Is this the end for offshore umbrella companies??

[LisaContractorUmbrella]

Following HMRC's recent update on offshore employment intermediaries I asked for clarification on the changes to the legislation:

"Contractors join offshore umbrella company schemes in a bid to avoid tax – from what I have read, the updated legislation would make that contractual arrangement null and void as the full contract value (less agency margin) would be subject to PAYE and NIC’s. Therefore, the arrangement that had been entered into between the contractor and the offshore umbrella company would be pointless as there could be no possibility of the offshore umbrella offering any sort of tax saving. Is my understanding in this matter correct? “

A policy advisor confirmed that my understanding was quite correct.

What does the panel think?? Is this the end for the QC approved 90% take home offerings?

[malvolio]

Following HMRC's recent update on offshore employment intermediaries I asked for clarification on the changes to the legislation:

"Contractors join offshore umbrella company schemes in a bid to avoid tax – from what I have read, the updated legislation would make that contractual arrangement null and void as the full contract value (less agency margin) would be subject to PAYE and NIC’s. Therefore, the arrangement that had been entered into between the contractor and the offshore umbrella company would be pointless as there could be no possibility of the offshore umbrella offering any sort of tax saving. Is my understanding in this matter correct? “

A policy advisor confirmed that my understanding was quite correct.

What does the panel think?? Is this the end for the QC approved 90% take home offerings?

No. It stops the abuse of the umbrella system for the various agencies supplying workers to health care, teaching and various other trades who avoid their own costs by claiming to be subject to offshore arrangements, although that saving didn't necessarily roll on to the workers themselves...

The other schemes that attract the unwary freelance contractor will persist unchanged, they are after all completely legal. The problem is answering the question 'does a standard UK-based taxpayer working in the UK qualify for their use'. We would say not, but that remains legally unresolved.

[craig1]

It's long overdue its death.

For the sake of posterity, here's the tax scams that I think will come up over the next few years.

- An extension of the scams around LLPs. HMRC haven't really got to grips with the whole range of possible frauds that can be done in this area.
- VAT intra-community scams.
- Bad debt scams.
- An extension of the investment write-off scams.

Most of them only require a set of brass balls and an administrator with a flagrant disregard for his clients eventual risk profile when HMRC catch up with the frauds.

[Clare@InTouch]

Surely something will spring up to take it's place though, but perhaps simply missing the QC approval. Certain people will always be willing to take massive risks if it means they can save money, and they often don't want to know/think about the method or whether it's legal. They probably just think they'll never get caught, or are too busy to do a google search and find out the truth.

[LisaContractorUmbrella]

Surely something will spring up to take it's place though, but perhaps simply missing the QC approval. Certain people will always be willing to take massive risks if it means they can save money, and they often don't want to know/think about the method or whether it's legal. They probably just think they'll never get caught, or are too busy to do a google search and find out the truth.

But the point is they won't be able to take that risk anymore - the offshore will not be able to pay them - the agency contracted to the end client will now be responsible for paying them through PAYE - this revised legislation makes any contract a contractor has with the offshore brolly null and void

[eek]

But the point is they won't be able to take that risk anymore - the offshore will not be able to pay them - the agency contracted to the end client will now be responsible for paying them through PAYE - this revised legislation makes any contract a contractor has with the offshore brolly null and void

You are aware that in most cases its the agency's own brolly that is offshore...

The offshore NI scam is not one used on contractors its more used on teachers or care home temps that gives both of them a few quid more a day.

Actually in the case of care home temps its worse than that. The scheme alongside 0 hour contracts have been used to reduce prices to the point that agencies have to be dodgy to stand any chance of winning contracts..

[cojak]

C'mon guys - I've already flagged up the current scam scheme - the 'Corporate Tax Planning'.

[northernladuk]

Just got to start on the on shore ones now

[Boney M]

I know a few offshore companies that have registered offices in the UK and were giving those details to agencies, so how would an agency now know they were dealing with an offshore if they dont do any due dilligence?

[cojak]

I know a few offshore companies that have registered offices in the UK and were giving those details to agencies, so how would an agency now know they were dealing with an offshore if they dont do any due dilligence?

Just looking at the umbrella's website will give you a massive clue. Most of these setups push 80%+ returns.