HMRC has made it clear in recent years that it plans to aggressively pursue those who try to avoid paying taxes. We have already seen some high-profile celebrities successfully prosecuted and punished. You do not want to face the same. Below you will find free tax avoidance information to help you avoid offshore tax schemes. The information covers the most popular schemes including S615 Pension schemes, Employee Benefit Trusts (EBTs) and devalued currency loans.
You may be tempted to reduce your tax liability by engaging in an offshore scheme. We urge you to think very carefully about this strategy. Chancellor George Osborne announced as part of his 2014 budget statement that HMRC would be given greater power and authority to seize the assets of tax avoiders – including bank accounts. That is just what it has done.
There are some offshore opportunities that are completely legitimate and financially advantageous. However, there are others that qualify as tax avoidance and, therefore, subject to severe penalties following a successful HMRC investigation and prosecution. Trust us when we say to go offshore is a risk not worth taking.
Genuine tax avoiders look to offshore schemes because they believe such schemes are untouchable. That is not necessarily true. A contractor who lives in the UK and does most of his/her work here is still subject to UK taxes. HMRC will not be kept at bay forever – they will catch up to tax avoiders in the end.
Here are several tax avoidance schemes you should be very wary of:
There is an added risk of being involved in offshore schemes that few people talk about. The risk is one of being caught up in a fraudulent scheme based on the actions of someone else. For example, your business may hum along just fine under an offshore scheme when suddenly, without any warning, you receive an inquiry letter from HMRC. They have begun investigating this scheme because of the actions of another participant. If they find this scheme to be illegal, it will be shut down and all of its participants – including you – could be subject to prosecution. In simple terms, the government does not need to be investigating you directly for you to find yourself in trouble.
We strongly urge contractors not to take the risk of getting involved in an offshore scheme. Being caught participating in an illegal scheme could result in unpaid taxes being due along with interest and significant financial penalties. You could also damage your reputation to the point of making it too difficult to overcome.
The key to avoiding illegal offshore schemes is to follow the simple rule that says something that seems too good to be true probably is. As an example, an offshore scheme operator might promise you 95% take-home pay as compared to 65% from an umbrella company or 80% from a legitimate limited company in UK. Take our word for it: 95% take-home pay is nearly impossible to achieve in the UK. Avoid such a scheme.
In the end, the goal should be to achieve the most tax efficient situation possible without breaking the law. ICP can help you do just that. We can help you set up a limited company in accordance with all applicable laws, and then help you administer that company to remain in good standing. Contractors who work through limited companies can take home between 70% and 80% of their contract rate while still being fully compliant. Contact us if you want to learn how.