When Is An Offshore Tax Haven Not A Tax Haven?
There is nothing that gets the heckles up of the average working class labour supporter more than the mention of tax havens! You know about tax havens right, those places where rich people stash all their money so they don’t have to pay tax? These dodgy little offshore places run like the wild west without any form of law or order, surely that’s right isn’t it?
Well no actually it’s not. In fact it’s not even close to the truth. Being an offshore finance centre in no way implies that a country is a tax haven. The truth is that all countries compete with each other to attract businesses. Businesses bring employment, tax revenue and huge amounts of other benefits. It is business that drives the economy and the more successful businesses your country can attract the better your economy will be. Now one of the best ways of attracting these businesses is to be competitive with your tax regime. ALL countries do this. The UK has much lower taxes in certain areas compared to the rest of Europe. Certain states in the US have much lower taxes compared to other states. It’s all about attracting business and low tax is a 100% legitimate way of attracting business.
So what about tax havens? What makes a finance centre/country bad is when they aren’t willing to share the information they hold with other countries/states. Tax havens are havens because they protect peoples details, locked away without a key. You’ll probably find that the majority of the “offshore finance centres” around the UK are actually very open with their information sharing. The Isle of Man for example meets all international requirements in this regard. By the definition of Tax Havens it is no more of a Tax Haven than the UK itself!
So why does all this matter to contractors? Well for a start the current Labour government has started to panic. Now that the muppets in charge have screwed up their own economy they are looking for scape-goats to screw up as well. An easy target in this regard is Jersey, Guernsey and the Isle of Man. There are many legitimate tax savings available to certain groups of contractors by being paid from offshore but if the current UK government gets its wish there will be nothing left of these finance centres. In reality these offshore centres have done nothing wrong or different than the UK itself. In fact without them literally 1000′s of expat British workers would not have access to suitable banking facilities as they are not allowed to bank in the UK without a UK address. Offshore finance centres do play an important role in the global economy and not all are “Tax Havens”. Some are just legitimate countries trying to attract business the same way as other countries do. The only difference being that when another country steals half a billion pounds of their depositors money they don’t have the resources to take it back!
Isle of Man Retains Its AAA Credit Rating
INDEPENDENT credit rating agency Standard and Poor’s has renewed the Isle of Man Government’s AAA rating – the highest rating that it awards.
The ratings provide an independent benchmark for investors.
The review of the finances of the Isle of Man Government to issue a sovereign credit rating is carried out on an annual basis.
Carl Hawker, of the Treasury, said: ‘We see this renewal of AAA status as an external validation of the financial position of the government and of the status of the wider Isle of Man economy.
‘The rating provides an impartial external opinion for those looking to invest in or relocate to the Isle of Man, which can be a useful marketing tool in a competitive global environment.’
Achieving the AAA means that government-issued debt will pay interest at a very low rate. Banks will consider the rating in pricing debt deals.
The same applies to borrowing in the name of the government, such as the MEA.
A reduction in status from AAA to AA typically results in an increase in the interest rate on a loan of 0.25 per cent.
The retention of the highest status also means the Isle of Man can be marketed as a financially secure environment.
Credible, external validation attracts investors. Meanwhile, the rating promotes a positive national identity and reputation for the Island, and strengthens the relationship with the UK.
The announcement has been welcomed by Treasury Minister Allan Bell, who said: ‘Despite the current volatility in world markets, the Isle of Man continues to demonstrate that it is a world class jurisdiction in which to do business.’
Some offshore rivals, including the Channel Islands, chose not to be rated.
What’s Happening To The Offshore Payroll Providers?
Rumours are starting to circulate about possibly more redundancies in the offshore payroll provider sector, is this perhaps the end of UK contractors being able to use offshore structures to mitigate their responsibilities? Ever since the chancellor announced the 2008 budget there seems to have been steady downsizing in what only a few years ago was a boom sector.
Is this down to smaller profit margins on the structures that they can offer or perhaps that the structures themselves are under such attack that many companies do not want the risk of running them, who knows? Either way the next 12 months will surely prove to be challenging for both those offshore offering payroll services to UK contractors and those UK contractors who rely on them.
Contracting, Who Would You Like To Win The Next General Election?
The results in the recent local elections won’t come as much as a surprise to most people. Labour seem determined to self destruct, punishing the poor and those who take the risk of running a small business in equal measure with economic policy that does little to inspire confidence in the bunch of morons currently running the country. Only those who are truly arrogant and blinkered could be surprised by what happened. They appear to have lost touch with such a great percentage of the population, reinforced by Gordon Brown’s appearance on the BBC on Sunday to let us all know that it is us who have the problem by not “understanding” what a great financial genius he is. Yes Gordon, of course you are right and everybody else is wrong. You’ve spent money based on a falsely inflated property market and low interest rates that have allowed huge amounts of people to borrow way more than they could afford. You encouraged this, now things have turned, the cycle is rotating. Instead of dragging more money from the private sector to fund ridiculous public sector spending what would really help us all out at the moment would be a reduction in the duty on fuel. This would lower the cost of living straight away across the board. The trouble is that without that revenue those that are elected wouldn’t be able to give themselves such big pay rises so for now they’ll keep with the “doing it for the planet” bandwagon.
So the question is what’s the alternative? In my own opinion Labour seems dead set against contractors and the contracting industry as a whole. On the other hand I think it’s a fair bet to say that the Lib Dems may be even worse on those that work hard to earn hard. The Conservatives seem notable by their silence. So as a contractor who would you like to see win the next General Election in the UK?
Loading ...No More Offshore Partnerships, It’s Now EBT All The Way
Unsure About EBT Schemes? There is a Much Better Payroll Solution Available!
Starting from today thousands of contractors currently paid through offshore partnership schemes will now need to find another solution. HMRC have specifically targeted the reciprocal tax agreements that allowed many of these schemes to work leaving contractors looking for another solution. Whilst the common misconception is that only handfuls of contractors are paid this way in reality many thousands have taken advantage of the various double taxation agreements offered by the UK Government in recent years. HMRC in removing that option are going to affect the earning potential of thousands of high net worth individuals.
UK Contractors looking to make the most from their contract should now maybe be looking towards EBT (Employee Benefit Trusts) as a viable option. An EBT is a legitimate way of rewarding high worth key members of staff. Several offshore companies are offering EBT schemes to
In the past the EBT route has offered less of a return than an offshore partnership but with the options now being limited more and more contractors will be seeing EBT as a viable payment solution.
The Hypocracy Of Government
Don’t even try to claim expenses that you’re not 100% sure about, put more money away for your pensions, don’t even think about using Offshores! All messages preached by a
Isle of Man Taxation
The Isle of Man indirect tax system closely follows that of the UK, levying VAT and customs and excise duties at the same rates and on the same goods and services as the UK.
A Customs and Excise Agreement exists between the UK and the Isle of Man creating a common customs and fiscal area. Under the Agreement the Island has access to the European Single Market.
A resident person, whether an individual or company, is liable to income tax on world-wide income. Persons who are not resident are liable only on Manx source income. There are no capital, inheritance or withholding taxes. The top rate of income tax in the Isle of Man is currently 18%. The Island has no international tax treaties other than the one entered into with the UK.
Tax Free Companies
A non-resident person can acquire or establish an Isle of Man company and subject to meeting certain requirements ensure that the company is free from tax in the Isle of Man.
Tax Free Trusts
A non-resident person can also settle funds on an Isle of Man trust, which, as long as no Manx residents can benefit, will not be subject to tax in the Isle of Man.
IR35 – UK Contractors
The IR35 issue has become a big deal for UK based contractors, before deciding to contract you should make yourself aware of the implications IR35 can have on not only your income but also your employment.
What is IR35 and how does it affect UK Contractors?
“IR35” is a piece of tax legislation announced in 1999, which took effect from April 2000. The legislation means that the Revenue office can tax some UK contractors as though they are employees of their clients and not as self employed. Any UK Contractors caught by the IR35 legislation pay significantly more tax reducing their take home pay.
Why did the UK government introduce the IR35 legislation?
HMRC’s intention was to tackle tax and National Insurance (NIC) avoidance schemes through the use of intermediaries, such as Partnerships or Personal Services Companies (PSC).
HMRC’s view was that a large number of IT Consultants, Engineers, non-executive directors and “one man band companies” were often treated as self-employed when in fact they should have been treated as employees of the client. This was based on the terms and conditions that the contractors worked under, essentially your contract with the client dictates whether or no not you fall inside or outside of IR35.
Does the IR35 legislation affect all UK contractors?
Yes, in the sense that all contractors need to consider IR35 and take action to protect themselves from it. As mentioned above having a contract that falls within IR35 can seriously impact on your earnings as a contractor. Being inside or outside IR35 is not a black and white issue.
How can contractors determine if they are inside IR35 and not really self-employed?
The law for tax and social security legislation does not define ‘employment’ and ‘self-employment’. Over the years Courts have considered the issue and their guidance on this issue is known as IR35 case law. Most contractor payroll service companies will be able to provide an assessment of your current contract as to whether or not you are inside or outside of the IR35 legislation. Many offshore payroll solutions for contractors provide their own new contracts that if acceptable ensure you fall outside of IR35.
Contract Length Does Not Imply You’re Inside IR35
It seems that the length of your contract does no longer imply whether or not you fall inside or outside of the IR35 legislation.
Not an Employee
In a recent judgement released by the Court of Appeal, is has been decided that the agency worker (James) was not an employee of the end client (Greenwich Council).
This case involved a Ms Merana James, who claimed unfair dismissal because her agency sent another temp worker to Greenwich Council when she took time off from the work.
Upon her return after a month’s absence Ms James found another temporary worker supplied by her agency carrying out the role. It was then that she claimed that she had worked for 3 years with the client and that she was an “implied employee” and entitled to the entitlements of a permanent worker.
Your Employment Status Doesn’t Change Because Of A Length of Time
The courts found that the length of time she had worked for the client had not provided her with employment status, she was not deemed an employee of the client. They stated the governing contract she had was a temporary agency workers agreement with the agency which had not been supplanted with an implied contract of employment between her and the end client.
Many UK contractors and their clients fear that after a year or more work for a single client an employment relationship can automatically exist between the two and IR35 becomes applicable. This does not appear to be the case.
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