Reply to: International Consultant Salary Packaging

[BlasterBates]

Yes it is on the radar and it the laws in different countries are constantly being revised to minimise it and virtually all major international companies still use it to reduce tax. Transfer pricing is not per se illegal and if they do it rightly, it is tax avoidance, if they get it wrong, potentially it is tax evasion; that is, why it is "grey" and not blatant tax evasion. Most of these schemes are various shades of "grey", there´s no disputing it. But behind each one of them is a valid legal argument; the danger is not being arrested in the middle of the night like what would happen in the case of hiding income, but the IR challenging the legallity in a longwinded court case.

[ASB]

Another example is transfer pricing, companies regularly sell goods to foreign subsiduaries to shift profits from high tax countries to low tax countries even though the goods physically never move. Again this might be immoral but is perfectly legal.

Transfer pricing is well on the radar and has been for years. It's one of the main reasons why we stopped having Datsuns and the franchise reverted to Nisssan.

Octav Botnar did a runner to Switzerland allegedly owing 200 million in evaded tax.

[Not So Wise]

Which begs the question, of course: why Singapore? Why not Jersey or IOM etc, where the second payment would be tax-free?

Simple, because regardless of it being actually "legal" or not, it most defiantly is a “grey area” and if the tax man does decide to investigate he will find Jersey or IOM authorities a hell of a lot more cooperative than somewhere like Singapore.

Said it before, if you don’t want the UK authorities to have access to your information get it totally out of their sphere of influence, which these days is pretty much anywhere in Europe, as the recent Barclays case has shown, Jersey and IOM are NOT “safe”

Plus even if what you are doing now is legal, there is no garantee sometime down the road the Tax man will not suddenly decide to make it illegal and back date the new "law" by 6 years (backdateing should be made illegal imo) so even more reason to have your money/information somewhere they cannot touch

[el duder]

[QUOTE=its_ying]I'm from Australia (yeah, I know, "Not another one?!" you're thinking!!!) and looking to contract in the UK.

go back to yer own farking island. bleedin' criminals.

[BlasterBates]

It depends expat. Was the loans scheme "stealing". They weren't real loans but in one prominent case the loan scheme won because the judge ruled that the money wasn't legally the contractor's. So yes in principle one could argue that the loan scheme at the time was immoral, but it was legal.

The same could be said of these employment contracts. There is nothing in Luxembourgian law that stipulates what does not or does mean "real work", so if someone wants to employ me to fill out a form they are legally entitled to do this.

Another example is transfer pricing, companies regularly sell goods to foreign subsiduaries to shift profits from high tax countries to low tax countries even though the goods physically never move. Again this might be immoral but is perfectly legal. What is immoral is not necessarily illegal. In the City goods are regularly bought and sold without a single geographical movement of goods.

[expat]

I now have to confess to doing something similar not in the UK but in Luxembourg. The trick there was to have a few plane tickets and fill out a marketing questionaire every month, so in the highly unlikely event of British officials raiding the offices on behalf of the Luxembourgian authorities that they could point to physical evidence of my "marketing" activities.

That's simply stealing, BB. OK, so you're likely to get away with it because you're small. But you're just a thief, whether you're caught or not.

I don't mind a parasite. I object to a cut-rate one.

[BlasterBates]

I've been thinking and I think you're right boredsenseless. I think this is comparable to the loans schemes a couple of years ago. In other words if the employee doesn't have legal access to the profit beyond his services. What the salary management company then does beyond that is probably not considered as remuneration for the same service in the UK, and can legally set up a contract with the same person overseas. Of course like the loans scheme the tax man would probably challenge it if it was worth his while, but I suspect that they may have to change the law, like they did to close up the loan schemes. In other words it might be tax avoidance.

[boredsenseless]

Employing a spouse as a secretary isn't illegal, paying them without doing any work isn't illegal.

HMRC are entitled to their interpretation, and at the moment it is that the income in many cases belongs to the fee-earning partner.

It's not illegal it is just opening up another weak link from which they can open an investigation and then find something to hang you on.

Ultimately you have to weigh up if a few extra quid is worth it.

However it is worth noting that HMRC are part of the same political process that runs the DTI which actively encourages employing spouses and sharing company ownership with them, its also part of the same political process that decrees that on divorce a partner is entitled to half the income of the company, but during marriage apparently isn't!!!

Go figure...

[BlasterBates]

Actually what might determine whether it is legal is whether this guy has some sort of right to the money that is earnt as profit. If not then the Singapore contract is separate, if they were to sack him in Singapore and he wouldn't have the legal right to the money earnt above and beyond his £38000, I could imagine that this might be legal, rather like loans.

[BlasterBates]

You can only do this if you do work overseas commensurate with the reward.

Who decides that ?

If someone mucks about at work but they're still paid, is that illegal ?

Id someone is suspended on full pay is that illegal ? or is it tax evasion on profits ?

What about traders that lose a million ? should they be paid ? or would the reward not be commensurate with the work ?

Supposing a company said they wanted their bin emptying and they wanted £300 to empty it, is that ilegal ?

This is why it is grey. What is obvious to you isn't always so obvious in law.

[meridian]

Why not go the whole hog:

Set up a company in Ireland and claim that the work is being done there. 12.5% corporation tax. Fly into Dublin, get the stamp on your passport to prove you're there, then drive/train to Belfast and fly/ferry back (no border control). Pay for everything here using cash or an Irish credit card.

Your passport proves you're in Ireland, and HMRC need know no differently.....

[Spartacus]

That is why it is "grey".

We won't know until a foreign contractor has been jailed, just as it is feasible that someone might get jailed for employing his wife as a secretary.

You misunderstand, BB. What isn't quite as cut and dried is doing trivial work overseas and remitting thousands for it. For example, the OP could not go to Singapore, empty a bin in the office, get paid £25,000 for it, and maintain this was a legal arrangement if challenged.

There is no grey area here. You can only do this if you do work overseas commensurate with the reward. And, yes, you are unlikely to get caught just as if you burgled a house or mugged an old lady. It is still illegal though.

In the meantime, I feel you should turn yourself in as it's people like you that put up taxes for us law abiding sorts.

https://www.taxevasionhotline.co.uk/forms/employer.htm

[Spartacus]

That is why it is "grey".

We won't know until a foreign contractor has been jailed, just as it is feasible that someone might get jailed for employing his wife as a secretary.

You misunderstand, BB. What isn't quite as cut and dried is doing trivial work overseas and remitting thousands for it. For example, the OP could not go to Singapore, empty a bin in the office, get paid £25,000 for it, and maintain this was a legal arrangement if challenged.

There is no grey area here. You can only do this if you do work overseas commensurate with the reward. And, yes, you are unlikely to get caught just as if you burgled a house or mugged an old lady. It is still illegal though.

In the meantime, I feel you should turn yourself in as it's people like you that put up taxes for us law abiding sorts.

https://www.taxevasionhotline.co.uk/forms/employer.htm

[BlasterBates]

It's not quite as cut and dried as that.

That is why it is "grey".

We won't know until a foreign contractor has been jailed, just as it is feasible that someone might get jailed for employing his wife as a secretary. I doubt however that it would be jail, it would probably be back tax, and penalties.

[meridian]

Well actually there is a further point and that is what is "work". I for example filled out little forms. Now the intention was minimising tax but I did work. I did fill out forms and these forms weren't bogus they were fed into a marketing database. So was what I did illegal ?

So if this guy flies to Singapore or Australia, or anywhere that is not the UK and does some work, like fill out a form, then it isn't fraud.

It's not quite as cut and dried as that.

It's likely that if the payments were out of proportion to the work that was actually done it could be seen as an arrangement to defeat the intention of the tax acts.

And to pre-empt your next question, yes this is difficult to prove but doesn't make it any less wrong!!!!