Reply to: Tax question - is it pointless?

[turbowoowoo]

You are comparing apples with oranges - it's not the same thing at all. A company like Amazon, for example, has offices all over the world Amazon.com: Locations, they will have tax obligations all over the world but some of those will be offset against losses in other areas or because of dual taxation agreements etc etc. Just because a multi national doesn't, according to the newspapers, pay the 'fair' amount of tax in the UK doesn't mean that they aren't paying the correct amount overall. People who used EBT's put their earnings with a company who promised to lower their tax liability artificially - they were effectively 'loaned' their own money knowing that the 'loan' would never be repaid. Either that or they had their earnings paid somewhere like the Isle of Man - they had no connection to the Isle of Man, no offices there, they weren't tax resident there, didn't live there - the only reason for doing it was to attempt to reduce tax liability artificially.

The bottom line is that both scenarios are tax planning and were effectively within the law. One takes advantage quite unfairly people may think of favourable terms and incentives of certain countries to locate their HQ. whilst within the law of that country aren't they lowerING their tax liability artificially
?

Answers on a post card please

What are your views on ISA's Pensions, family trusts etc etc? are people who use these lowering their tax liability artificially?

Whilst these schemes are now clearly out of scope for users, these were used for many years as valid vehicles

One other question

People who use your umbrella functions are they lowering their tax liability artificially by claiming travel costs to their place of work?

[Forbes Young]

You are comparing apples with oranges - it's not the same thing at all. A company like Amazon, for example, has offices all over the world Amazon.com: Locations, they will have tax obligations all over the world but some of those will be offset against losses in other areas or because of dual taxation agreements etc etc. Just because a multi national doesn't, according to the newspapers, pay the 'fair' amount of tax in the UK doesn't mean that they aren't paying the correct amount overall. People who used EBT's put their earnings with a company who promised to lower their tax liability artificially - they were effectively 'loaned' their own money knowing that the 'loan' would never be repaid. Either that or they had their earnings paid somewhere like the Isle of Man - they had no connection to the Isle of Man, no offices there, they weren't tax resident there, didn't live there - the only reason for doing it was to attempt to reduce tax liability artificially.

Couldn't agree more - good reply, Lisa.

Graeme Bennett ACMA MBA

[LisaContractorUmbrella]

Do me a favour...

Tax planning is about reducing your liabilities within the law. When most of these EBT's were around that is exactly what they did.

Tax planning/avoidance by moving your HQ is exactly the same. Funny how you defend one yet always pounce on the other one

You are comparing apples with oranges - it's not the same thing at all. A company like Amazon, for example, has offices all over the world Amazon.com: Locations, they will have tax obligations all over the world but some of those will be offset against losses in other areas or because of dual taxation agreements etc etc. Just because a multi national doesn't, according to the newspapers, pay the 'fair' amount of tax in the UK doesn't mean that they aren't paying the correct amount overall. People who used EBT's put their earnings with a company who promised to lower their tax liability artificially - they were effectively 'loaned' their own money knowing that the 'loan' would never be repaid. Either that or they had their earnings paid somewhere like the Isle of Man - they had no connection to the Isle of Man, no offices there, they weren't tax resident there, didn't live there - the only reason for doing it was to attempt to reduce tax liability artificially.

[BlasterBates]

You cannot compare a company who has their HQ in another country because of a tax advantage with an EBT scheme.

Companies don't simply transfer all the profits they have perfectly good commercial reasons for charging out.

Its not exactly the same.

An example which would work for the OP is if he were to open an office in IOM. If he were to travel over to the IOM and develop some of the Software in IOM. He could charge out to his UK Ltd and reduce his tax liability.

Now the Tax man may dispute how much can be charged out and this is important to note. You have to back it up with commercial reasoning. i.e. you can't use extortionate pricing to reduce your profits, you have to demonstrate that how much your charging is comparable with other companies doing the same thing.

If the contractors who were on EBT offshore schemes had spent time in these offshore locations working there and then paid the profits into the scheme I think there would be no problem. Such an EBT scheme would be comparable with the tax planning of large companies.

[jamesbrown]

Tax planning/avoidance by moving your HQ is exactly the same.

Not really. It's about risk assessment. The risks associated with a large corporation conducting some form of "aggressive" tax planning are very different than those associated with YourCo (legal support, resources to create the impression of legitimacy, ability to handle the potential liabilities etc.). So, as a matter of principle, whether they are "exactly the same" or not is completely moot. Somehow this point was missed by a large number of YourCos that engaged in "out of the ordinary" tax planning activities.

[turbowoowoo]

There is a difference between giant global corporations using the tax laws in their countries of operation to be as legally and legitimately tax efficient as possible and individuals using schemes which are wholly artificial and which have been created to serve no other purpose other than to avoid tax

Do me a favour...

Tax planning is about reducing your liabilities within the law. When most of these EBT's were around that is exactly what they did.

Tax planning/avoidance by moving your HQ is exactly the same. Funny how you defend one yet always pounce on the other one

[LisaContractorUmbrella]

LOL is that exactly what many contractors and celebrities recently took advantage of which is now known as tax avoidance.

There is a difference between giant global corporations using the tax laws in their countries of operation to be as legally and legitimately tax efficient as possible and individuals using schemes which are wholly artificial and which have been created to serve no other purpose other than to avoid tax

[turbowoowoo]

What exactly are you talking about? I'm not looking for 'massive corporation type scams' - I was simply interested to learn whether any contractors had employed geographical solutions to earning income. Seemed a relatively straightforward question to me - apologies if it seems ridiculous.

If you do a quick search of TykeMerc you will see that his posts are always OTT so relax.

[turbowoowoo]

This.

And I think you'll find that the sort of companies you are talking about are multi-nationals who have offices all over the world and are therefore able to take advantage of tax planning and investment schemes that would not be available to, for instance, a one man band in Chingford

LOL is that exactly what many contractors and celebrities recently took advantage of which is now known as tax avoidance.

[d000hg]

At this time of year, when I have just paid my enormous Corp Tax bill, my personal tax swallows all my available funds

If your CT bill was enormous, that means you earned a shed-load, stop whining.

Try to minimise taking dividends+salary above the upper tax threshold - put money into business-held investments, turbo-charge your pension through the company, etc.

[LisaContractorUmbrella]

What exactly are you talking about? I'm not looking for 'massive corporation type scams' - I was simply interested to learn whether any contractors had employed geographical solutions to earning income. Seemed a relatively straightforward question to me - apologies if it seems ridiculous.

Do you work in the UK? Are you a UK resident? Are you tax resident in the UK? If the answer to all these questions is yes then you are liable for tax in the UK and no about of jiggery pokery with registered offices offshore will change that

[Jessica@WhiteFieldTax]

Wouldn't we all be doing it and it would be standard process if there were?

NLUK hits the nail on the head. The world is more or less a democracy these days, and anything simple / risk free / appropriate for a small business would be well know.

Basically - maximise expenses, plan your dividends, and at least relax in the knowledge that IR35 caught it would be much worse.

[Maslins]

What exactly are you talking about? I'm not looking for 'massive corporation type scams' - I was simply interested to learn whether any contractors had employed geographical solutions to earning income. Seemed a relatively straightforward question to me - apologies if it seems ridiculous.

Some will have done offshore EBT loan type schemes...most who did will have regretted it a few years later.

The likes of Amazon won't do something as artificial as that, as others have mentioned they genuinely trade around the world, and will also have expert accountants around the world looking very closely at each country's tax laws and how they interact with each other to help decide what best to do. A typical contractor doesn't.

[BQF]

That's correct you are doomed to pay massive tax bills forever, oh and a £1k fee for each letter in each ridiculous post here on CUK for that matter.

You claim to be a 5+ year contractor yet looking for massive corporation type scams and phoenixing seem entirely reasonable to you, those are mutually opposing situations except in the wildly thick or a certain type of posting account, I strongly suspect the latter. Trolling in the professional sections isn't clever.

What exactly are you talking about? I'm not looking for 'massive corporation type scams' - I was simply interested to learn whether any contractors had employed geographical solutions to earning income. Seemed a relatively straightforward question to me - apologies if it seems ridiculous.

[stek]

At this time of year, when I have just paid my enormous Corp Tax bill, my personal tax swallows all my available funds, and there are a raft of stories of multi-nationals paying 20p of tax of £100Bn of turnover, I start to think about ways of paying less tax.....

All these '90% take home' fellas seem to be very risky - in any case most contracts require a Limited company in my field (FS, Risk and Reg).

Has anyone used a fancy 'Amazon' style tax arrangement with their Limited Co - basing it somewhere low tax like Luxembourg/Cayman Islands and then through a fiendishly complex loan/investment structure exporting their UK contract earnings to the overseas parent?

Or does such a wheeze not exist? Am I doomed to pay enormous tax bills forever?

You pay tax where the work is done, simples........