Spending Review – Offshore Umbrella Companies escape Osborne

Spending Review

Spending Review

Chancellor Osborne’s Spending Review last week didn’t touch offshore umbrella companies spending review. Indeed he has decided to cut HMRC’s budget by 5%.

He said in the Autumn Statement late last year that HMRC’s Budget would remain untouched. However, he has obviously changed his mind.

It doesn’t make much sense to cut the Budget of the department that brings in all your revenue. This will delight those who run and those who use Offshore Umbrella Companies, though.

Tackling Tax Evasion

The Chancellor did say that he would allocate extra resources to tackle tax evasion. However, was undecided on what that would be. He has set HMRC a target to bring in an extra billion pounds from that.

More and more contractors are using he Offshore Umbrella Company  as a means of tax avoidance (rather than tax evasion). The can retain 84% or more of the money they earn by using them.

Of course, the Chancellor and Prime Minister would like to stop this but other than call it unethical and immoral, there’s not much they can do other. The only way would be by changing the laws in ways that they would prefer no to do. As we have shown in previous articles, it’s not just contractors (or comedians) who are using these schemes but MPs too.

David Cameron’s Inheritance

We showed that David Cameron’s inheritance came mainly from the money his father Ian made from offshore schemes. We showed how the Chancellor has an offshore family trust worth ¬£4.5m. We also showed how hammer of the tax avoiders, Labour MP Margaret Hodge, is a user of offshore schemes herself. She has a stake in an offshore company worth millions.

The offshore umbrella company sprung up when the Conservative Government of Mrs. Thatcher changed the law to allow money to leave the country untaxed. It’s been used to avoid tax by many of the top Conservative Party donors as well as the MPs themselves. So, they are hardly likely to try very hard to stop it.

For a list of these Offshore Umbrella Companies see Offshore Umbrella Companies List Continue reading

G8 Summit Fails to Halt Offshore Umbrella Companies

G8 Summit leaves Offshore Umbrella Companies alone

G8 Summit and Offshore Umbrella Companies

So, the G8 summit is over.

Offshore Umbrella Companies and the UK Contractors who use them, breathed a sigh of relief this week. David Cameron failed to get the G8 countries to act in tandem to stop the use of them and to stop multi-nationals paying very little tax, in some countries, like the UK.

The G8 said that countries should put in place their own rules. This is precisely the opposite of what David Cameron wanted. He knows that if he acts unilaterally that multinationals will just up sticks and move elsewhere. That would mean that not only would they not pay Corporation Tax in the UK but they would not hire any more UK workers who pay lots of Income Tax.

Register of Assets Abroad

The G8 did suggest that there should be a register of people who hold assets abroad. However, this is not for general disclosure but only disclosure to the tax authorities. This is nothing new, as the Isle of Man and Jersey and do this anyway. It hasn’t stopped UK Contractors using Offshore Umbrella Companies, previously, and won’t stop them now.

David Cameron has previously said that those who used offshore umbrella companies, although legally right, were morally wrong. That’s rich coming from someone who got his inheritance from the tax avoidance schemes set up by his father Ian.

Labour MP, Margaret Hodge, who is in charge of the Commons Committee looking at tax avoidance, also said it was morally wrong. It was then revealed she ahs a stake in an offshore trust run by her brother. This trust paid less than 2% tax. She has a stake worth millions.

Companies, legally, have to maximise returns for their shareholders. This includes taking advantage of any tax avoidance measures available.