Dodging taxes on my new limited company

[robbob]

However, I do not share the view that an EFRBS or EBT, correctly implemented, is 'artificial.'

I can't see that anyone has said they are artificial on this thread - perhaps i an wrong though

[jsts]

Do yourself a favour...and go and see a tax consultant (and yes pay for the advice)...

If what you say is true you are looking at a corp tax liability of 50k plus and there is the potential to make a significant tax saving but don't do it on a shoe string budget....from a forum which (with the best will in the world) will not insure you against any duff advice given. I am sure alot of advice is correct but without the full details it is impossible for anyone to give the most appropriate advice.

[idontlikethetaxman]

Nomos and jsts, very helpful points as with the rest of you.

I understand there are indeed schemes that are a standard in this country just little known however the complexity of implementing these are in fact what put me off.

I just wanted to see if there was a flaw in my simple idea? Whilst I acknowledge that if it was this easy, everybody would do it - as I am indeed a relatively small company (300k profit, isn't considered huge these days), I thought perhaps it may slide. I mean what would happen if I had a legitimate reason to pay this offshore entity? They couldn't challenge me there!?

And the real reason I won't incorporate wholly offshore is that the stigma attached to it when going for larger customers, isn't always seen in a positive or neutral light. Plus, given the political climate I'd hate to be in a situation where my company is closed or accounts frozen, and as such having no way to go over there to sort it out!

In short I wouldn't mind paying tax liabilities in the UK if it was so exorbitantly high. To think I get up to 40% on Corp Tax, then up to 40% on Income Tax, plus NI Tax, and anything left that I issue as a dividend is up to the same high rates of CGT. It's just wholly disheartening! And I'm sure I'm not the only one feeling that.

Just the crux of it is this, will a large or series of small transactions to an offshore entity be seen as genuine, if not how would I have to prove it is or would the tax office have to prove it isn't? And iff if works on that level, every month or two I could just withdraw a bit of cash through the wall with my offshore company debit card and live life?!

Much appreciated,

[Incredulum]

Corporation tax is 22% for your company.

And when you pay a dividend you are taxed at 0%/25% of the cash received.

So, if your company earns £100,000 of income, £22k is paid in corporation tax.

If you then pay a dividend of the remaining £78k, the first 44k of dividend is tax free. The next 34k will suffer £8.5k of tax.

So total tax paid is 30% which is pretty reasonable really. And if you take part as salary the result is even better.

Once you begin to earn the stratospheric levels of income you predict, the tax level is higher. Go pay some of it to a tax adviser who will help you. Trust us, trying to take it offshore won't help you at all - even if you move abroad.

[section 44]

There's a lot of complex technical issues being touched on here. In short, what is proposed would not work (would not be lawful). If the law was really that simple do you not think this would be well trodden ground? I can't be bothered to explain all of the arguments against why this wouldn't work, but a few points for consideration:

1. If the overseas incorporated company had a credit card in its name that you used to buy things, there's likely to be employment related income PAYE/NIC issues.

2. As another poster has already said, the payment from the UK incorporated company to the overseas incorporated company does not not sound like it would be tax deductible in any event because it wouldn't be wholly and exclusively incurred for the purposes of its trade.

3. Practically, given your apparent lack of sophistication in this area, the overseas incorporated company would likely be UK tax resident in any event by reason of it being controlled and managed from the UK.

The list could go on but there seems little point.

[TEAP]

In particular, for EFRBS there is nothing overly aggressive, unless you are trying to claim a CT deduction on the contribution made.

so if you have a profit you still have a taxable profit if you don't claim the tax deduction

[Incredulum]

In particular, for EFRBS there is nothing overly aggressive, unless you are trying to claim a CT deduction on the contribution made.

so if you have a profit you still have a taxable profit if you don't claim the tax deduction

Not my words....!

[wamstax]

For goodness sake do not start using the Cyprus ATM card for your normal UK expenses as you will not only end up paying the tax you should have paid in the first instance (along with the NIC) but also interest on the unpaid tax (presently running at 4% ) plus a penalty of up to 100% (or 200% if you incorporate offshore in a country that doesn't exchange information with the UK) of the unpaid tax

Get a reliable tax adviser as it will save you in the long run from having to read the following HMRC booklets

http://www.hmrc.gov.uk/leaflets/cop9-2009.htm

http://www.hmrc.gov.uk/pdfs/cop8.pdf