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Offshore Overview
Over the last couple of years the Government has clamped down on the way individuals’ structure their income to maximise returns and minimise tax payments. Examples include IR35, the Managed Service Company Legislation, Section 660a and Income Shifting. This clampdown has effectively limited contractors to two options; either use an Umbrella Company to deal with contract income or go into business with a Contractor Limited Company.The vast majority of Contractors work compliantly and operate within the rules laid down by the Government. However, some contractors (incentivised by unscrupulous service providers) direct UK generated contract income offshore (often to organisations operating from the Channel Islands or Isle of Man) in order to save tax. If you work in this way or are seriously considering this as a realistic option you should think again as you may become involved in tax evasion (tax evasion is illegal, tax avoidance is not).
If you would like to discuss working compliantly in the UK feel free to call a Commonwealth Contractors Account Manager now on 0800 294 4388 or Submit your details and we will get right back to you. Our Account Managers can discuss your options and recommend a suitable contract structure.
What does the United Kingdom charge tax on?
Broadly speaking the United Kingdom charges tax on:- Income arising in the UK, whether or not the person to whom it belongs is resident in the UK
- Income arising outside the UK which belongs to people resident in the UK (non-domiciled temporary residents may escape this if they never bring the money to the UK)
- Gains accruing on the disposal of assets anywhere in the world which belong to people resident or ordinary resident in the UK (non-domiciled temporary residents may escape this if they never bring the gains to the UK)
If you are a UK National or an Expat on a temporary work visa and you have income arising in the UK you should declare this income on a tax return and pay respective taxes to the HM Revenue and Customs in the United Kingdom.
What is ‘Offshore’?
The word ‘Offshore’ (when referred to in the context of the UK contract market) is often seen as referring to dubious contract structures that reside outside the UK. In the past many contractors used ‘Offshore’ schemes (such as Employee Benefit Trusts (EBTs)) to vastly reduce tax payments. Many individuals thought that the HM Revenue and Customs would never catch up with them, but they did. And once they did they undertook long and costly investigations, closed many offshore structures and charged back dated tax to contractors.However, although ‘Offshore’ often conjures up many negative images in reality it is a simple term used to describe anywhere outside the United Kingdom. Many large companies reside offshore and those that do reside in another jurisdiction and pay local tax rates.
Expats Contracting in the UK
If you are an Expat Contractor on a temporary work visa you may consider using an offshore structure to deal with contract income from time to time. Under certain circumstances using an offshore structure may be a perfectly legal thing to do. To find out more about please see the pages listed below:- Genuine Non-UK work for Non-UK Domiciles
- Hope you don’t get found out!
- Pay part onshore and the rest offshore
