrella companies, the money is sent offshore untaxed and stays there.

The offshore company gives the contractor a loan in lieu of the money.

That loan money is never paid back so the offshore company keeps the money sent offshore in lieu of it.

So, what should the Government do about it? Make loans taxable?

Think what would happen to the banking system then or to the City of London and all the commerce that goes on there.

Upholding the UK Tax Laws

As tax expert Jonathan Schwartz said “Tax administrators must apply the law as it exists rather than what they, or anyone else, might think it ought to be”.

The courts must do that also. It’s Government that makes the laws. It’s the duty of the courts to apply those laws.

The Government may fulminate against offshore tax avoidance but it is they who create the laws that allow it.

Money Leaving UK Untaxed

One of the first things that Mrs Thatcher did when she came to power was to bring in a law that allowed money to leave the UK untaxed.

Many Tory grandees have taken advantage of this to send their money offshore untaxed. This includes David Cameron’s father Ian, his father-in-law Lord Astor and the Tory party’s main funder, Lord Ashcroft.

Paying UK Tax

Paying UK Tax

It also includes Chancellor, George Osborne, who has a £4.5 trust offshore. He says he will pay the appropriate tax when it comes back onshore. However, it never will. It was sent offshore in the first place to avoid UK tax.

Margaret Hodge and Stemcor Tax Avoider

The hammer of the offshore companies, and big companies who avoid UK tax, is Margaret Hodge, a Labour party MP who is in charge of the Public Accounts Committee in Westminster.

However, it was revealed that she owns part of an offshore company called Stemcor, which her brother runs, and that her stake  is worth a million and saved her 50 grand in tax annually.

Of course, the Government could reverse Margaret Thatcher’s tax law and make money that leaves the UK taxable.

What would that do for British business and the City of London, and the Tory grandees, income streams?

Offshore Tax Avoidance Schemes to Continue

So, the Government may fulminate against offshore tax avoidance schemes every time they are ‘exposed’ in the press. They have to do that.

What they are not going to do is make money that goes offshore taxable again or to make loans subject to tax.

So, offshore tax avoidance will continue as long as the laws of the land allow it – and courts will continue to rule that loans are not taxable.

For a list of hose companies who operate offshore (and onshore) tax avoidance schemes click on Offshore Umbrella Companies List

Rangers Tax Case – HMRC accused of bringing them down

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Rangers Tax Case

Rangers Tax Case

Rangers Tax Case – a former owner has accused HMRC of bringing a great football club, Glasgow Rangers, down via a spurious tax claim against them.

HMRC demanded more than £46m from Rangers after they used offshore Employee Benefit Trusts (EBTs). HMRC lost the Rangers tax case in a 2-1 verdict at a First Tier Tribunal in November 2012.

So, they decided to appeal it. The judge has now thrown that appeal out too.

EBTs for UK Contractors

HMRC said that Rangers were using EBTs to pay top players salaries. However, the tribunal and then the judge said that the money given to the players were loans.

Now, former owner, David Murray, said that the tax demand was instrumental in Glasgow Rangers being liquidated.

He said that the case hanging over the club caused the market to have a lower perception of the value of the club.

Bought by Craig White

Eventually Craig Whyte bought the club for just £1.

Rangers Tax Case

Rangers Tax Case from Rangers football club

He would have to pay the debt of £18m to Lloyd’s Bank as part of the agreement. Unfortunately, he financed that out of future season ticket sales.

As a result of Rangers not making it into the group stages of the Champions League and Rangers season ticket income already being spent, they got into tax and VAT trouble. So, they went into administration and then liquidation.

Rangers Enquiry

Now David Murray wants the Government to start an enquiry over the Rangers Case and how HMRC acted. It seems that Rangers offered HMRC a substantial amount of money to settle the case but turned it down.

Rangers tax case and their defeat could have huge ramifications for HMRC. They were using Rangers as an example.

It’s estimated that there are 5000 other companies using this route, including a number of top English football clubs.

So, a win for HMRC in the Rangers Tax Case could have produced a huge windfall for HMRC.

However, defeat in the Rangers Case has now caused them a lot of trouble amongst football fans and club owners. There will be a backlash against HMRC.

Rangers Supporters Club

According to a Rangers Supporters Club the Rangers tax case has caused a lot of pain to Rangers. They said “Rangers Football Club and its fans have been the victims of a witch-hunt by HMRC. It has done tremendous damage to a proud Scottish institution.

“Why did HMRC continue with this spurious claim when they were offered settlement? We deserve answers as to why this was done to our club”.

It was revealed, last year, that HMRC had come to settlement with many major firms. They were panned for it.

Therefore, the Rangers tax affair could still up a whole can of worms for HMRC. Football fans are not to be trifled with.

For a list of Offshore Umbrella Companies for Contractors click on Offshore Umbrella Companies List

Rangers Update

HMRC appealed the case again and won it. Now Rangers are going to appeal to the Supreme Court.

General Anti Avoidance Rules (GAAR) will not catch multinationals

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General Anti Avoidance Rules offshore

General Anti Avoidance Rules (GAAR)

There is a common misperception that the new General Anti Avoidance Rules (GAAR) will force companies like Google, Facebook and Starbucks to pay more UK tax. It will do no such thing and it is not even aimed at them.

Playing Field

The problem that the UK Government has in this area is that it doesn’t control the playing field. Other countries can use whatever rate of Corporation tax that they like and the UK cannot do anything about it. They can’t tell Ireland, Luxembourg and Switzerland what Corporation Tax to set.

Maybe the EU could but remember that the EU has a common VAT rate – but Britain has a different one. This would certainly be brought up if Britain tried to introduce a standard rate of corporation tax across the EU.

Switzerland is not even in the EU anyway and neither are the Bahamas, Bermuda etc.

Loading Up Costs

In terms of General Anti Avoidance Rules (GAAR), it’s also up to companies in which countries they load up costs and in which countries they have low costs and high profits.

General Anti Avoidance Rules

General Anti Avoidance Rules affecting UK contractors

Those countries with low corporation tax rates lose out as the companies incur fewer costs there like opening factories or hiring people.

Those with higher rates of tax will ge the benefit of the companies loading up costs by running their operations there. Those countries will earn income tax and have fewer people claiming unemployment benefit.

Dice Loaded

It’s swings and roundabouts. Cameron is trying to load the dice so that the UK can get both jobs and the corporation tax. However, he can’t bring in many measures to do so. He would have to get international cooperation and that will prove very difficult to do with low tax countries like Ireland saying that their corporation tax rate of 12.5% was not negotiable even when they were being forced into a bailout.

Any multinational agreement on all of this is a long way off, if it happens at all. Why should countries not compete on tax rates as well as on everything else. Surely that’s the free market. Surely a Conservative would understand that. Why do they want or need General Anti Avoidance rules (GAAR)?

Facebook avoiding UK Tax

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Facebook

Facebook

Facebook are the latest company caught avoiding UK Tax. They made £840m in profits last year. However, they paid just £2.9m in tax – all of it in Ireland. Although they only hire 287 staff in Ireland all, of the advertising outside the USA they book to Facebook Ireland.

They book the profit to Ireland. However, they then move that money out of Ireland to the Cayman Islands and its Californian parent. The technique is called Double Irish. They charge the Irish company royalties for using the Facebook brand in much the same as Starbucks do. They moved £750m that way.

Advertising Revenues

Facebook then reported a loss of £15m loss in Ireland despite all the advertising revenues outside the US ending up there. This is even though 44% of Facebook’s revenues come into Ireland.

At least they gave Ireland £2.9m. They gave the UK just £238,000 in Corporation tax. Facebook say that they comply with all UK laws – and of course they do. They just know how to work the system.

It said that it picked Ireland as its European base because it was the “best location to hire staff with the right skills to run a multilingual hi-tech operation serving the whole of Europe”.

The low Corporation Tax of 12.5% and the ability to do be able to do a Double Irish, it seems, played no part in the decision to go there. Of course, Ireland didn’t get any great benefits from Facebook in terms of Company Tax. Although Facebook’s Irish staff pay income tax there.

UK Tax Avoidance

The Chancellor George Osborne has promised to do something about it. However, it will be difficult and he risks major companies pulling out of the UK. He is going to target high income earners in the UK who hide money overseas.

However, most of the schemes are completely legal. Neither the individuals or companies, like Facebook, are breaking any laws. It is legal tax avoidance rather than illegal tax evasion.

The big problem is with companies who charge other companies within the group royalty payments for using the brand name. They are perfectly entitled to do so. They are perfectly entitled to charge them anything they want for the use of it too.

Perhaps that is one area where the UK can legislate, i.e. to limit the amount that they can charge for using the brand name. Of course, those companies will then look for other costs that they can load up in the locations where they want to load up costs.