Offshore schemes for IT contractors - our recommendation

Offshore schemes - the background

The Danger...

On December 10th 2003 our esteemed chancellor Gordon Brown announced a measure which we believe gives a huge boost to tax efficient offshore schemes for IT contractors and other small incorporated businesses.

Hidden away within this rather lengthy treasury publication (search it for 5.91) and strangely reminiscent of IR35, the failed attempt to impose punitive taxation on hardworking professionals, we find in the small print ...

5.91 The Government has introduced a range of measures and targeted tax reductions to support small businesses including though reform of capital gains tax, reducing the rate of corporation tax for smaller companies and the introduction of a zero rate, Stakeholder Pensions, and the abolition of advance corporation tax.

These measures are encouraging the creation of more small companies, including through self-employed people incorporating their businesses. The Government is keen to ensure the measures it has introduced provide support for these firms taking on the opportunities and responsibilities involved in that transition, and to encourage them to reinvest their profits and grow their businesses.

At the same time, the Government is concerned that the longstanding differences in tax treatment between earned income and dividend income should not distort business strategies, or enable reductions by tax planning of individuals' tax liability, and that support should continue to be focused on growth.

The Government will therefore bring forward specific proposals for action in Budget 2004, to ensure that the right amount of tax is paid by owner managers of small incorporated businesses on the profits extracted from their company, and so protect the benefits of low tax rates for the majority of small businesses.

Whatever new scheme is dreamed up it may prove to be a dismal failure in the chancellors aim to drive contractors into permanent employment. On the other hand by learning from past mistakes a watertight piece of legislation may appear which removes all financial incentives from taking the risk of running a small incorporated business. If you are sick of seeing your money thrown into the black hole of failed public services read on ...

4Contractors warmly thank Gordon Brown

By giving four full months notice we now have time to investigate more tax efficient ways of doing business than the Limited Company route. We have a candidate scheme in mind and will be fully investigating a number of others in the very near future. When we have selected one or more fully legal tax avoidance schemes we will be bringing them to the notice of the contracting community through this website.

4Contractors tax efficient alternative

We have investigated a number of offshore schemes and are currently looking into some others. We are only promoting those schemes we would feel confident using ourselves - indeed there is every chance that in the near future we will be leaving our limited company days behind and going offshore ourselves..

If you are aware of any other schemes worthy of investigation please use this contact form to leave some details.