Category Archives: Isle of Man Umbrella Companies

Isle of Man Umbrella Companies
Isle of Man Umbrella Companies are being used more and more by contractors to avoid tax. These offshore umbrella companies are perfectly legal.

Moreover, they can give UK contractors returns of 85% to 90% on their money.

It used to be just high net worth individuals, and major internaional companies, who used offshore facilities to save tax.

Now UK freelancers are getting in on the act too.

They use legal means, therefore, to return more of the money that contractors earn to them.

Many of the top people connected to the Conservative party use these methods to save tax.

These include top cabinet ministers, party donors and party organisers.

[caption id="attachment_515" align="alignnone" width="194"] Isle of Man Umbrella Companies for UK contractors[/caption]

Offshore Umbrella Company Benefits

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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

Offshore Umbrella Companies – How Much Money will I keep?

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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

Offshore Isle of Man Umbrella Companies – Autumn Statement leaves them alone

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Autumn Statement

Autumn Statement

Offshore Isle of Man Umbrella Companies are in the news due to the Chancellor’s Autumn Statement.

The Chancellor unveiled his new tax avoidance measures yesterday in the autumn statement. He says will net the government £9bn extra in taxes. However, he has made those predictions before and only managed to get a fraction of what he expected to get. Most contractors using offshore  Isle of Man Umbrella Companies will not be hit.

There are two areas that the Chancellor is attacking as regards tax avoidance.

Intermediary Companies Legislation

Firstly, the Chancellor is targeting Intermediary Companies.

This is where UK companies register their UK employees as self-employed and pay them through Intermediary companies offshore. This saves the employer paying National Insurance on them.

Several hundred thousand construction workers are ’employed’ this way. It is the companies that get the main benefit. It is not something that affects most contractors in Offshore Umbrella Companies.

False Partnerships Crackdown

Secondly, the Government is going to crack down on what they see as false partnerships, i.e. those set up just to avoid tax. This may affect some Offshore Umbrella Company contractors, if the Isle of Man Umbrella Companies have set them up as partners. However, it is only a small percentage that are set up this way.

All that would happen here is that the offshore Isle of Man Umbrella Company owner would change to a new scheme that is legal and move their contractor over to it.

This legislation is not retrospective so there would be no legacy problems for contractors here. There will be no back payments that HMRC can claim. The very fact that they are changing the law on partnerships means that it was legal before. It will be legal right up to April 2014 when the contractors, presumably, will move to a new legal Offshore Umbrella Company scheme.

Government and HMRC

It would be different if the Government and HMRC fought a scheme through the courts and won. Then the contractors might have problems. However, the Government haven’t won many of these.

If the Government are to get anywhere near the £9bn that they expect to get then they are going to have to get it through the Intermediaries side of it. They may get some from onshore partnerships.

Offshore Isle of Man Companies

However, after this autumn statement those contractors using offshore Isle of Man Umbrella Companies can rest more easily. They weren’t in the Government’s line of fire this time around.

The vast majority of the offshore umbrella company schemes were legal and remain legal under current UK laws. If they do make them illegal, in the future, the legislation will not be retrospective. So, contractors whose schemes are made illegal will not lose out and have to pay back taxes.

For a list of legal Offshore Umbrella Companies you should click on Offshore Umbrella Company List

Applying for Contractor Mortgages

If you want to find out more see Specialist Contractor Mortgages

To apply for one of those specialist contractor mortgages see Contractor Mortgages Application

 

Isle of Man Umbrella Companies happy with Budget

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Isle of Man Umbrella Companies for contractors

Isle of Man Umbrella Companies

Isle of Man Umbrella Companies are happy with the latest budget.

The Chancellor took aim at tax avoidance in his budget today – especially offshore tax avoidance. However, the Isle of Man Umbrella Companies appear to have got away relatively lightly compared to Jersey and Guernsey.

The Chancellor has acted on the intermediaries tax loophole where UK companies avoid payroll tax by routing their payroll offshore in places like Jersey and Guernsey.

Isle of Man Umbrella Companies

Isle of Man Umbrella Companies for UK contractors

Often the temporary workers used by those UK companies didn’t even know it was happening. This is even though it could have led to them losing sick pay and maternity pay entitlement.

Illegal Schemes

However, these schemes are illegal in the Isle of Man and one company was fined for trying to operate one.

The Chancellor also said that he would work with the Isle of Man, Jersey and Guernsey over disclosure. However, the former has been ahead of the game here and has worked closely with HMRC and the Government.

The people targeted are those who hide money in offshore bank accounts.  It’s not about contractors who use offshore umbrella companies.

The companies will feel that they got away relatively lightly.

Contractors can retain 85% of their income by using these companies. Many contractors are now doing so.

Here is one here:-

Compare the Umbrella

 

Offshore Umbrella Companies Boosted by UK Government

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Offshore Umbrella Companies Boosted

Offshore Umbrella Companies Boosted

We have now got offshore umbrella companies boosted by the UK Government.

The UK Government is inadvertently boosting them by their attacks on freelancers’ use of Personal Service Companies. The UK Government appear to want freelancers to get out of Limited Companies and get into Umbrella Companies. The UK Government can then grab more income tax and National Insurance Contributions from them.

Although, to a certain extent they are managing to do this, more and more fish are escaping their nets and slipping into the offshore umbrella companies net. This means that the Government will get very little tax at all from them if any.

Legal Offshore Companies

Most of these schemes are completely legal. The freelancers’ money goes to the offshore umbrella company as an investment. They get back a loan in lieu of the investment. They use the investment as collateral.

One such scheme has the freelancer’s money paid as an investment. This is then invested in a broad spread of 150 telecoms companies. They insure the investment against loss. Therefore, as they insure the investment against loss the offshore umbrella company is able to loan money to the contractor in lieu of that investment.

When the contractor wants to cash in the investment he, or she, will get any profit from the investment in the telecoms companies. All they will pay is Capital Gains Tax on any profit they have made.

Conservative Party

Of course, this is all completely legal. The Conservative Government knows that as it was they, under Margaret Thatcher, who legalised it in 1979 within a month of coming to office. Perhaps it was payback time for their sponsors.

A number of Tory Grandees have used it successfully. They include David Cameron’s father Ian, Lord Astor his father-in-law, Lord Ashcroft the Conservative Party’s main donor and fundraiser. Of course, the Chancellor himself, George Osborne has a family trust of £4.5m offshore.

IT Contractors

Of course, these schemes were never meant for the likes of IT Contractors and other freelancers. However, they cannot just exclude IT Contractor from this tax avoidance gravy train. If they stopped it they would be cutting off their noses to spite their faces.

So, contractors are happy to see offshore umbrella companies boosted by the Government.

Check out our Which Umbrella Company guide and our Which Contractor Accountant guide.

Office Holders Boost for Offshore Umbrella Companies

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Office Holders

Office Holders IR35 Legislation

The Chancellor has given Offshore Umbrella Companies a major boost by his new office holders changes to the IR35 legislation. The more that the Chancellor tries to move contractors out of Limited Companies and into Umbrella Companies the more contractors now approach offshore umbrella companies about operating through them. They have been thriving recently.

Of course, the Government would like to knock these out. However, this is proving difficult for them as the companies are not in their jurisdiction. Also the courts have ruled that the system that they use is perfectly legal.  This is where contractors are given loans rather than paid income.

PAYE Umbrella Companies

HMRC and the Government would like to see all freelancers in PAYE Umbrella Companies. They don’t want them in Limited Companies. They certainly don’t want them in offshore umbrella companies. However, their policies appear to be driving more and more contractors that way rather than becoming an effective employee of an onshore PAYE Umbrella Company.

IPSE Survey

There’s a lot to play for here. An IPSE survey showed that there were now 1.6m people who call themselves Freelancers in the UK. Only 200,000 of these are in Umbrella Companies. The Government take around £10,000 in tax and NICs more from an Umbrella Company contractor than a Limited Company contractor. There is a lot of money at stake for the Government. So, they want to herd as many contractors as possible out of Limited Companies and into Umbrella Companies.

However, if those contractors leave the onshore companies, and go offshore, the Government gets nothing at all in tax. They appear to be helpless to prevent this. This office holders legislation will cure nothing.

For a review of offshore umbrella companies see Offshore Umbrella Companies