Is offshore legal?

[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%.

[offshore junkie]

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

and these ways are...?

[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]

No-one said that it would.

there is still likely to be tax to pay

tim

Here is the deal from doing some research on this. A company in another country that has no tax to pay invoices your uk company for a certain amount for services that you subscribe to. This is a legitimate UK claimable expense for a limited company.

That money is then moved off shore to the invoicing company bank account. Where is it taxable if the forigen country does not tax it? I agree if the person that has the UK company is a disclosed share holder than yes they would have to pay tax on worldwide income. But if they were a non disclosed share holder with the country's privacy laws being observed, then who would know if you were or were not a share holder of the off shore company? And if you received any income from that company?

That money could have been moved on to another account in another country and then vanish.

The only thing that is scary about the offshore industry appears to be the fact there are many sharks out there that will run off with your money! Not very appealing when you look at it that way.

[tim123]

But if the company that is invoicing you from the FORIGEN or OFFSHORE company for the service does not fall under UK law.

No-one said that it would.

there is still likely to be tax to pay

tim

[ASB]

- If it is a legitimate service then something is consumed. Ergo there is no money to bring back. Sound more like the service he is purchasing is "we'll hide this money for you" since it finds it way back to him.
- Could reasonably be taken as remuneration from UK based work. Taxable in the UK.
- If the guy is not UK domiciled then there may be some opportunities for him. This probably wouldn't be one of them.
- Taxation in the destination country could be an issue. However Guernsey for example now has a 0% corporation tax rate. [And no you can't just go and nominally operate from there whilst resident in the UK because your company will likely gain UK residency].

It is possible you friend has discovered a scheme which is compliant with UK regulations in his particular circumstance. I find it very unlikely.

He's probably much more likely to get into real trouble for false accounting than tax issues - the latter normally only costs money to unwind.

[cykophysh39]

But if the company that is invoicing you from the FORIGEN or OFFSHORE company for the service does not fall under UK law.

It doesn't matter if the UK government Cannot tax it, but I am sure Uzbekistan gpvernment would like to get thier hands on revenue.

[offshore junkie]

Because the company that it's being paid into has no expenses, so every penny that's paid into it will be the company's profit.

It's usual for companies to pay tax on profits that they make.

tim

But if the company that is invoicing you from the FORIGEN or OFFSHORE company for the service does not fall under UK law.

[tim123]

Why would it if it was a legitament charge?

Because the company that it's being paid into has no expenses, so every penny that's paid into it will be the company's profit.

It's usual for companies to pay tax on profits that they make.

tim

[offshore junkie]

Surely that money will be taxable in the offshore country?

Why would it if it was a legitament charge?

[cykophysh39]

Surely that money will be taxable in the offshore country?

[Ivor1]

Personally I wouldnt risk it, I know quite a few people who have had visits from the IR for such schemes and most had to pay up, combine this with the fact most schemes such as these charge massive fees 10%, so if it goes wrong it very expensive to get out of it

[offshore junkie]

I am new to this forum and have a question. After speaking to another contractor at my workplace he has an invoice every month get sent to him by an offshore company for a set amount say 1k for arguments sake.

Now that money goes offshore to another company into a bank account. He said that as long as he did not bring that money back to the UK is was legal. He subscribes to a service, it does exist, that charges his UK company for supply of this service. The service company is based in another country which he has no ties to.

That money is left offshore and he never brings it back into the UK so he said that that was legal. He did say that if he did bring it back then it would become taxable...

Is that so?