Offshore Schemes legal says top HMRC boss

Offshore Schemes Legal

Offshore Schemes Legal

Are offshore schemes legal? Are the Offshore Umbrella Companies that contractors use legal?

Offshore Schemes can be perfectly legal HMRC’s Commissioner and Director General for Enforcement and Compliance, Jennie Granger, said. According to today’s Times she conceded that “There is nothing illegal about an international structure, especially in a globally integrated economy and these arrangements may be particularly legitimate”.

So, many contractors and freelancers are now aping the bigger companies and even members of Parliament. They are using offshore schemes such as offshore umbrella companies.

Offshore Schemes Legal – Tax Systems of Countries

Jonathan Schwartz, a barrister at Temple Tax Chambers and a professor in international tax law, 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”.

Offshore Umbrella Companies Legal

That makes a lot of sense. There’s no point in Governments or MPs moaning about companies behaving immorally, when avoiding tax, when they just follow the tax rules created by Governments. It is their laws that make offshore schemes legal.

Usually the companies are just using schemes that the Government created, like special tax dispensation for the film industry, so that they come to the UK rather than go elsewhere.

The UK Government complain about companies avoiding paying tax whilst, at the same time, progressively cutting Corporation Tax. This is with the purpose of undercutting other countries. It is their stated intention to have the lowest Corporation Tax of all the G8 countries.

David Cameron’s Legacy

Then there’s David Cameron whose family money came from his father Ian’s use for himself, and others, of offshore schemes. There’s Chancellor Osborne who has an offshore family trust worth £4.5m.

Then there’s Margaret Hodge herself, the hammer of the multinationals like Google, whom she calls immoral. She has been exposed as owning part of an offshore company.

Stemcor paid her dividends of £50,000 last year. Her stake is worth over a million pounds. Tax was paid at less than 2%. Google would have been appreciative.

Said Mike Dean of Milestone International Tax partners “The companies under fire are doing nothing wrong legally, morally or ethically. They are, in fact, using the tax system in the way intended”.

Therefore, its Government laws that make offshore schemes legal like offshore umbrella companies.

Gain an Advantage

It is Governments who have been trying to ‘cheat’ and gain an advantage on other countries, in certain areas, that has caused this problem. Offshore schemes and offshore umbrella companies are just taking advantage of all of this.

So, it is Governments who make offshore schemes legal.

See our Offshore Umbrella Company Directory

offshore umbrella company list

Offshore Umbrella Company List

Offshore Umbrella Company Benefits

Offshore Umbrella Company Benefits

Offshore Umbrella Company Benefits

Benefits – so what are the offshore umbrella company benefits?

The main benefits are all connected to the money. This is the best way for contractors to keep most of their money. They can keep anywhere between 84% and 90% of their hard-earned money.

The exact amount depends on how much they are earning.

Mrs Thatcher Changed the Loan laws

Offshore Umbrella Companies started up when Mrs Thatcher changed the laws so that money sent offshore was no longer taxable. It was one of the first laws she brought in when she became Prime Minister in 1979. The Tory party grandees were among the first to get the benefits.

One of the earliest to benefit was David Cameron’s father Ian. He quickly saw the benefits  and set up lots of offshore schemes. Indeed he made his money that way. That’s where David Cameron’s inheritance came from.

Many of the Tory grandees saw the benefits and operate schemes like these including Lord Astor, David Cameron’s father-in-law and Lord Ashcroft, the Tory party’s main donor.

How Loans Works

So, the money that is sent offshore stays offshore. The Offshore umbrella company loans the contractor money in lieu of that loan. The loan is never paid back. The contractor defaults on that. The Offshore Umbrella Company takes the money in lieu of that.

Money is not taxed until it comes back onshore. The money never does. It is different money. Loans aren’t taxable. This is how it all works. It’s how the contractor benefits.

Tax Avoidance

It is tax avoidance, of course. However, it is legal and it is not tax evasion which is illegal.

The Government complain about it. However, it is they who make the rules. It is they who can change them. Contractors and others are only taking advantage of the rules as they are. They take the benefits from the Governments own laws.

Indeed it is the legal duty of the directors of a company to maximise the returns for shareholders.

Of course, the Government don’t want to change the rules as it benefits many of their party sponsors. Indeed George Osborne has a £4.5m family offshore trust. He sees the benefits of it.

Benefits Not Intended

It’s annoying for the Government when newspapers reveal that comedians and rock stars are reaping these offshore umbrella company benefits.

The benefits weren’t intended for the likes of them and contractors. The Government had to react. However, they don’t change the law.

For some examples of these companies see Offshore Umbrella Company List

offshore umbrella company list

Offshore Umbrella Company List

Umbrella Companies Dilemma over Supervision, Direction and Control

umbrella companies dilemma on supervision, direction and control

Umbrella Companies Dilemma

The Chancellor Osborne’s Autumn Statement and 2016 Finance Bill has caused a huge umbrella companies dilemma.

The Chancellor has said that all Umbrella Company contractors will be deemed to be under the Supervision, Control and Direction of their clients – unless it can be proved otherwise.

This would mean that they are no longer able to offset travel and subsistence expenses against tax.

As this is the main expense that umbrella companies can claim for their contractors, it means that their contractors are going to take a huge hit in their pockets.

Umbrella Companies will have to tell contractors this before April and before they notice a huge chunk mission from the money returned to them.

Umbrella Company Expenses

Umbrella Company Expenses explained

Leaving Umbrella Companies or Staying

It will also mean that many of those contractors will have a decision to make, whether to stay with their brolly or to take themselves out of IR35 and use a personal service company.

Some contractors will stay and some will go.

They have to pay upwards of £100 a month to umbrella companies, basically just to pay them.

This was offset by what they would save on an Accountant and even more by what the umbrella company could offset in taxes for them.

What they gained was more than they paid out to the umbrella company.

So, it was worthwhile for them to stay in the umbrella company rather than pay the IR35 tax.

Autumn Statement and Finance Bill

However, that situation has now changed after the Autumn Statement and Finance Bill 2016.

The main expense they could offset against tax was the travel and subsistence expenses.

That will be gone from April 2016.

So, many umbrella company contractors will now be paying the umbrella companies more than they are saving in tax.

The contractors will have a decision to make and so do the umbrella companies.

Umbrella Company News UK Contractors need

Umbrella Company News for UK contractors

Changing the Contract for SDC

However, the brollies will now have a dilemma.

Should the umbrella companies try to take contractors outside the Supervision, Direction and Control of clients?

In terms of the contract this should not be too hard to do.

The contract would say that for any task, or piece of work, the client would have to agree this with the contractor.

They would have to agree the estimate too.

Employers tell permanent workers what to do and how long it should take. Suppliers, with a contract for services, would agree with their customer what should be delivered and when.

Changing Contractors Working Practices

As I said, it would be easy enough to change contracts to reflect this. After all, umbrella companies normally have a cosy relationship with agencies who supply them with contractors.

Providing the client is reasonable, and most are, they would be happy to change the contractor’s working practice to match the contract.

Both parties would agree the piece of work,  as would the estimate. The contractor would complete the task unsupervised, using his, or her, own knowledge and experience.

Of course, they are taking a bit of a risk. If they got it wrong they could get hit for the missing tax.

However, theres is no reason to get it wrong,

It’s fairly simple. The contract HAS changed. The relationship between the contractor and the client HAS changed to a customer / supplier relationship in terms of agreeing what has to be delivered and the time it should take.

So, it is not fraudulent. It is just a fact – a change way of working.

Working through Umbrella Companies

Working through Umbrella Companies for maximum returns

Umbrella Company Options and Choice

So, here’s the umbrella companies dilemma.

Here is their Catch-22.

If they do help the contractor to be unsupervised, working without direction and uncontrolled by the client, this would get the contractor his travel and subsistence expenses back again.

That might save him, or her, £5,000 a year.

It might make it more worthwhile to stay with the umbrella company.

Contractor Now Outside IR35

However, it would also take him, or her, closer to being outside of IR35.

This would mean that he, or she, could now work through a personal service company.

Personal service company contractors pay an average of £10,000 a year less in tax than an umbrella company contractor.

There are three main IR35 factors which point to you being caught by IR35 or outside it.

Major IR35 Factors

They are:-

1 Supervision, Direction and Control

2 The Right of Substitution

3 Mutuality of Obligation

IR35 and UK Contractors - Inside or Otsideu

IR35 and UK Contractors and the tax they pay

Right of Substitution Contract Clause

We know, from a previous court case, that you can easily insert the right of substitution into your contract and a named substitute and that the burden of proof is with HMRC to prove that it was a sham.

They could only do that if the client triggered the substitute clause and the substitute failed to show up. That court verdict must have had HMRC gnashing their teeth.

So, of the three main pointers to IR35, putting a right of substitution clause that will never be triggered into your contract would allow you to tick that box.

The umbrella company has just helped the contractor to be outside the Supervision, Direction and Control IR35 factor.

So, the contractor is able to tick off two of the three main IR35 boxes.

Keeping More of a Contractor’s Income

He, or she, would naturally think “Maybe I can get outside IR35 and set up a personal service company so that I could save not just the £5,000 for travel and subsistence but also another £10,000 a year on top of that”.

So, that is the umbrella companies dilemma.

Should they arrange with the agencies and clients to change the contracts fo some of their contractors to take them outside the Supervision, Direction and Control clause?

This would mean that they could still claim their travel and subsistence expenses which might come to more than the monthly fee that the contractor pays to the umbrella company?

Intermediaries Rules for Contractors

Intermediaries Rules for Contractors over IR35

Big Question for Contractor Umbrella Companies

The big question for them is this:-

Will getting contractors outside Supervision, Direction and Control of the client be more likely to get umbrella companies contractors to stay with them or be more likely to show them how it is done and make it easier for them to leave the umbrella and set up a personal service company.

That’s the 64 million dollar question for umbrella companies.

They are going to have to decide, before April, whether they are going to open that box or keep it shut.

They are going to have to decide whether to twist or stick.

That is the umbrella companies dilemma and they need an answer to it well before April.

So, what will they do?

I’m absolutely certain which option they will take – but that is for another article.

Umbrella Company Alternatives

If they don’t answer it correctly, contractors could jump ship to Limited Companies or Offshore Umbrella Companies.

Tax Efficient Limited Partnerships

Tax Efficient Limited Partnerships for UK contractors

 

Finance Bill 2016 – How Contractors Affected by Chancellor

Finance Bill 2015 contractor effects

Finance Bill 2016

So, how will UK contractors be affected by Chancellor George Osborne’s Finance Bill 2016, the details of which he will announce on Wednesday afternoon?

UK contractors felt that they dodged a bullet in the Chancellor’s Autumn statement a couple of weeks ago.

Chancellor’s Leaks and Rumours affecting Contractors

Prior to that there had been statements from the Chancellor, leaks and rumours that:-

  1. He would take away the right of both umbrella company and personal service company contractors to be able to offset travel and subsistence expenses against tax.
  2. He would force clients, who hired contractors for more than a month, i.e. virtually all contractors, to take those contractors onto their payroll. He called these contractors off payroll employees – which shows what he really thinks of them
  3. He, with HMRC, was devising a new online IR35 test. Clients would make contractors sit this new online IR35 test. If they passed it they could operate as normal as contractors. If they failed it they would have to go on the client company’s payroll. HMRC would also keep the results of failed online tests for future reference
Finance Bill 2015 and Contractors

Finance Bill 2015 and how it affects Contractors

Chancellor Osborne’s Autumn Statement

When the Chancellor read his Autumn Statement, most of these were missing.

The only one that was there was only partially there.

He  would still stop contractors who are caught by the Intermediaries legislation (IR35), i.e. umbrella company contractors, from offsetting travel and subsistence expenses against tax.

However, those not caught by IR35, i.e. personal service company contractors, would still be able to offset travel and subsistence expenses against tax.

Chancellor Finds Extra Tax

In a press release, IPSE (ex-PCG) claimed that as a great victory for they, and their members, lobbying efforts beforehand.

This may be true. However, another factor could have been that the Treasury suddenly found an extra £27 billion in tax receipts, which they would get in the next year, meaning that the Chancellor needed less tax money.

This, and the Lords defeat, may have been why the Chancellor changed his mind on Tax Credits.

It may, also, be a reason why he pulled back out the triple threat above.

However, there is a third possibility.

Finance Bill 2015 as it affects contractors

Finance Bill 2016 and its effect on contractors

Anti-Contractor Measures in Finance Bill

That is that he is going to introduce the measure in his Finance Bill which he will produce on December 9th.

Contractors are not out of the woods, or murky water, yet.

It would seem unlikely that the Chancellor will stop personal service company contractors claiming travel and subsistence expenses against tax after saying he wouldn’t a couple of weeks earlier.

Umbrella Company Threat

However, there may be some truth in he second and third threats, i.e. forcing contractors caught by IR35 onto a client company’s payroll rather than using an umbrella company.

That would be an existential threat to umbrella companies.

Good Umbrella Companies Contractors

Good Umbrella Companies Contractors prefer

He may use the Finance Bill 2016 to announce this measure and may use it to announce a new IR35 test which has legal bearing as well.

The life of UK contractors, since IR35 was brought in, has been a constant worry.

December 9th is the next date for contractors to worry about.

Umbrella Companies Contractors Alternatives After April

Umbrella Companies Contractors Alternatives

Umbrella Companies Contractors Alternatives

Are you looking for umbrella companies contractors alternatives?

Umbrella Companies in the UK are under a severe threat that would be a severe blow to the solar plexus. It would leave 200,000 umbrella companies wondering whether it would be worthwhile staying in an umbrella company or looking for another solution.

The Chancellor has already told us that he is going to abolish the ability of umbrella company contractors to offset travel and subsistence expenses against tax.

Umbrella Company Recommendations for UK Contractors

Umbrella Company Recommendations for UK Contractors

It is mainly contractors who fear that they are inside IR35 who join umbrella companies.

Disguised Contractors in Umbrella Companies

The umbrella companies disguise these contractors as employees of the umbrella company and they deduct PAYE from the contractors’ income.

In all other ways the contractor behaves like a contractor.

The umbrella company performs no other function other than to disguise contractors as employees for tax purposes and pay them accordingly.

They allow for tax deductions like travel and subsistence, pay the contractor and send the PAYE to the taxman.

If contractors were to just pay the IR35 tax they would not be able to claim much in the way of tax deductions.

Tax Deductible Travel and Subsistence Expenses

However, using the ruse, or device, of the umbrella company, they are able to claim certain things against tax.

These include travel and subsistence, equipment costs (e.g. their PC), pension contributions and membership fees of trade organisations.

However, the most important of these is the travel and subsistence that they can claim as deductible.

Conservatives Bashing Contractors Again

However, the Conservative Government, in the guise of Chancellor George Osborne, intends taking it away from them.

To be fair, they are also going to take it away from personal service company contractors too.

They couldn’t be fairer than that, could they?

Umbrella Company Contractors Monthly Fee

Umbrella Company contractors pay a fee of normally over £100 a month for their umbrella company, basically, to pay them.

They must be the only ‘permanent employees’ who their company charge  just to pay their salaries.

It was worthwhile, previously, for contractors to pay that fee because they would get more back in tax-deductible allowances than their month fee.

Doing a financial bean count they still came out on top.

However, a financial bean count, after this, may well show that the money they are paying their umbrella company to pay them, and do their admin, is more than they are able to claim back in tax-deductible expenses.

They may as well just pay the full  IR35 tax. It might be cheaper for them to do so.

Contractors Staying with Umbrella Companies

Some contractors will stay with the umbrella companies. They will be those who are happy to pay the umbrella company to do their admin for them even though they lose out financially.

There will also be those contractors shoved unceremoniously by their unscrupulous agencies into umbrella companies, against their interests, so that the agencies can continue to get ‘bungs’ from the umbrella companies for doing so.

Inducing contractors to join an umbrella company is illegal under the 2010 Bribery Act – but we know it happens.

However, many contractors will be looking for alternatives to umbrella companies.

Here are some umbrella companies contractors  alternatives worth looking at.

Personal Service Companies (Limited Companies)

Although the Conservatives intend to take the travel and subsistence allowance from personal service companies too, there are still lots of other tax-deductible expenses that a limited company contractor can claim.

Indeed, it is reckoned that limited company contractors pay an average of £10,000 a year less in tax and NI contributions than an umbrella company contractor.

So, umbrella company contractors may seek to change their contracts, and working practices, to take themselves outside of IR35.

Many of those contractors using umbrella companies were those who weren’t sure if they were inside IR35 or outside IR35.

They didn’t want to take the chance of an IR35 investigation which may take years and cost them tens of thousands of pounds of back tax and fines if they lost.

However, with these changes to allowances that they can claim they may well be more willing to take a little bit more risk for more rewards.

Tax Efficient Limited Companies

These are similar structures to the common or garden limited companies.

However, they manage contractors income in the most tax-efficient way to give them returns of 85% or more.

Limited company contractors can continue to use their existing limited companies going this route.

An example of one of those, and how they do it, is here – Tax-Efficient Limited Companies.

Offshore Umbrella Companies

Multi-national companies and high net worth individuals, as well s hedge funds, have long used offshore companies to save on tax.

Now contractors are taking advantage of UK tax laws to do so too.

They can get keep 85% or more of their income using these.

For more information see Offshore Umbrella Companies List for UK Contractors.

The contracting world is now very different to the one that we are used to.

Those that plan in advance will be those who will not miss out.

To be forewarned is to be forearmed.

Umbrella Companies Future – Do They Have One?

Umbrella Companies Future now

Umbrella Companies Future

Contractors are asking, now, about Umbrella Companies future after the Chancellor’s summer budget.

In the budget the Chancellor has taken away the ability of onshore umbrella companies to claim tax relief for contractors on travel and subsistence.

This was the main reason for contractors, inside IR35, to be in PAYE umbrella companies.

IR35 Tax and Contractor Umbrella Companies

Contractor umbrella companies sprung up in 1999 when the IR35 tax came onto the statute book.

Very few contractors actually pay the IR35 tax.

From memory, I think that the Government only collect around £12m a year from it which is a tiny amount. It was not worth creating a tax just for that amount of money.

However, what most contractors, who were inside IR35, did was to go into onshore umbrella companies.

Contractors Inside IR35

They paid more tax than their fellow contractors who were outside IR35 and continued to use limited companies.

However, because of the travel and subsistence expenses that their umbrella companies were able to claim on their behalf, for working away from their main office, they paid less than those contractors who paid their IR35 tax.

Estimates show that umbrella company contractors pay, on average, £10,000 a year more in tax than those who use limited companies. They pay around £20,000 a year more than those who are in offshore umbrella companies.

Estimates show that there are 200,000 UK contractors in umbrella companies. That means that the Chancellor gets £2 billion a year more tax than he used to get if those umbrella company contractors were still in limited companies.

Contractors group, IPSE, claimed that the IR35 tax was a failure because it only brought in £12m a year.

However, they forgot to point out this extra £2 billion a year that the Treasury has been getting from contractors who were inside IR35 but went into an umbrella company instead of paying the IR35 tax.

Travel and Subsistence Tax Relief

Estimates show that they could save around 5% of their income a year on tax relief on travel and subsistence expenses.

So, a contractor on £400 to £450 a day would save around £5,000 a year on tax and relief on travel and subsistence expenses.

So, UK contractors are £10,000 a year worse off in an umbrella company than they would be in a limited company.

However, they would have been £5,000 a year better off than someone paying IR35 or PAYE.

Disguised Contractors

How it works is that umbrella companies disguise contractors as permanent staff. Indeed, they pay PAYE.

However, the umbrella companies passed on the tax relief for travel and subsistence expenses for working away from the umbrella company’s offices at client’s sites.

The Labour Government set up IR35 to stamp out the practice where companies laid off people on a Friday from their permanent jobs and started again as contractors doing the same job.

This was, of course, a ruse to save tax.

The Government saw these ‘contractors’ as disguised employees, which, essentially, they were.

However, the IR35 tax caught more than just those fake contractors it its net. It also caught contractors who had been contracting for years, using limited companies, in its net too.

However, the Labour Government saw the extra money it was pulling in and decided that they didn’t want to ‘fix’ it.

The Tories and UK Contractors

Now, the Conservative Government, who in opposition had pretended to be the ‘friend of contractors’ and who promised to ‘look at’ IR35 again on behalf of contractors if they got elected, have shown themselves to be much worse than New Labour. They were satisfied with the their creation of IR35.

The Conservatives did as they had promised and looked at IR35 again.

However, they decided that, if IR35 was abolished, there was a danger that umbrella company contractors would leave their umbrella companies and start up limited companies again.

Damn right they would have!

Who pays £10,000 a year extra tax when they don’t have to?

The government saw this as a bad thing, though.

It was a no-brainer. Whoever thought that, in times of austerity and Government debt that the Government would hand back £2 billion in tax to people earning a couple of grand a week.

Chancellor Strengthening IR35

However, Chancellor Osborne went even further. He said that he was going to STRENGTHEN IR35 and hired 36 new IR35 Compliance Officers based in Croydon, Edinburgh and Stretford to get more tax from contractors.

The assumption was that it was limited company contractors that he was gunning for.

Umbrella Companies future seemed secure.

Umbrella Company owners fondly imagined that HMRC were in favour of them.

After all, the Government decided to keep IR35 because of the threat of contractors leaving umbrella companies and setting up limited companies.

The Conservative Government must like Umbrella Companies then, right?

Rosy Umbrella Companies Future

Umbrella Companies future seemed rosy.

Umbrella Company owners fondly imagined that HMRC, the Chancellor and the Treasury looked kindly on them.

As one told us “HMRC would rather deal with, and legislate for, a few hundred umbrella companies rather than several hundred thousand contractors”.

The umbrella companies extracted PAYE from their contractors after deducting tax relief on travel and subsistence expenses and sent large cheques, monthly, to HMRC.

If those contractors were in limited companies, HMRC would only get the tax in dribs and drabs and would have to wait till well after their year-end to get it.

Therefore, the Government and HMRC were happy to allow contractors to get that 5% extra in tax relief, weren’t they? Umbrella Company operators saw this as a sop to them.

Onshore Umbrella Companies and Tax Avoidance

They, and their marketing directors, saw offshore umbrella companies as tax avoidance and those who used them as tax avoiders.

They turned their nose up at them.

A part of that was sour grapes, though, as they would have rather have had those contractors themselves.

They saw themselves as on the inside, on the side of right.

It turned out that the Chancellor saw Umbrella companies as tax avoidance too and those contractors who used them as tax avoiders.

How that must have stung!

Disguised Contractors and Tax Avoidance

They were kidding themselves. Whereas IR35 was set up to penalise disguised employees, umbrella companies were setting up disguised contractors, pretending that contractors, who had their own clients, were employees and paying PAYE tax for them.

It was a ruse – a device to avoid tax.

They may not like that but that’s how the Chancellor sees them and their brollies, as the budget showed.

Now, umbrella companies future does not look so rosy.

Umbrella Companies Unique Selling Point

So what is umbrella companies future?

The Chancellor has removed their Unique Selling Point.

Now, umbrella companies future is not rosy. It is hard to see it as a growth industry now.

Will contractors pay a fee to umbrella companies every month just so they will do their admin for them?

The answer is that some might.

With umbrella companies future looking bleak, others will decide that it isn’t worth their while. They may look at changing their working practices and contracts to see if they can operate through limited companies again.

Limited Company Contractors Attacked

However, the Chancellor has attacked limited company contractors too and has taken the travel and subsistence tax relief away from them as well.

He is also taxing their dividends to make it not worthwhile, any more, for limited company contractors to pay themselves in dividends rather than salary.

So what options do UK contractor have now?

What options has the Chancellor left untouched?

What are the umbrella company alternatives?

Offshore Umbrella Companies Option for UK Contractors

Besides limited companies, which are less lucrative for contractors now, there are two main options.

Firstly, there are offshore umbrella companies where contractors can get 85% returns on their money or more.

For more information, or to apply, you should click on Offshore Umbrella Companies List

Tory Election Win Good for Offshore Umbrella Companies

Tory Election Win

Tory Election Win

Whoever you voted for, it has to be said that those who run, or use, offshore umbrella companies will be pleased at the Tory Election Win.

Labour had been threatening all sorts of things as regards offshore tax havens.Of course, this would have affected offshore umbrella companies.

Although David Cameron and George Osborne have also been threatening to do all sorts of things to people who use offshore tax havens. However, the press has usually prompted this after some new tax avoidance ‘scandal’.

Offshore Umbrella Companies

As we all know, it is the Government that sets the rules, including the tax rules. Companies are legally bound to maximise profits for their shareholders.

If that includes taking advantage of Government rules and schemes that is the right thing to do for their shareholders.

It might not be the right thing to do as far as the British taxpayer is concerned. However, it is the British Government who are elected to look after the rights of their taxpayers. Companies are put in place to look after the interests of their shareholders.

Governments shouldn’t complain if companies use offshore means to so this. After all they are only following Government rules. If the Government don’t like those rules they should change them. The Tory election win will delight the hedge funds.

Offshore Tax Havens

The astonishing fact is that half of the world’s trade goes through these offshore tax havens. Also, one-third of all the world’s wealth resides in these offshore tax havens.

When we tell you that most of these offshore tax havens are British owned or British Dependencies you see the real reason that Britain, and the Tories, don’t want to do anything about them. They will do as little as the press will allow them.

One of the first laws that Mrs Thatcher pushed through, when she came to office in 1979, was a law that meant that money moved out of the UK was no longer taxed.

That opened up the floodgates.

Don’t expect the Tory election win to change things too much.

Ian Cameron and Offshore Tax Schemes

David Cameron’s father, Ian, was one of the first to set up offshore schemes for people and companies. Indeed, David Cameron’s inheritance came from profits from these offshore schemes.

What about George Osborne?

He had to admit that he had a family trust offshore worth £4.5m. He said that, when the money comes back onshore, the right amount of tax will be paid.

It never will.

Loans in Lieu of Income

What happens is that people send their ‘income’ offshore and are given loans in lieu of it. They never pay the loans back. Loans are not retrievable after death. Eventually when the person dies, the loan disappears along with the obligation to pay it.

It was the wealthy hedge funds and rich individuals who use offshore schemes who bankrolled the Tory election win. Most of them have offshore addresses in British Dependency tax shelters,

He who pays the piper calls the tune. They wouldn’t expect to be punished for it after the Tory election win.

Offshore Schemes

The Conservative Party’s main fund organiser and donor, Lord Ashcroft, takes advantage of offshore schemes.

David Cameron spends much of his holiday time at Lord Astor’s, his father-in-law, estate in Scotland. This is owned from The Bahamas.

Of course, it does annoy them all when common or garden folk, like Contractors, use schemes like offshore umbrella companies.

Tax Avoidance Schemes

These tax avoidance schemes were not set up for ordinary folk to take advantage of.

However, there’s not much they can do about it as contractors are just following the rules set up by successive Tory Governments and taking advantage of them. They are just doing the same as the toffs and hedge funds after the Tory election win.

These offshore umbrella companies mean that UK contractors can keep 85% or more of their hard-earned money – and it is all perfectly legal.Cclick on Offshore Umbrella Company Directory to find out more information about offshore umbrella companies, or to apply to join one.

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

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

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

Crushing HMRC defeat in Rangers offshore tax case

Rangers Tax Case

HMRC Defeat

There was a crushing HMRC defeat in its appeal against Rangers football club’s use of offshore Employee Benefits Trust (EBTs) to pay its players. There was a major HMRC defeat in the original case by 2-1.

HMRC said that these were payments rather than loans. The First Tier Tribunal (FTT) said they were loans. HMRC lost.
The case, and the tax said to be owed, was a major in bringing down Rangers Football Club.

HMRC Appeal

It was a crushing HMRC defeat but they quickly decided to appeal. They have now lost that appeal. The tribunal judge Lord Doherty ruled against HMRC and in favour of Rangers. It confirms that the EBTs and offshore umbrella companies were completely legal.

This HMRC defeat will have major consequences. Tory Grandees, including David Cameron’s father, his father-in-law, Lord Astor, and the Tory Party main sponsor, Lord Ashcroft, have long used these schemes. George Osborne has an offshore family trust.

However, they didn’t like it when this nice scheme spread to the likes of actors, pop artists, footballers and comedians. Nowadays, contractors and freelancers us them. Many of them are in offshore umbrella companies.

Sleep Safely

Now, after this huge HMRC defeat, freelancers and contractors who use offshore umbrella companies can sleep more safely in their beds at night.

A spokesman for Murray International holdings (MIH) which owned Rangers and made the offshore payments to players said:-

“We are pleased with the judgement. It again leaves negligible tax liability. It overwhelmingly supports the views collectively and consistently held by our advisers, legal counsel and MIH itself”.

Rangers were forced into liquidation in 2012 by HMRC.

Rangers Update

HMRC appealed this case again and won. Rangers are now going to appeal that to the Supreme Court.

More Info

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

See also Offshore Schemes legal says top HMRC boss

Offshore Umbrella Companies and how they work