Is offshore legal?

[IR35 Avoider]

This is a legitimate UK claimable expense for a limited company.

From what you describe, I would say no it isn't. An expensive only reduces the profit subject to Corporation Tax if it is wholly and exclusively for the purposes of trade. I can't see how this contractors potential profit is enhanced by incurring these expenses, or how you can argue that he would not be able to bring in the money he does without the services. I know that the only expense I really have to incur is my UK accountants charges, so anything else is not deductible for a contractor. (OK we get away with a certain amount in terms of home office and computer, and training courses are legitimate, but I doubt these presumably much more expensive "services" of which you speak contribute anything to the companies success.)

In a non-contractor case many years ago, when directors of a medium-sized company voted themselves a pension scheme, it was disallowed as an expense for Corporation Tax after HMRC proved they would have worked just as hard for the company if they hadn't got the pension scheme, and that therefore creating it did not facilitate the companies ability to make profits.

What I think a non-domiciled person might be able to do is have an off-shore company upstream of his own in the chain of payments.

Re-reading your post, I see I'm actually wasting time debating what is tax deductible; further down you question how anyone would find out about foreign share-holding. Rule of thumb: if a scheme depends on HMRC not knowing something then you are definitely doing something for which you can go to jail, and the questions you need to consider are the likelihood and consequences of being caught. As long as you are clear in your own mind that you are embarking on a criminal enterprise and focus on the issues that raises, there's nothing I can say, other than I wouldn't do it for the sake of avoiding tax, when there are so much easier legal ways to reduce the bill.

[offshore junkie]

when there are so much easier legal ways to reduce the bill.

and these ways are...?

[IR35 Avoider]

IR35 avoidance through correct contracts and working practices, and (for money that was going to be saved/invested anyway) pension contributions.

Corporation tax is only in the region of 20%, that's a pretty reasonable price to pay to get taxable earnings legally into your own name, especially considering that even a minimum wage salary is taxed at a marginal rate of 41%.