Sanzar Partnership? New IOM company

[malvolio]

As I said earlier, people who don't understand the scheme criticise it unfairly.

The generic rules on double tax relief are superseded by double tax treaties which, in the case of the Isle of Man UK double tax treaty on trust income state that if you have paid tax in the IOM, no further tax is due in the UK.

If the scheme were that seriously flawed, I don't think it would have taken HMRC 5 years to fail to get a case to court!

But you haven't paid any tax if it's at 0%. And even if it's anything higher, you are still liable for the balance between that amount and your "usual" UK tax bill. Unless, of course, you leave all the income offshore, which kind of spoils the whole idea of earning it.

If it's legal then fine but nobody wants to state categorically that it is, or even that they understand it. Also fine. However, given the growing intensity of the attacks on our business by HMRC in their attempts to close off these kinds of schemes by other means, and the impression they give that anyone who wants to go contracting is doing it so as not to pay any tax at all, you'll forgive me thinking that the actions of a 'clever' few are royally f***ing it for everyone else.

[BrilloPad]

But you haven't paid any tax if it's at 0%. And even if it's anything higher, you are still liable for the balance between that amount and your "usual" UK tax bill. Unless, of course, you leave all the income offshore, which kind of spoils the whole idea of earning it.

If it's legal then fine but nobody wants to state categorically that it is, or even that they understand it. Also fine. However, given the growing intensity of the attacks on our business by HMRC in their attempts to close off these kinds of schemes by other means, and the impression they give that anyone who wants to go contracting is doing it so as not to pay any tax at all, you'll forgive me thinking that the actions of a 'clever' few are royally f***ing it for everyone else.

If all the other contractors went IOM we would soon find out if it is legal or not...

[THEPUMA]

But you haven't paid any tax if it's at 0%. And even if it's anything higher, you are still liable for the balance between that amount and your "usual" UK tax bill. Unless, of course, you leave all the income offshore, which kind of spoils the whole idea of earning it.

If it's legal then fine but nobody wants to state categorically that it is, or even that they understand it. Also fine. However, given the growing intensity of the attacks on our business by HMRC in their attempts to close off these kinds of schemes by other means, and the impression they give that anyone who wants to go contracting is doing it so as not to pay any tax at all, you'll forgive me thinking that the actions of a 'clever' few are royally f***ing it for everyone else.

I'm afraid on the first point, you are simply wrong. That's not what the double tax treaty says.

I think the second point is pretty spurious too. HMRC's perception is that quasi-employees shouldn't be able to avoid NI or use their spouse's basic rate tax thresholds and that is what they are seeking to prevent.

The fact that another completely separate group of contractors use a tax avoidance scheme also pisses them off I guess but the 2 matters are unrelated.

They are people out there using all sorts of schemes to avoid tax. Lots of people are avoiding stamp duty but it doesn't mean that HMRC are going to target all house-buyers. etc etc

[malvolio]

I'm afraid on the first point, you are simply wrong. That's not what the double tax treaty says.

No, it says, in effect, an individual resident in only one of the two countries is exempt from tax in the other country on personal income, including professional services performed in the other country on behalf of a resident of his own country (but they must be taxed in his own country). So not quite the same thing as the more conventional tax-paid offsetting arrangements. But surely the bit in brackets is quite significant?

I say again - the con, if there is one, is that the income is liable for tax as soon as it comes onshore and assuming you declare it. If it said that in bold type on the Sanzar website, I would be a lot happier that they had the bases covered. Until it does, it's still chumpware.


Edited...
I think I see how it works now. They take your earnings and put it into a trust in their name. They pay you a fee for the use of your money that is roughly equivalent to 85% of your earnings. The balance is used to pay their taxes to the IOM (and just possibly take some profits for tehmselves). The two services are tax free in both directions. Legal but marginal IMHO

Interesting, but fragile. The risk that HMRC or the IOM at some point closes it off is that you are then liable for 6 years back tax. I'll pass. YMMV of course.

[THEPUMA]

No, it says, in effect, an individual resident in only one of the two countries is exempt from tax in the other country on personal income, including professional services performed in the other country on behalf of a resident of his own country (but they must be taxed in his own country). So not quite the same thing as the more conventional tax-paid offsetting arrangements. But surely the bit in brackets is quite significant?

I say again - the con, if there is one, is that the income is liable for tax as soon as it comes onshore and assuming you declare it. If it said that in bold type on the Sanzar website, I would be a lot happier that they had the bases covered. Until it does, it's still chumpware.

This is really frustrating. Why do you insist on arguing about issues you don't understand? You've obviously decided to try and blag it by looking up the double tax treaty but have no idea what you're looking at! I know how Tim123 felt earlier in the week.

It isn't taxable when you bring it onshore. Again, otherwise I reckon HMRC might have had a stab at bringing a case or two by now.

Have you considered approaching HMRC and asking for a job? I'm sure they'll be begging to offer you a job once you explain to them that you've spotted a huge oversight on the parts of Montpelier, Sanzar et al and if they pass the several thousand cases over to you to deal with, you'll nip up to the Commissioners and reclaim several hundred million quid from all those evil tax avoiders. I'd ask for a percentage if I were you.

[ASB]

As I said earlier, people who don't understand the scheme criticise it unfairly.

The generic rules on double tax relief are superseded by double tax treaties which, in the case of the Isle of Man UK double tax treaty on trust income state that if you have paid tax in the IOM, no further tax is due in the UK.

If the scheme were that seriously flawed, I don't think it would have taken HMRC 5 years to fail to get a case to court!

Can I check my understanding is correct?

Overseas income - in the absence of anything to the contrary - is liable to UK tax. Credit is then received against the foreign tax paid. [Does this need a DTA in place?]

Certain overseas income - as a result of the specific DTA in force - may supersede this.

In the case of IOM income trust income is taxed in the IOM - it is assessed in the IOM at 0%. The fact that the actual rate paid was 0% is irrelevant. It is still regarded as fully taxed.

Is that about right ?

[THEPUMA]

Can I check my understanding is correct?

Overseas income - in the absence of anything to the contrary - is liable to UK tax. Credit is then received against the foreign tax paid. [Does this need a DTA in place?]

Certain overseas income - as a result of the specific DTA in force - may supersede this.

In the case of IOM income trust income is taxed in the IOM - it is assessed in the IOM at 0%. The fact that the actual rate paid was 0% is irrelevant. It is still regarded as fully taxed.

Is that about right ?

That's pretty much spot on. And HMRC have to give notice to change the DTA by sometime in June in advance of the following tax year so it can't now be changed for 08/09 and if there is no notice given this June it will continue through to April 2010.

Where you ask if there needs to be a DTA in place, the answer is no. The position you desciribe applies if there is no DTA. If there is, the DTA provisions apply.

[cailin maith]

Can I check my understanding is correct?

Overseas income - in the absence of anything to the contrary - is liable to UK tax. Credit is then received against the foreign tax paid. [Does this need a DTA in place?]

Certain overseas income - as a result of the specific DTA in force - may supersede this.

In the case of IOM income trust income is taxed in the IOM - it is assessed in the IOM at 0%. The fact that the actual rate paid was 0% is irrelevant. It is still regarded as fully taxed.

Is that about right ?

DTA always overrides domestic legislation

0% isn't zero - when it comes to tax...

[malvolio]

This is really frustrating. Why do you insist on arguing about issues you don't understand? You've obviously decided to try and blag it by looking up the double tax treaty but have no idea what you're looking at! I know how Tim123 felt earlier in the week.

It isn't taxable when you bring it onshore. Again, otherwise I reckon HMRC might have had a stab at bringing a case or two by now.

Have you considered approaching HMRC and asking for a job? I'm sure they'll be begging to offer you a job once you explain to them that you've spotted a huge oversight on the parts of Montpelier, Sanzar et al and if they pass the several thousand cases over to you to deal with, you'll nip up to the Commissioners and reclaim several hundred million quid from all those evil tax avoiders. I'd ask for a percentage if I were you.

Read what I wrote (and then edited) again. I accept now that there is no tax liability. I still think it's marginal and carries a degree of business risk I'm not happy with.

And I still think that if the basic prinicple is fully legal and fairly risk free, why an NDA before you can talk about it?

[cailin maith]

Read what I wrote (and then edited) again. I accept now that there is no tax liability. I still think it's marginal and carries a degree of business risk I'm not happy with.

And I still think that if the basic prinicple is fully legal and fairly risk free, why an NDA before you can talk about it?

Intellectual property rights?