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

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

101 Limited Company Structure gives Greater Returns

101 Limited Company Structure

101 Limited Company Structure

The 101 Limited Company Structure allows you to make drawings from your company in the most efficient way in order to save the maximum in tax for UK contractors. It is important to make drawings from your company in a very structured way if you are to save the most money.

The 101 Limited Company Structure means that you can get the best return on the marketplace. It does that by implementing an efficient and safe structure. It is fully compliant with GAAR and also with all current and known future tax legislation changes.

All of the tax planning strategies are fully compliant with UK legislation. This has been ratified by Queens Council opinion, as well as in-house barristers.

Bookkeeping and Accounts

Those operating the 101 Limited Company Structure, do all the accounts including bookkeeping and invoicing, as well as annual returns. They can also advise on investment strategies for contractors in order to maximise their income.

By using a 101 Limited Company Structure you can increase company profits without any increase in sales. In fact, using the 101 Solution is the quickest and easiest way of raising company profits.

Most contractors, without realising it, operate in a very tax inefficient way. As a result, they pay far more to the taxman than they need to do. The 101 Limited Company Structure will help change this.

Inefficient UK Contractors Wasting Money

UK contractors tend to act in a very tax inefficient way and this holds back both their businesses and their profitability. It means they have to work for more years than they need to.

One company has been operating the 101 Limited Company Solution for contractors for 9 years now. So, they know what they are doing. They have helped many contractors this way.

To find out more, just click on 101 Limited Company Structure Solution or to apply just click on 101 Limited Company Solution

offshore umbrella company list

Offshore Umbrella Company List

Begging Letters Sent Out by HMRC on Offshore Umbrella Companies

Begging Letters from HMRC to UK Contractors

Begging letters from HMRC

As regards Offshore Umbrella Companies HMRC is to continue sending out threatening begging letters to contractors. This is an attempt to get money from them for using offshore schemes that are completely legal.

Said one offshore umbrella company owner “To be honest it’s HMRC scare mongering. They know they can’t legally demand retrospective taxes. However they sent out 30,000 letters in 2013 and will again this year”.

They cannot hope to process that number of contractors, especially when their staff numbers have been cut. However, they are hoping to scare contractors into sending them money.

Tax Avoidance, Not Tax Evasion

Their big problem is that offshore umbrella companies are tax avoidance rather than tax evasion. One is legal and one is illegal.

What HMRC really need to do, if they want all that tax money, is to get the Government to change the laws to make it illegal.

However, despite what they say, the Government have little interest in shutting this down. They are not keen for comedians like Jimmy Carr to use tax avoidance schemes or indeed common or garden contractors.

Legal Tax Avoidance

Most of their donors use tax avoidance. Indeed Cameron’s own money came that way as his father was a setter-up of offshore avoidance schemes and was into it earlier than most people. So, this is where Cameron’s inheritance came from.

George Osborne has an offshore family trust worth around £5m. They probably teach Tax Avoidance at Eton.

Most of the offshore tax avoidance islands around the world are British colonies where the hedge funds ‘reside’.

Isle of Man

Offshore Umbrella Companies for contractors, which are mostly in the Isle of Man, are allowing contractors to do the same as the ‘knobs’ and avoid tax.

As regards offshore umbrella companies HMRC would love this to be changed. However, there is no way that the Tories will annoy their benefactors and sponsors by killing off this golden goose. It is annoying for them that contractors and comedians can’t be kept out.

So, as regards offshore umbrella companies, HMRC just have to send out begging letters to thousands of contractors. They may or may not be using offshore umbrella companies. They hope to can scare them into sending them money.

For a list of Offshore Umbrella Companies you should click Offshore Umbrella Companies List

Rise in Use of Offshore Umbrella Companies

Rise in Usage of Offshore Umbrella Companies

Rise in Offshore Umbrella Companies

Offshore Umbrella Companies appear to be on the rise. One of the top dogs at HMRC recently said that many offshore schemes were completely legal.

Top people in the Conservative Party have been using these schemes for a long, long time. Indeed David Cameron’s inheritance came to a great extent from the money his father Ian made from setting up offshore schemes for himself and for others.

His father-in-law Lord Astor has many offshore schemes. Indeed the house in Scotland that David Cameron and his wife visit every year is registered in the Bahamas.

The top Tory party donor Lord Ashcroft is another one who operates offshore tax avoidance schemes. He is also the Tory party’s top fundraiser.

Tory Party Leaders

The top dogs in the Tory party have been doing this for years. They are getting on their high horses about multi-national companies joining them in doing this now. They didn’t create these rule for them (nor for comedians like Jimmy Carr) but for the ‘good old boy’ network.

As the head of Google said, it wasn’t Google that created the rules. It was, previous, mainly Conservative governments who created them. Making money moved offshore untaxable was one of the first things the Conservative government brought in when they won the 1979 election.

Now, contractors and freelancers are doing the same and setting up offshore umbrella companies. Of course the Government don’t like it but if they changed the rules it would affect many of their own supporters and donors. They liked it best when it was only the ‘good old boys’ that were able to take advantage of it.

Margaret Hodge Avoiding Tax

Even Labour MP, Margaret Hodge, who has been bashing multi-national companies as immoral for avoiding tax, turned out to be a shareholder in an offshore company that pays less than 2% tax. Her share is worth millions and she got a dividend of £50,000 last year. Everyone is at it now, it seems, except the PAYE workers who now pay most of the tax.

Contractors and freelancers can now get 85% or more of their money returned to them through using offshore umbrella companies. It is very difficult for the Conservatives to change the rules so that contractors and multi-national companies are hit and Tory party donors and members aren’t hit. They don’t want to share this goldmine but they don’t want to lose it either.

This is why more and more contractors are operating through these offshore umbrella companies. Their usage is on the rise. To see a list of these companies click on Offshore Umbrella Company Directory

General Anti Avoidance Rules (GAAR) will not catch multinationals

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)?