Reply to: Consultation on offshore umbrella companies

[cojak]

It looks like they're all at it - even Margarate Hodge who has been bashing the multinationals - Margarate Hodge is an offshore tax avoider

Keep Up At The Back!

That's old news...

[Craic]

All at it

It looks like they're all at it - even Margarate Hodge who has been bashing the multinationals - Margarate Hodge is an offshore tax avoider

[LisaContractorUmbrella]

And what about those schemes that are set up using UK limited companies as fronts for the offshore scheme?

The agency should ask, in it's due diligence process whether or not funds are transferred from the company registered in the UK to any other companies

[cojak]

And what about those schemes that are set up using UK limited companies as fronts for the offshore scheme?

If I was an agent I would want to know if the contractor was a Director or a major shareholder of said Ltd company.

If they weren't either of those my barge pole would stay firmly in it's box.

[bangface]

Nope. they'll just stop dealing with anyone other than through a UK limited company or onshore umbrella

And what about those schemes that are set up using UK limited companies as fronts for the offshore scheme?

[LisaContractorUmbrella]

Yes you are right. But that is perfectly legal as set out by a number of provisions in the finance act and not covered by this consultation paper.

Sorry but I don't think you're right. The intro states:

some businesses are using [offshore scheme providers] to avoid paying employment taxes for their UK based workers. This is not fair and undermines compliant businesses. These structures are increasingly being marketed as a legitimate way to avoid Eer's Nic's. The consultation sets out plans to provide a level playing field so that UK businesses that are playing by the rules cannot be undercut by those who are involved in avoidance arrangements.

The document implies that any company purporting to 'employee' the contract (as with an offshore umbrella company) they will fall within the new legislation.

[porrker]

Really? That doesn't seem to be the way that HMR&C see it. I have no doubt that some providers make tax/ NI contributions but I wouldn't mind betting that is is on a nominal figure with the balance being treated as a loan or similar or contributions are made for tax and ee's nic's but none for eer's. How could offshore umbrella companies offer 85-90% take home otherwise with the basic rate of PAYE tax at 20%?

Yes you are right. But that is perfectly legal as set out by a number of provisions in the finance act and not covered by this consultation paper.

[LisaContractorUmbrella]

Yes they do! They pay all NIC and PAYE based on the salary they pay. Doing anything else would be considered tax evasion. They are governed by uk law and that would mean scheme providers potentially spending time at her majesty's pleasure.

Really? That doesn't seem to be the way that HMR&C see it. I have no doubt that some providers make tax/ NI contributions but I wouldn't mind betting that is is on a nominal figure with the balance being treated as a loan or similar or contributions are made for tax and ee's nic's but none for eer's. How could offshore umbrella companies offer 85-90% take home otherwise with the basic rate of PAYE tax at 20%?

[porrker]

They may be responsible (although I thought the host regulations applied only to NIC's) for it but a lot of them don't pay it - as I read it this will stop all offshore umbrella companies working as intermediaries through anything other than PAYE and so should stamp out the 'take home 90% of your earnings' brigade

Yes they do! They pay all NIC and PAYE based on the salary they pay. Doing anything else would be considered tax evasion. They are governed by uk law and that would mean scheme providers potentially spending time at her majesty's pleasure.

[LisaContractorUmbrella]

Absolutely that is nothing new as they are also currently responsible for PAYE.

They may be responsible (although I thought the host regulations applied only to NIC's) for it but a lot of them don't pay it - as I read it this will stop all offshore umbrella companies working as intermediaries through anything other than PAYE and so should stamp out the 'take home 90% of your earnings' brigade

[porrker]

From the document produced it would seem that the new legislation will apply to IOM companies - the only mention of them directly is with regard to NI contributions only where, as you say, there is already a reciprocal social security arrangement between IOM and the UK; the effect is that the employer in the IOM is liable for contributions in respect of employees in the UK.

Absolutely that is nothing new as they are also currently responsible for PAYE.

[porrker]

From the document produced it would seem that the new legislation will apply to IOM companies - the only mention of them directly is with regard to NI contributions only where, as you say, there is already a reciprocal social security arrangement between IOM and the UK; the effect is that the employer in the IOM is liable for contributions in respect of employees in the UK.

Absolutely that is nothing new as they are also currently responsible for PAYE.

[LisaContractorUmbrella]

I think you will find IMO schemes are not not included as there are joint arrangements currently in place under the social security (IMO) order 1977.

From the document produced it would seem that the new legislation will apply to IOM companies - the only mention of them directly is with regard to NI contributions only where, as you say, there is already a reciprocal social security arrangement between IOM and the UK; the effect is that the employer in the IOM is liable for contributions in respect of employees in the UK.

[porrker]

So this won't affect those off-shore umbrellas based in IoM? How are those aimed at public sector workers different from IT contractor schemes?

I think you will find IMO schemes are not not included as there are joint arrangements currently in place under the social security (IMO) order 1977.

[malvolio]

sorry to spoil the OP thunder but this will have no effect on the types of schemes operated by uk IT contractors! This will target the schemes supporting public service workers that have recently been in the news such as teachers and healthcare workers.

Yeah right. And the PS rules on IR35 compliance brought in by the Alexander Review only apply to around 200 designated office holders in a small number of Government agencies