Offshore limited company schemes EBT and Offshore invoicing
Special update January 2010 - Offshore tax scheme warning - Royal Court of Justice ruling
If you have once used or are thinking of using an offshore tax scheme as a way of avoiding UK tax please read the note below.
Thursday 28 January at 9:30am the Royal Court of Justice ruled the retrospective effect of BN66 is not unlawful.
Which in plain English means that HM Revenue and Customs can now go back in time and retrospectively apply a piece of tax legislation which will affect thousands of contractors who either once used or are still using an offshore scheme/company as a way to avoid paying UK taxes.
HMRC can now go back as far as 1987 (which is when BN66 was imposed), so even if a contractor used a scheme in 1987 for one day or one year, they may now have to pay both fines and backdated taxes.
This news further supports the fact that contractors should think very carefully before using offshore schemes as a way of avoiding paying UK taxes.
Basically if you live in the UK, work in the UK, get paid for work you do in the UK, there is no way and has never been any way of avoiding UK taxes. Working through your own UK limited company is and has always been the most tax efficient way of working legally.
If you have any questions about working through your own legitimate UK limited company, as many hundreds of thousands of contractors already do and many millions of other UK limited companies do, please don’t hesitate to call 0500 152 500 / 01442 275789 or email: Jaime.thorpe@sjdaccountancy.com. End of special update.
Are Offshore schemes worth the risk?
With fees usually in the region of £2,000 - £4,000 or 5% - 7% of your contract value, offshore schemes are quite costly. However, some do promise returns as high as 80% plus, but are they really worth the risk?
Lets face it, HM Revenue and Customs aren't fools, they know about all tax avoidance, tax avoidance and magical schemes, scams and loop holes that promise ultra high take home pay. Unfortunately, like all huge super-sized organisations, the Revenue can sometimes take a while to pass laws that snuff out these schemes but when they do, it can have devastating affects on the contractors and clients who used them.
Certain offshore schemes are the latest (BN66), if the government closes this scheme it will affect anybody who has used it, and when we say anybody, that’s exactly what we mean, even if you used the scheme five years ago for just one year, the Revenue will be sending out back tax demands and possible penalties.
Think about it for one moment; if your work is predominantly in the UK and you mainly live in the UK, you are going to be liable for UK taxes! There really is no legal way of avoiding UK taxes. No matter what anybody tells you or whatever you read however jazzy the sales blurb or hyper promotional the literature may be, you will eventually be liable for UK taxes.
This doesn't mean you shouldn't seek to operate in the most tax efficient way possible. The most tax efficient way of working in the UK is through your own limited company, any UK professionally qualified accountant will tell you this.
Again, be cautious of companies who promote unrealistically high returns, ALL UK accountants are bound by the same government regulations and tax laws. Therefore, on the whole, providing they know what they are doing, your take home pay from one firm to another should be roughly the same.
Of course it is best to seek an accountant with specialist knowledge and experience in supporting contractors Your local accountant may provide excellent advice to local shop owners, trades people and SME’s on industrial estates but contractors needs and ways of working are unique. It therefore makes sense to appoint a firm that specialises in the contractor market.
So are offshore schemes worth the risk? We’ll let you decide for yourself.
If you traded through your own legitimate UK limited company your returns would typically be 75% - 80%. Additionally, UK accountancy fees are nowhere near as expensive as offshore providers, SJD (we are the UK’s largest accountancy firm for Contractors working through their own limited company's and have over 10,000 clients) only charge a fixed inclusive monthly fee of £110 plus VAT, which is one of the lowest fees in the market.
One last point – you’ll be hard pushed to find any UK accountant that uses such scheme themselves, surely that speaks volumes.
If you would like to understand more about how to work through your own limited company and what you could be taking home, please visit the following pages:
Two-minute guide to contracting through your own limited company
Take home pay through a limited company
SJD Accountancy
SJD Accountancy are the UK's largest specialist provider of fixed fee, limited company accountancy services to contractors; we've been acting for contractors across the UK since 1992 and have more than 11,000 clients.
We are the only National specialist firm of accountants with offices in all major UK cities so you’ll never be far from your accountant. SJD also have more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies - ATII, ATT, ACCA, CA, ACA, FCCA, ACMA. You’ll also be pleased to know that we are one of the lowest priced as well.
SJD have also won every relevant industry award possible, including:
- Best Contractor Accountants - Contractor UK 2011 - 2007
- Accountant of the Year - The British Accountancy Awards 2011
- Best Professional Team of the Year - UK Customer Experience Award 2011
- Customer Commitment Award - Institute of Customer Service 2011
- National Chamber of Commerce Award 2010
- Medium firm of the Year - Finalist Accountancy Age 2010
- Excellence in Customer Service - Finalists National Customer Service Awards 2009
- Sunday Times Best Small Companies - Award 2009 - 2007
- Small firm of the Year - Accountancy Age 2007 & 2004 and finalists in 2010 and all years since 2003
- Deemed PCG accredited accountants and fully MSC compliant
We offer all clients:
Free face-to-face meetings. This is another unique service, only SJD offers free face to face meetings - tax is complicated and sometimes only a meeting will do.
Unlimited access to your own dedicated accountant. No call centres, no outsourcing, no automated call handling. Simply telephone, e-mail or meet your own dedicated accountant face to face.
Money back service guarantee. All your telephone calls and e-mails will be answered the same day or we will refund your monthly fee's.
Outstanding reputation. We have won more awards for customer service and accountancy excellence than any other firm in our market.
All inclusive low cost monthly package which includes completion of accounts, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, unlimited access to your accountant and all company returns.
All this for a fixed monthly fee of £110 plus VAT, which is one of the lowest prices in the market. And most importantly, in a recent survey 98% of our clients rated SJD as 'better than other accountants' - we are working hard to convince the other 2%!
If you have any question about contracting or would like any further advice please either contact your SJD Accountant or call our new client services helpdesk on 0500 152500 / 01442 275789 or email: michelle.turbutt@sjdaccountancy.com.
Appoint SJD Accountancy and never worry about your tax or accountancy affairs again!
You may also find the following pages, guides and case studies useful:
Take home pay calculator - How much could you be taking home
Contractor FAQ - All your frequently asked questions and their answers
First time Contracting or Freelancing? - A summary of the alternatives along with pros and cons
Choosing an accountant - For a full review
Step-by-step Guide to Contracting - Download a FREE copy of our guide
Limited or Umbrella? Can't decide? - We help you decide which is best for you
Guide to Contracting - All the best guides to contracting in one place
Expenses Guide - Know exactly what you can claim
Umbrella company guide - Everything you ever wanted to know about umbrella company services
IR35 Guide - A great plain English guide to IR35.
