Choosing the right business structure for you.

 

 

Offshore (sometimes called “Offshore Employee Benefit trust”)

 

Accounts Direct does not endorse or recommend schemes run from ‘tax havens’ such as the Isle of Man, Switzerland or the Channel Islands which claim to be able to reduce your tax liability to around 10%. Typically, a contractor in this setup is paid a very small salary on which he or she pays tax and National Insurance contributions, but receive the majority of your salary in the form of a loan.

As well as being inherently risky, because the setup works on the basis that the business making the loan will never ask you to pay it back, the schemes fall foul of recent HMRC legislation. Moreover, should you find yourself being investigated, it is likely that you will be required to repay in full the amount of tax you believe you have ‘saved’ by choosing this route.

Accounts Direct strongly recommends that you do not pursue this business option. Offshore schemes are legally dubious and you run a significant risk of running into trouble with the UK tax authorities.

Given that alternative – and fully legitimate – options are available which can reduce your tax bill very significantly, it would be unwise to choose to operate through an Offshore Employee Benefit trust.

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