UK Taxman gets powers to go offshore...

Posted on 1 October 2008

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The beginning of the end for offshore arrangements?

As the founder and Managing Director of probably the UK’s largest Umbrella company, I have been frustrated at the apparent inability of the UK tax authorities to prevent offshore Umbrella companies from setting up aggressive structures. These structures rely on the secrecy afforded to them from operating from bases outside of the UK rather than by implementing compliant structures which meet both the spirit as well as letter of the UK tax system. 

Many of these structures claim to return at least 85% of a contractor’s income to them, and are supported by so called leading tax expert opinion. These "solutions" are of course attractive to certain Contractors but it does none of us any good in the long run as it forces HMRC to look at Contractors, Agencies and we are all tarnished by the apparent lack of compliance or extra work needed to police it.

However, there does appear to be a significant light at the end of the tunnel.  On 29 September 2008, the UK and Isle of Man Governments signed an agreement which may lead to the end of these so called “compliant” arrangements.

The agreement, which will require ratification by the House of Commons, will for the first time allow the UK tax authorities to obtain information about these offshore companies.  The financial secretary to the Treasury is reported as saying “This new tax information exchange agreement represents a significant step in our efforts to counter and prevent tax evasion and avoidance. “

The agreement will also allow officials from the UK to enter the Isle of Man and conduct interviews with, and inspect the records of, those individuals who they suspect are involved in the promotion of these arrangements. 

So for the first time HMRC will have some significant “teeth” to combat the growing offshore market and enforce the MSC and debt transfer rules that were introduced in 2007.  We may, at long last, see the end of non-compliant structures with those responsible for their creation being held personally accountable for any unpaid UK tax or NIC.  

Category: Tax

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