Offshore tax avoidance schemes

[Chugnut]

I think the theory is that if you earn £5K you are more likely to be picked for investigation than if you earn £30K. Lots disagree others (e.g. QDOS) agree with the argument. Which is why they insist on a £9.5K salary for their insurance. I think the idea is that if you pay £30K they will ignore you and not discover you are actually avoiding a whole lot more!

That's probably to mitigate the chances of a) having to defend you in the first place, and b) having less tax + penalties to pay back if they failed the defence.

[Archangel]

I agree 100%. In fact you can get over 80% take homeif you are married. all completely legit. It will be more like 75% next year though due to 'income shifting' legislation. These schemes offer 85%. There is no point going off-shore with all the associated risk for a couple of K a year!

and I find it easier to sleep at night.

[Chugnut]

1. fees not hefty

2. get one with onshore presence

3. great if you are not divorced with an ex-wife to pay

4. good point!

5. true - but if you get one with onshore presence you are fine.

You are entitled to your opinion - you fit in with the majority here...

1/ Fair enough, some are though.

2/ Have they disclosed?

3/ Cow.

4/ Thanks, relevant too.

5/ See 2.


But I forgot: -

6/ HMRC tolerance of avoidance is decreasing year on year. Expect this to continue, with cries of "tax avoidance" forced down Joe Public's throat until they're perceived with the same disdain as evasion.

and the most important one: -

7/ Hector undoubtedly reads these boards.


I'm not being blinkered about this Brillo, just have a good think is all I'd say. Sincerely HTH.

[crack_ho]

Fees are normally >=5% of your turnover which I would consider substantial especially as you would never be able to get them back if you are investigated.

The salary you have to pay yourself is detemined by what you tell them your role is. They then use a national average to set your wage. So most people lie and say they are backup tape changers and get assigned a salary <30k.

[dude69]

With Montepelier, on £500/day, net is 87.4% after first year.

Via an LTD, the take-home is:
71.5% with one employee taking all income
78.6% with one employee using CGT to wind-up every 3 years
80.3% with one employee plus spouse
83.0% with one employee plus spouse using CGT

Both assuming £6k expenses. £20k salary in first case, £5435 in second. Higher effective take-homes if you have a pension or higher expenses.

On lower rates the offshore scheme is less attractive, on higher rates it is more attractive.

[Ardesco]

I know that my accountant has mentioned these schemes before, his opinion is that you need to bring in at least £60,000 a year to make them more profitable than your own LTD Co.

[Cheshire Cat]

I'm using an offshore scheme, and as I've discussed previously on this board, I will be switching to Ltd at some point this year, not because I doubt the legality or legitimacy of this scheme, but because, in the event of an investigation I have no guarantee of the legality/legitimacy being defended by the scheme providers.
Instead I may end up footing a hefty legal bill to do this, which I couldn't afford, or pay up whatever Hector decides we wants from me.
As a ltd I can buy legal insurance, which (assuming I follow the conditions) guarantees I won't have to pay hefty legal bills, or unnecessary amounts to Hector.

[kryten22uk]

With Montepelier, on £500/day, net is 87.4% after first year.

Via an LTD, the take-home is:
71.5% with one employee taking all income
78.6% with one employee using CGT to wind-up every 3 years
80.3% with one employee plus spouse
83.0% with one employee plus spouse using CGT

Both assuming £6k expenses. £20k salary in first case, £5435 in second. Higher effective take-homes if you have a pension or higher expenses.

On lower rates the offshore scheme is less attractive, on higher rates it is more attractive.

Where did you find the Montpelier info? Was it online or what they sent you? I've been trying to get hold of them as I cant find any decent info on their site, but they dont respond. I'm pretty much finished joining TaxDesign but it doesnt mean I cant swap to Montpelier if its a better run scheme.

My rate is close to £1k per day, so the benefits were looking too tempting for me.

[ASB]

Ir35 ??

Let's assume that the scheme of itself is successful and defendable etc.

What about IR35?

Presumably one can still get caught if the revenue decide the arrangements between the supplier and the client are caught. This might be easier for HMIT to establish than the lack of legitimacy of the scheme itself.

If one were caught by IR35 in these circumstances then it is likely that the overall arrangements would prove spectacularly unsuccessful from a tax planning point of view.

[Friendly Accountant]

Small Salaries

Don't know which schemes you are referring to , but in response to the original question, one of the reasons to take a bit of salary is to comply with minimum wage legislation.

All the comments re: Ltd company are contingent upon not being caught by IR35. A lot of these schemes are targeted to people who would be caught by IR35.

Also, re: use of limited company:

If the Revenue found out that you were winding up every 3 years you would not llikely get Capital treatment on the distribution. Therefore, distribution would be taxed as a dividend, not a capital gain. Therfore, this approach will only work until you get caught. Also, using spouse will be attacked, if not in the proposed income splitting legislation, then in the next drafting.