Sub 5% Tax Rate...
Discussion
Hi all, regular poster here but using another name as I don't wish to be identified.
I've just had a meeting with a former competitor who has agreed to work with me - my margins are better, his volumes are higher. Cutting to the chase, he's making £500k/month profit and using a number of trusts to keep his non-UK profits offshore. On these, as long as he doesn't bring the money into the UK, he pays just a couple of percent. The trusts are based in safe locations, and according to his accountant, there is no catch after setting the system up for around £25k.
I'm worried this tax system could come back to bite me later on, and wondered if anyone here (including Eric of course) has heard of anything similar with regard to offshore profits - my accountant, although very tax efficient, was clueless. This is personal tax, not corporation - and I would imagine I will have to move away using a UK Ltd company to make this work...
I've just had a meeting with a former competitor who has agreed to work with me - my margins are better, his volumes are higher. Cutting to the chase, he's making £500k/month profit and using a number of trusts to keep his non-UK profits offshore. On these, as long as he doesn't bring the money into the UK, he pays just a couple of percent. The trusts are based in safe locations, and according to his accountant, there is no catch after setting the system up for around £25k.
I'm worried this tax system could come back to bite me later on, and wondered if anyone here (including Eric of course) has heard of anything similar with regard to offshore profits - my accountant, although very tax efficient, was clueless. This is personal tax, not corporation - and I would imagine I will have to move away using a UK Ltd company to make this work...
If you are looking for tax advice on holding £5m profit a year offshore, I would say that advice on here would be basic at best.
I looked at these type of schemes before, and none are perfect and rely on a certain amount of 'bending' to make them work.
They cost to set up, and for the amounts you are talking about I would suggest a specialist offshore accountant with a track record for these type of investments.
I looked at these type of schemes before, and none are perfect and rely on a certain amount of 'bending' to make them work.
They cost to set up, and for the amounts you are talking about I would suggest a specialist offshore accountant with a track record for these type of investments.
Are you sure it's personal tax, not company? £500K/mth seems a lot for someone to operate on a personal basis.
If it's through a company set-up, and the profits are not made in the UK, then it seems feasible. We work with largeish American companies and they're all set-up in various tax-havens. Microsoft got a lot of stick for putting loads of stuff through S. Ireland, for example. Our work is all virtual, so advice we've had is that there's no reason why we (the company) couldn't also set-up in the same tax havens.
Issue is, as you've mentioned, what happens when you want to bring the money back to the UK? We've been given some ideas, but they all seem to involve some level of dodgyness.
ETA: Why don't you talk to his accountant?
If it's through a company set-up, and the profits are not made in the UK, then it seems feasible. We work with largeish American companies and they're all set-up in various tax-havens. Microsoft got a lot of stick for putting loads of stuff through S. Ireland, for example. Our work is all virtual, so advice we've had is that there's no reason why we (the company) couldn't also set-up in the same tax havens.
Issue is, as you've mentioned, what happens when you want to bring the money back to the UK? We've been given some ideas, but they all seem to involve some level of dodgyness.
ETA: Why don't you talk to his accountant?
Edited by Deva Link on Monday 26th January 14:20
Two things.
The taxman isnt stupid and his powers are nearly limitless.
Pay, through the nose, for the best expert you can lay your hands on to come up with as many flaws as possible in the proposed plan.
If it sounds to good to be true it almost certainly is.
Oh and dual profiles are a bannable offence...
The taxman isnt stupid and his powers are nearly limitless.
Pay, through the nose, for the best expert you can lay your hands on to come up with as many flaws as possible in the proposed plan.
If it sounds to good to be true it almost certainly is.
Oh and dual profiles are a bannable offence...
Just to clarify, that's £500k in gross profit - and before you ask, I don't make anything like that.
I'm currently seeking paid advice, but as you know PH is always quicker with an opinion/knowledge than any solicitor/accountant/tax advisor - hence the post. Thanks for the responses so far - whilst I can clarify his profit levels, I'm thinking the tax rate too good to be true - but I'll report back when I've exhausted all avenues.
I'm currently seeking paid advice, but as you know PH is always quicker with an opinion/knowledge than any solicitor/accountant/tax advisor - hence the post. Thanks for the responses so far - whilst I can clarify his profit levels, I'm thinking the tax rate too good to be true - but I'll report back when I've exhausted all avenues.
V8mate said:
I'm intrigued as to who the OP is.
Mr Will.... can you 'out' him please?
V8mate - you already know me, and I would really appreciate it if my identity remains unknown. Tax is not an issue you discuss under your usual username on a public forum - there was never any intention to mislead, and I think this is why the guideline (which I didn't know existed - I've been on PH too long) is in place. Mr Will.... can you 'out' him please?I’m not an accountant; however I have looked at various offshore schemes. These include EBT’s, trusts etc. often they are tax deferral rather than tax avoidance
I have also had these checked out by my (city) lawyers and my auditors (Grant Thornton)
1. yes they can be legal
2. the devil is in the detail - one wrong clause in an agreement or wrong action by you / the company can make these schemes illegal
3. retrospective taxation laws (possible in a recession with a desperate PM trying to raise revenue) can make this an expensive option
If you live & trade in the UK, HMRC believe that you should pay UK tax, and in fairness they're probably right (the reason I say probably is because I think the UK tax rate is too high, both corporate and personal)
I know a friend who invoices his UK company using an offshore bearer share company for ‘services’ then uses a visa card to draw funds from the offshore company - it will only be a matter of time before they catch up with him.
All I would say is what does ‘work with you mean’, proceed with caution and make sure you have no liabilities on your competitors behalf.
I have also had these checked out by my (city) lawyers and my auditors (Grant Thornton)
1. yes they can be legal
2. the devil is in the detail - one wrong clause in an agreement or wrong action by you / the company can make these schemes illegal
3. retrospective taxation laws (possible in a recession with a desperate PM trying to raise revenue) can make this an expensive option
If you live & trade in the UK, HMRC believe that you should pay UK tax, and in fairness they're probably right (the reason I say probably is because I think the UK tax rate is too high, both corporate and personal)
I know a friend who invoices his UK company using an offshore bearer share company for ‘services’ then uses a visa card to draw funds from the offshore company - it will only be a matter of time before they catch up with him.
All I would say is what does ‘work with you mean’, proceed with caution and make sure you have no liabilities on your competitors behalf.
This definitely sounds like some of the Employee Benefit Trust schemes currently available (which incidentally are for corporate and not personal income).
My advice would be to only choose a provider that has an excellent track record of creating, implementing and defending such schemes and like the post above has done, make sure you take independant advice as to the detail and likely success of the scheme. All such ashemes will have gone through a process of review by tax QC's and specilaist tax advisors, but as ever they will be deemed aggressive AND will take some time to conclude (like years!!) whether in the taxpayers favour or not.
So to answer your question, yes, there is always a worry that the planning will ultimately fail and if your colleague has since spent all funds routed offshore (and I would guess IOM??) without retaining at least an amount to cover the corporation tax saved then this would be a genuine risk going forward, i.e. that the tax relief claimed will be disallowed and crystallise some years down the line (plus interest, possible penalties, etc). If this does not fit your risk profile then you should bring it to the table and ask what provisions he has in place should the planning ultimately fail.
We have several coporate clients who have undertaken such strategies (fully disclosed to HMRC by the way) but they are all intelligent businessman and women who fuly understand the risks and implications of undertaking such an aggresive tax avoidance scheme. Do make sure that it is a HMRC registered scheme too.
If you want a wholly impartial ear on the subject or don't want to post full details of the provider of the scheme on PH, then please feel free to PM me.
My advice would be to only choose a provider that has an excellent track record of creating, implementing and defending such schemes and like the post above has done, make sure you take independant advice as to the detail and likely success of the scheme. All such ashemes will have gone through a process of review by tax QC's and specilaist tax advisors, but as ever they will be deemed aggressive AND will take some time to conclude (like years!!) whether in the taxpayers favour or not.
So to answer your question, yes, there is always a worry that the planning will ultimately fail and if your colleague has since spent all funds routed offshore (and I would guess IOM??) without retaining at least an amount to cover the corporation tax saved then this would be a genuine risk going forward, i.e. that the tax relief claimed will be disallowed and crystallise some years down the line (plus interest, possible penalties, etc). If this does not fit your risk profile then you should bring it to the table and ask what provisions he has in place should the planning ultimately fail.
We have several coporate clients who have undertaken such strategies (fully disclosed to HMRC by the way) but they are all intelligent businessman and women who fuly understand the risks and implications of undertaking such an aggresive tax avoidance scheme. Do make sure that it is a HMRC registered scheme too.
If you want a wholly impartial ear on the subject or don't want to post full details of the provider of the scheme on PH, then please feel free to PM me.
Superb advice, more use than anyone paid has been to date. I'm going to have another meeting with my new business partner tomorrow - we're keeping our businesses separate, and as such there will be no damage, even retrospectively, to me due to any tax oversight by him. The only thing he seemed sure about was that this was 'personal tax' - but this seemed strange at the time given this mechanism is for profits from non-UK activity. Anyway, I intend to stay the right side of the taxman, any doubt and I'll be walking away.
I'll report back when I know more.
Thanks again. DanX5 I may be in touch.
I'll report back when I know more.
Thanks again. DanX5 I may be in touch.
Gassing Station | Business | Top of Page | What's New | My Stuff