Reply to: Offshore tax avoidance schemes

[kryten22uk]

I acquired it. You register as self-employed, earn £20k, and pay NI and IT on that minus expenses (say £6k), and pay NI and IT on that. The spreadsheet I have been given has NI has 11% which I don't understand - the self-employed rate is 8%. And then 10% of annual gross goes to Montpelier, with £1k setup charge. £250 Isle of Man CT. You keep everything else (no tax on offshore trust payment for balance).

Cool, thanks. Sounds almost identical to mine then.


P.S how many posts is it before I dont need moderators review?

[dude69]

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.

I acquired it. You register as self-employed, earn £20k, and pay NI and IT on that minus expenses (say £6k), and pay NI and IT on that. The spreadsheet I have been given has NI has 11% which I don't understand - the self-employed rate is 8%. And then 10% of annual gross goes to Montpelier, with £1k setup charge. £250 Isle of Man CT. You keep everything else (no tax on offshore trust payment for balance).

[ASB]

My guess is that if the scheme relies on the double-taxation treaty, it doesn't matter if the income is taxable or not under UK law (whether as a result of IR35 or otherwise) as the treaty over-rides UK law.

Yes, that would probably do it wouldn't it. In order for IR35 to kick in you have to be entitled to income not subject to PAYE. The trust time income I guess is for the purposes of that legislation.

[IR35 Avoider]

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.

My guess is that if the scheme relies on the double-taxation treaty, it doesn't matter if the income is taxable or not under UK law (whether as a result of IR35 or otherwise) as the treaty over-rides UK law.

[ASB]

I can't remember why but I'm sure these schemes avoid IR35 on a technicality somehow.

Ok, so they end up being created in such a way as there is not an intermediary as defined under the finance act.

I don't see how they can do that - but I'm sure the promoters have a better understanding of that bit than me.

[ASB]

Therefore, the revenue can assess the recipient on the basis that that step is ignored under (whatever rule it is that allows them to do this).

I guess you are thinking of the ramsay principle. I would imagine if it were straight forward they would have had a go by now.

[malvolio]

They avoid it because you become an "employee" of the offshore organisation.

Wouldn't that rather blow the "services rendered" qualification for tax exemption then?

[BrilloPad]

Might be a good idea to find out, wouldn't it...?

Can't see how the scheme itself would affect anything either way, afaicr no IR35 case has used payment terms as a differentiator.

I have been told by the scheme it is definetly outside IR35 - but they would say that!

HMRC would first have to prove the scheme illegal. And if that happens I will have to pay back alot of money.

When one is a corner with no place to run one has to take risks. I think I should get a prayer mat.

[malvolio]

I think the one I am in avoids IR35.

Might be a good idea to find out, wouldn't it...?

Can't see how the scheme itself would affect anything either way, afaicr no IR35 case has used payment terms as a differentiator.

[ChimpMaster]

I think the one I am in avoids IR35.

They avoid it because you become an "employee" of the offshore organisation.

[BrilloPad]

I can't remember why but I'm sure these schemes avoid IR35 on a technicality somehow.

I think the one I am in avoids IR35.

[THEPUMA]

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.

I can't remember why but I'm sure these schemes avoid IR35 on a technicality somehow.

[tim123]

What I don't understand about these schemes is why the revenue can't (and presumably don't) attack the fact that taking the money offshore is an unnecessary step.

Basically, the money is payment for work done: by a person physically present in the UK, paid from a company in the UK, to someone who is ordinarily resident and (usually) domiciled in the UK.

WTF is the reason that the money is going offshore in the first place?

There doesn't seem to be a genuine business reason for this step and thus it can only be there in order to create the tax saving.

Therefore, the revenue can assess the recipient on the basis that that step is ignored under (whatever rule it is that allows them to do this).

Or perhaps the revenue do do this, and the hard part (for them) is finding the 'dodgy' people.

tim

[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.

[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.