Using an Offshore Contractor Solution

Over the last few years the HM Revenue and Customs have really clamped down on Contractors who choose to structure their income via ‘offshore’ solution providers with the introduction of BN66.  

The 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’re 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;

Are you planning to come to the UK to work as a professional Contractor? Would like to find out about maximising your contract income or working towards a future visa extension? If so Commonwealth Contractors can help!

To discuss your situation with an experienced advisor call Commonwealth Contractors now on 0330 390 9021 or Submit your Details and we will get right back to you!

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, AND
  • 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), AND
  • 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.

Find out More

To find out more about Commonwealth Contractors call now on 0330 390 9021 or Submit your Details and we will get right back to you!