Tag Archives: Public Accounts Committee

Public Accounts Committee
The Public Accounts Committee have been attacking companies like Google, and individuals like UK contractors and UK freelancers, who legally avoid UK tax.

However, it was revealed that Margaret Hodge, the Chairperson of the PAC took advantage of an offshore scheme to pay only 2% in tax on the earnings of the company called Stemcor.

[caption id="attachment_494" align="alignnone" width="194"] Public Accounts Committee and UK contractors[/caption]

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

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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

Offshore Umbrella Companies storm has died down

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Offshore Umbrella Companies Storm

Offshore Umbrella Companies Storm

There was an Offshore Umbrella Companies storm a while back. The Times whipped up an offshore umbrella companies storm and the Government decided that they needed to react. The press spouted a lot of hot air. David Cameron even brought it up at the G8 summit.

He did that as he didn’t want Britain to go it alone and give competitive advantage to other countries. After all, Britain is the world’s leading exponent of owning territories which run offshore schemes.

However, the G8 didn’t back Cameron, who was probably only doing it to show the press that he was doing something. The G8’s rejection has let him off the hook. We have since learned that the Conservative Party have received £45m in contributions from hedge schemes many of which operate from offshore addresses.

We then learned that those hedge funds had received a tax break recently worth £145m. A Labour MP was called a ‘stupid woman’ by Foreign Minister William Hague for suggesting that there might be a connection.

Margaret Hodge

We also learned that Labour MP, Margaret Hodge, who is Chairperson of the House of Commons Public Accounts Committee has a share in an offshore company run by her brother call Stemcor. She has called major companies and people who avoid tax as unethical. Her stake is worth millions and the company pays as little tax as the major company tax avoiders.

Not only has David Cameron piped down about it recently but Margaret Hodge has been a little quieter too. He is, no doubt, too busy eating humble pie. There is little point in attacking the major companies for avoiding tax. It is their duty to shareholders to maximise profits.

Umbrella Company Contractors

There’s no point in haranguing contractors for using offshore umbrella companies either. They are just doing the same.

It’s the Government who makes the rules that big companies and contractors take advantage of. However, the Government doesn’t want to change those rules unilaterally.

So, it looks as if the offshore umbrella companies storm has all died down. So, it is business as before for the operators of, and those who use, offshore umbrella companies. It remains tax avoidance and not tax evasion.

For a list of legal Offshore Umbrella Companies see Offshore Umbrella Company List

Rise in Use of Offshore Umbrella Companies

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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

Margaret Hodge an Offshore Tax Avoider too

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Stemcor and Margaret Hodge

Margaret Hodge

It turns out that Labour MP, Margaret Hodge, is a tax avoider too.

You couldn’t make it up. The newspapers revealed, not long ago, that two senior managers at HMRC were putting their salaries through Limited Companies to save tax. This was whilst they were hunting down genuine contractors who were doing so.

They have now revealed that the Hammer of Google, Facebook, Starbucks etc., Labour MP Margaret Hodge, has a share in an offshore fund as well and is an offshore tax avoider.

The newspapers revealed that Chancellor Osborne is an offshore tax avoider and has an offshore family trust worth £4.5m. They also revealed that David Cameron’s father Ian was an offshore tax avoider He made most of his money (and David Cameron’s inheritance) from offshore funds.

The new revelation is that the Chairperson of the Committee which looks into tax affairs and tax avoidance has a share in an offshore fund. Margaret Hodge is an offshore tax avoider too.

Stemcor Offshore Company

She has a shareholding in Stemcor – which paid just 0.01% tax last year. Google and Amazon would be proud of that. Hodge claimed in a grilling, by Michael Crick, that she just had a small shareholding in the company run by her brother who is an offshore tax avoider.

However it turns out that her shareholding is 1.26% of the company. That would mean that she would have been paid out £56,939 in dividends last year. Her shareholding is now worth £1.8m. That’s hardly a tiny, tiny amount as she claimed.

Stemcor have confirmed that it doesn’t even include shareholdings in her children’s names. It turns out that she owns several million pounds worth of shares when you include her children’s shareholdings. They will now pay no inheritance tax on it.

She was asked to explain what other purpose that there could be other than avoiding tax for her share in the trust? She hadn’t replied so far.

It’s always been the case that those in the know have been using these tax avoidance schemes. It’s to save paying their full whack of taxes.

The top Tories have been offshore tax avoiders for a long time. Now it looks like Labour MPs are at it too. They are using them while bashing multinational companies and genuine contractors who now use offshore umbrella companies.

To see some examples of offshore umbrella companies for contractors see Offshore Umbrella Companies

Offshore Schemes have Government foaming at mouth

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Offshore Schemes for contractors

Offshore Schemes

The Government has fulminated about offshore schemes where big companies are able to avoid paying tax in the UK. David Cameron has criticised ‘clever accountants’ who set up these offshore schemes for their clients to avoid paying UK tax.

Margaret Hodge of the Public Accounts Committee has attacked the big Accountancy companies for setting up these schemes at a Public Enquiry.

However, one wonders who should be in front of this Public Enquiry, the big Accountancy companies or the Government. After all, it is the Government who are in charge of the law. The big Accountancy companies just follow the laws that the Government set up.

Offshore Schemes for UK contractors to save tax

Offshore Schemes for UK contractors to save tax

Thatcher Government

Perhaps the Committee should investigate members of the Thatcher Government. The Committee could ask them why one of the first pieces of legislation they put through in 1979 after being elected was to allow people to send money offshore without it being taxed. Why was that so urgent?

There’s a lot of talk also about trying to shame companies like Starbucks into paying more tax than they legally have to.

Perhaps they should put David Cameron in front of the Committee to ask him if he would hand over to HMRC a big chunk of his own inheritance which came from the offshore schemes set up by his father Ian, who was one of the early practitioners of such schemes.

George Osborne

Perhaps they can bring Chancellor George Osborne before the Committee. They could ask him if he would promise to that he and his family will pay not just the tax that they have to but the amount of tax that they would have had to do if their £4.5m family trust has been set up in the UK rather than set up offshore.

Contractor Tax Avoidance sches on Isle of Man

Contractor Tax Avoidance schemes

So, the problem for the Government is that these offshore schemes are mainly used by their supporters and backers. There’s not a huge amount of Labour backers with offshore trusts.

These offshore schemes are used by people like David Cameron’s father-in-law Lord Astor and the Conservative Party’s main sponsor and fundraiser Lord Ashcroft. However, it was Margaret Thatcher’s Conservative Government who brought in the laws allowing people to send money offshore untaxed.

Multinational Companies

What they don’t appear to like is multinational companies getting a slice of what was set up just for the upper and business classes in Britain to avoid paying UK Tax. The upper and business classes in Britain have been taking advantage of this for more than 40 years. However, they are now outraged that companies like Starbucks, IBM, Google and Microsoft are using them.

What really annoys them is that freelancers, many of them in IT, are using offshore schemes to avoid UK tax. IT Contractors mainly come from the middle and working classes. They didn’t set these laws up for them.  So, will Cameron and Osborne change the laws which have helped their supporters and sponsors for many, many years – or is this just a knee jerk reaction to a media frenzy.

We shall see. For the moment these offshore schemes remain perfectly legal.