Offshore v2: UK Umbrella, Offshore Trust (not EBT) 90% take
Discussion
Webber3 said:
I have a friend that's been using an IOM offshore arrangement for some time now. He's an IT contractor working in the city with his own Ltd company and the way he described it was pretty much as you've described above. The scheme is run by two separate companies and they handle the setting up of the trust and everything else, they also declare the avoidance scheme to the revenue. They pay him 86% of anything that goes through the trust. This money goes into his personal account, tax paid (at 0% in the IOM of course). His wife is a contractor too, so income shifting was not an option for him and he'd previously been paying personal tax at 40%.
This sounds slightly different to the setup which I'm looking at. The ones I am considering are not tax avoidance schemes, and the setup is such that it cant work with an LTD; you'd have to be employed by them.I'm steering towards Sanzar at moment. I figure that I'll just calculate the difference between the 85% return offered and the equivalent amount assuming PAYE status, then put this every month into my mortgage. If all goes t!ts up and HMRC want it all back, then so be it, I can just take out the mortgage again. I'll still be better off than when I was permie, as my gross earnings is still so much higher.
If your happy taking the risk then do it, I see what your saying about ltd being a risk buts alot less risky, also for £350 you can buy yourself IR35 insurance that covers both professional fees (accounts etc), but will also pay the tax, interest and penalties you owe. Im pretty confident in saying no one would insure you like this on an IOM scheme. Factor in the fact that the gov need to raise taxes and they already know the IOM type schemes are easy pickings. In the end its up to you Im just trying to point out that the IR have a nasty way of comming back to haunt you years later when you think its history
Edited by BumFLuff on Saturday 2nd February 20:50
JustinP1 said:
Kryten, what in your situation makes being paid dividends so risky?
I have paid myself just over the tax allowance and NI threshold and the rest in dividends since I started. As far as I am aware, as long as the dividend payments are lawful, that is from company profits, with agreement of all directors, and a record kept of the dividend agreement then this is perfectly fine with the HMRC, and this must be how hundred of thousands or more directors of small Ltd companies get renumerated.
After all, as the director gets paid last and may not have a fixed wage each month anyway unless there was profit to do so, why choose to do this through PAYE and pay NI on it when what it really is is a dividend anyway?
Further to your previous post, I am surprised you can get insurance coverage. The only issue may be is that lets say you can save 20k a year for 5 years and *then* the HMRC decide the system is wrong. Although the insurance might pay for the legal costs and fines, I am guessing you would still have to pay back the £100,000 plus about £20k interest!
I dont know about you, but I dont keep that kind of cash around, and even not in liquid assets.
I suppose the way to find out definitively would be to write to the HMRC, explain your work and the system and get them to confirm in writing that they are OK with it. That should then cover you.
The other issue I thought of would be the issue of overheads/expenses. If you are working on individual contracts I suppose you can just add costs to that contract directly to the price. For me though, I would have a lot more other expenses which would currently reduce my company profits and tax bill which I don't think could be engineered into the same system.
In a nutshell, if you are a sole trader, or you can re-arrange your business method to do it, then it does look interesting. The advice I took at the time, even from the companies that run the schemes was that 'moving' or re-inventing a UK Ltd with staff just isnt realistically feasible at least for a small business anyway.
From what I've been hearing the tag on legislation to the Arctic Systems paper are going to basically give the revenue free reign to destroy any and all contractors they wish in future.I have paid myself just over the tax allowance and NI threshold and the rest in dividends since I started. As far as I am aware, as long as the dividend payments are lawful, that is from company profits, with agreement of all directors, and a record kept of the dividend agreement then this is perfectly fine with the HMRC, and this must be how hundred of thousands or more directors of small Ltd companies get renumerated.
After all, as the director gets paid last and may not have a fixed wage each month anyway unless there was profit to do so, why choose to do this through PAYE and pay NI on it when what it really is is a dividend anyway?
Further to your previous post, I am surprised you can get insurance coverage. The only issue may be is that lets say you can save 20k a year for 5 years and *then* the HMRC decide the system is wrong. Although the insurance might pay for the legal costs and fines, I am guessing you would still have to pay back the £100,000 plus about £20k interest!
I dont know about you, but I dont keep that kind of cash around, and even not in liquid assets.
I suppose the way to find out definitively would be to write to the HMRC, explain your work and the system and get them to confirm in writing that they are OK with it. That should then cover you.
The other issue I thought of would be the issue of overheads/expenses. If you are working on individual contracts I suppose you can just add costs to that contract directly to the price. For me though, I would have a lot more other expenses which would currently reduce my company profits and tax bill which I don't think could be engineered into the same system.
In a nutshell, if you are a sole trader, or you can re-arrange your business method to do it, then it does look interesting. The advice I took at the time, even from the companies that run the schemes was that 'moving' or re-inventing a UK Ltd with staff just isnt realistically feasible at least for a small business anyway.
Maybe some of the accountant types on here can confirm / revoke that, but essentially it makes everyone viewable as a Managed Service Company and then the crusade will start
emicen said:
From what I've been hearing the tag on legislation to the Arctic Systems paper are going to basically give the revenue free reign to destroy any and all contractors they wish in future.
Maybe some of the accountant types on here can confirm / revoke that, but essentially it makes everyone viewable as a Managed Service Company and then the crusade will start
News to me. Legislation closed the MSC route some time ago. Maybe some of the accountant types on here can confirm / revoke that, but essentially it makes everyone viewable as a Managed Service Company and then the crusade will start
Arctic Systems and the subsequent Income Shifting Legislation only affects those who were previously well, income shifting.
There have of course been two recent high profile IR35 "wins" for HMRC, specifically around differences between subcontractor-agency and agency-client contracts, IIRC this is being appealed.
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