Offshore Umbrella Companies returns for UK Contractors

Offshore Umbrella Companies Returns

Offshore Umbrella Companies Returns

Offshore Umbrella Companies returns are the best returns a contractor can get. Those using them are able to keep the most of the money they earn of all contractors.

The returns can be as high as 90% depending on income.

It’s usually reckoned that a contractor using an onshore umbrella company will pay around ten grand a year tax more than one using a limited company.

However, offshore returns dwarf even that of limited companies. Indeed, it could make another ten grand’s difference again to the UK Contractor.

Difference in Take Home Pay

So, the difference between the annual take home pay between a contractor in an offshore company and one in an onshore one can be as much as £20,000 a year.

That’s a difference, over 15 years or so, of around £300,000. Once you’ve added in the extra earning potential of having that extra money to invest, it could be quite a substantial sum we are talking about.

On the Stock Market you are able to get an average return of around 12% a year, including dividends.

Extra Money Calculation

If you calculate how much your extra 20 grand a year would come to over 15 years at 12% interest a year, your money would be worth an extra £835,000 over that 15 years.

Of course, if you are better than the average Stock Market punter you could make even more.

So, it is clear that Offshore returns are much higher than for those using onshore companies. Using them would make contractors a million quid richer in 16 and one-third years, I calculate. That’s not to be sniffed at.

If you are going to be a successful and rich contractor you should maximise your returns from your earnings.

Apply for Offshore Umbrella Companies

So, to find out more, or to apply for one, click on Offshore Umbrella Companies List to get the best offshore umbrella companies returns and offers.

Keep More of Your Income

Keep More

Keep More of Your Income

You can keep more of your income, i.e. 85% or more using one of three methods:-

Tax Efficient Umbrella Companies

There are both onshore and offshore umbrella companies. Using the standard onshore one will mean that you lose 40% or more of the money you earn.

This could be even more, however, after the Chancellor ruling that umbrella contractors can no longer offset travel & subsistence against tax.

One way to get around this was to use an offshore umbrella company. Another way is to use a more tax efficient onshore one. That’s so you can keep 85% of your money with one of those.

To lean more click on Umbrella Companies

Tax Efficient Limited Companies

The majority of IT Contractors use Limited Companies. These are termed Personal Service Companies when one person earns most of the income in the company.

However, most freelancers don’t use their companies in the most tax efficient way.

They could retain 85% of the money they earn and more if they optimised its use.

So, to find out more click on Limited Companies

Apply for More Information on Both Options

Fill in the form below to get your information pack on how the above three work. Click Y against each of those options for which you want to receive the Infopack.

Your Name (required)

Your Email (required)

Your Telephone (required)

Your Daily Rate (required)

Limited Company (Y or N) (required)

Umbrella Company (Y or N) (required)

Comments

Offshore Umbrella Companies and how they work

How They Work - Offshore Umbrella Companies

How They Work

Contractors want to know how they work.

Offshore Umbrella Companies normally operate through loans. In 1979 the Thatcher government, in one of its very first bills, allowed money to go offshore untaxed. It doesn’t get taxed till it comes back onshore, if ever.

This opened the way for offshore schemes and offshore umbrella companies which operate in places like the Isle of Man, Jersey, the Bahamas, Bermuda etc.

Indeed most of the world’s hedge funds operate from one of the UK’s offshore islands.

How they work is that money held offshore is not taxed unless it returns to the UK. Among the first to take advantage of this were the Tory Party grandees.

David Cameron’s father made his money this way by setting up schemes both for himself and others. David Cameron’s inheritance came mostly from money earned this way. Another to benefit is Chancellor Osborne who has £4.5m held offshore in a family trust.

Tory Party’s Money

Much of the Tory party’s money comes from people who operate these schemes. Lord Ashcroft, the top donor and fundraiser for the Conservative Party operates these offshore schemes. Now contractors and freelancers are enjoying the benefits of it too.

How they work is that most of the offshore umbrella companies and offshore schemes operate through loans. Because they’ve sent money offshore untaxed, i.e. the money they earn, that money is not taxable till they bring it back onshore. However, it never does.

Because they have that money offshore, the offshore umbrella companies that they operate through will loan them money back in lieu of that. They will then take that money back at the end to pay back that loan. Money loaned is not taxable.

Different Money Comes Back Onshore

Basically it is different money that comes back onshore than the money sent off. How they work is that he contractor receives loans and never pays them back as the offshore umbrella companies take the money sent offshore in lieu of those loans.

This is all completely legal. There is nothing HMRC can do about it as it is all framed in UK law. They would have to change the law to stop it and that is fraught with difficulties and would hit the Tory Grandees who basically pay for the Conservative Party.

Very Neat Scheme

There is one other scheme, which is quite neat, which one offshore umbrella company operates. They basically invest your money in a whole range of safe companies and send you loans in lieu of that money. You may even make a profit when you eventually quit the scheme and the only tax you would pay would be capital gains tax on the profits.

The beauty of it is that you can operate this through your own limited company and it would be invisible to your agency. See details of it here – Offshore Scheme using your Limited Company

To see details of these offshore umbrella companies see Offshore Umbrella Companies Directory

Offshore Umbrella Company Returns

offshore umbrella company list

Offshore Umbrella Company Returns

So, what are the offshore umbrella company returns on your hard-earned cash compared to other options?

First of all, what are the other options?

Firstly, you can just pay up on your IR35 tax. Secondly you can operate through a Limited Company (or Personal Service Company). Thirdly you can operate through a PAYE Umbrella Company. Finally, you can operate through an offshore umbrella company.

Offshore Umbrella Company

Offshore Umbrella Company Returns can vary anywhere between 85% and 90%, depending on your income. Using offshore umbrella companies are by far the best method of keeping most of your money.

So, if you earned £100,000 you would expect to keep £85,000 to £90,000 of the money you earn.

Limited Company (Personal Service Company)

This is the next best option. However, you would still be £10,000 to £15,000 down than the offshore umbrella company returns. You would expect to keep around 75% of your money. So, you would keep around £75,000 if you earned £100,000.

Onshore Umbrella Company

Using a normal onshore umbrella company would let you keep around 60% of the money you earn. This means you would keep around £60,000 of the £100,000 you earned.

PAYE Operator

If you pay the IR35 tax or use normal PAYE, you would get back around £55,000 of £100,000 that you earned.

There are many reasons for using one or the other. However, if it is a bean count, and you are just going for the most lucrative option then the offshore umbrella company returns of up to £90,000 makes it a no-brainer for contractors.

You could be keeping up to £30,000 a year more by using an offshore umbrella company rather than using a normal onshore umbrella company. That mounts up over time. That money escapes you.

To find out more about offshore umbrella company returns you should click on Offshore Umbrella Company Directory

offshore umbrella company list

Offshore Umbrella Company List

Offshore Umbrella Companies – How Much Money will I keep?

How Much Money

How Much Money Will I Keep

Contractors want to know “How much money will I keep by using offshore umbrella companies?”

Is it worthwhile operating through Offshore Umbrella Companies? How much money will you save a year by operating this way?

Say you are a contractor who is earning just over £400 a day – which is around £100,000 a year.

If you operated PAYE you would probably keep about £64,000 of that.

Offshore Umbrella Companies Viable Alternative

Offshore Umbrella Companies Viable Alternative to PAYE Umbrella Companies and Limited Companies

If you operated through a Limited Company you might keep around £75,000 of that.

If you operated through one of the offshore umbrella companies you would keep something between £85,000 and £90,000 of that depending on how much you earn and your circumstances.

Operating Through Limited Company

So, if you were PAYE you would contribute about £36,000 a year towards the Treasury.

Therefore, if you operated through a Limited Company this loss would be around £25,000 a year.

However, going through one of the offshore umbrella companies you would give up between £10,000 and £15,000 a year. Most freelancers would be towards the lower side at 85% but if they got a really good contract rate they could probably negotiate up towards the higher mark.

It’s probably worthwhile getting a quote from 3 or 4 companies to see what is the best offer. You’ve worked hard enough for it and you might as well keep as much as you can of it.

Government Complaints

The Government complain about it but have no real will to stop it. As the top dog in Google asked, why are they complaining when it is they who created the rules that allowed tax avoidance in the first place?

Legal Tax Avoidance for UK contractors

Legal Tax Avoidance schemes used by UK contractors

It was the Thatcher Government who changed the rules to allow money to go offshore untaxed which gave rise to this tax avoidance in the first place. If they were to abolish it now it would hit many of the Conservative Party donors.

As one of top dogs at HMRC said recently many of these schemes are completely legal. If the Government want to make them illegal they have to change the laws. Until then, offshore Umbrella Companies are legitimate ways for contractors in the UK to avoid tax quite legally.

To see details of these offshore umbrella companies and how much money you would keep see Offshore Umbrella Companies Directory

Favourite Umbrella Companies for UK Contractors

Favourite Umbrella Companies

Favourite Umbrella Companies

Many people have their favourite umbrella companies. That’s especially true for agencies who tend to only include those umbrella companies on their Preferred Supplier List who give them bungs for sending contractors their way.

The 2010 Bribery Act bans this but it happens.

However, that’s another story.

So, what constitutes a favourite umbrella company?

Dodgy Umbrella Companies

Firstly, one that doesn’t try to con you in the contract.

Make sure you read the contract and if you see any clause detailing any penalties for leaving the umbrella company, run a mile.

Umbrella Company Recommendations for UK Contractors

Umbrella Company Recommendations for UK Contractors

If they are being sneaky and duplicitous in the beginning that’s because they are, well, sneaky and duplicitous.

If you go with that umbrella company you really have started off on the wrong foot.

Umbrella Company Recommended by Agency

So, should you go with the umbrella company recommended by your agency?

You would if you were an idiot.

There’s almost certainly one reason, and only one reason, that your agency are recommending a particular umbrella company to you and that is that they expect to get a fee from the umbrella company for every contractor that they send them.

What about that then?

Too many contractors think of their agency as their agents, e.g. like the Mr. Ten Percents in the Acting and Football professions, who look after their clients’ interests.

Nothing could be further from the truth.

‘Your agent’ wants to extract as much money as he, or she, can from you. If they can possibly take half of the rate that is paid by the client for you then they would happily take it without any scruples.

Umbrella Company Preferred Supplier Lists

If your agency demand that you use a particular umbrella company, or an umbrella company on their Preferred Supplier List, you should refuse to do so.

If they tell you that you have to, ask them to put that in writing and see how they react.

It is illegal under the 2010 Bribery Act for agencies to induce contractors to join a particular umbrella company for a fee.

Don’t worry about standing up to them.

Umbrella Company Costs

Umbrella Company Costs for UK contractors

They won’t dump you. The main fee you get for them is the margin they get on your weekly earnings.

The bung the umbrella company give them is just a bit extra on the side.

They are not going to reject the main course for a little dessert.

Your Favourite Umbrella Companies

Your favourite umbrella companies should pay you weekly and pay you on receipt of your timesheets.

Certainly run a mile from an umbrella company who say “we’ll pay you when we get paid” or make you wait for payment.

Many umbrella companies pay you straight away so use one of them.

Umbrella Company Fees

Before you join an umbrella company, examine the fees they charge and what you get for that.

Don’t necessarily go for the cheapest. Go for the best service at the best price. Look at what they are throwing in.

Umbrella Company Fees and charges

Umbrella Company Fees and charges for using them

See, if they throw in are any insurances like Professional Indemnity Insurance.

They can purchase these insurances in bulk so they can get them for you more cheaply than if you applied for the insurances yourself.

Tax Deductible Umbrella Company Expenses

One thing that is very important, if they are to be among your favourite umbrella companies, is to find out of they’ll help you to claim expenses as tax-deductible – and what expenses you can claim.

You can more than cover the cost of your umbrella company fees by setting expenses off against tax.

Umbrella Company contractors already pay an average of £10,000 a year more in tax and national insurance contributions than a personal service company contractor does.

Don’t make it even worse by not offsetting your expenses against tax.

Umbrella Company Contractors Who Don’t Claim Expenses

I was astonished to find that between 50% and 60% of umbrella company contractors don’t claim any expenses at all.

That would increase the tax differential between umbrella company contractors and personal service company contractors to perhaps £15,000.

Soon you’ll be talking real money.

Travel and Subsistence Expenses

From April 2016, umbrella company contractors are longer be able to offset travel and subsistence expenses against tax if they are Supervised, Controlled and Directed by their client when working for them.

It would be relatively easy for you to change your contract and working practices to make it  so that you aren’t Supervised, Controlled and Directed by the client.

Umbrella Company Comparison

Umbrella Company Comparison for UK contractors

If the client previously gave you a piece of work, told you how long it should take and told you how to do it, supervised you doing it and where you should do it, negotiate a change in the contract and working practice here.

Supervision, Direction and Control

You are an experienced contractor.

Agree the piece of work to be delivered by the client and get the agreement signed off. Do the same with the estimate for the project. Agree that and get the agreement signed off. Agree where it is best done, at your home office or at the client’s site and document that agreement.

You surely don’t need to be supervised in doing the task. When the task is delivered ask your customer to give you a signed acceptance on what you have delivered to them.

If your umbrella company won’t give you advice on how to get these expenses offset against tax after April 2016 it may be because they don’t want you to be Unsupervised, Uncontrolled and Undirected.

They may not want not to change your contract to reflect your new way of working.

Outside IR35

Why, would they not want to do this?

One good reason, from their point of view, is that Supervision, Control and Direction is one of the three major planks of IR35.

The other two major planks are the Right of Supervision and Mutuality of Obligations, i.e. the obligation for them to pay you for turning up and for them to pay you whether there is work for you or not.

IR35 and UK Contractors - Inside or Otsideu

IR35 and UK Contractors and the tax they pay

If you are able to get outside the first plank of IR35, i.e. Supervision, Direction and Control, and you enter a Right of Substitution clause in your contract, then you are only a very short step away from being outside IR35 altogether – and not have to lose all that money each year by being in an umbrella company.

Maybe that’s why many umbrella companies are not too bothered about their contractors not claiming any expenses at all against tax.

Onshore or Offshore Umbrella Companies

Of course, the favourite umbrella companies for contractors could be either onshore ones or offshore umbrella companies.

The average IT Contractor earns £425 a day. That equates to around £100,000 a year once you take out time off.

An onshore PAYE umbrella company contractor would keep somewhere between £60,000 and £65,000 in tax and NI contributions.

Offshore Schemes for UK contractors to save tax

Offshore Schemes for UK contractors to save tax

An offshore umbrella company contractor would keep somewhere between 85% and 90%, depending on circumstances, mostly on what they earn.

Umbrella Company Alternatives

So, the offshore umbrella company contractor could be keeping as much as £40,000 more than an onshore umbrella company contractor – particularly one who doesn’t claim any expenses.

Other alternatives to onshore umbrella companies include Tax Efficient Limited Companies for Contractors.

Both return £85% or more to contractors.

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