Offshore scheme for IT contractors - our recommendation

Our offshore schemes are temporarily and probably permanently closed to new applicants

The 2004 budget has effectively blocked EBT based to new applicants. Should this situation change we will provide more information and application forms.

The attraction of offshore schemes is that they offer big tax savings over more traditional ways of working - typically over 80% of gross will arrive in your bank account. The schemes we are suggesting are all run by companies operating from the Isle of Man. For some background information on why you may now wish to choose to use an offshore scheme please read this.

Our offshore schemes fall into two distinct tried and trusted categories.

• Employee Benefit Trust
• Offshore Invoicing Agent

Both types take over your contract. This removes the need for you to operate your own limited company, removes any possible risk from IR35, and in the case of the EBT also completely removes the need for an accountant.

We have compiled a list of frequently asked questions
If you have any further queries please use our contact form

Employee Benefit Trust

With this type of scheme you become the employee of an offshore company and pay normal UK P.A.Y.E. on your income from the company. The salary offered will be considerably less than the amount the offshore company receives from invoices for your services.

As an employee of the company you are eligible to participate in the Employee Benefit Trust which makes payments to company employees. Payments are based of the profit the company has generated from employing you - effectively the difference between the amount invoiced for your services and the cost of employing you. For legal reasons to remain free from taxation these payments from the Trust cannot be guaranteed.

The Employee Benefit Trust route has been in use for many years. There have been several changes in legislation attempting to block this option but the offshore companies have always modified their procedures to remain within the law. Unfortunately the 2004 budget has effectively blocked the schemes to new applicants.

Offshore Invoicing

These schemes require participants to register and pay UK taxes as self employed (Schedule D). With no limited company returns, V.A.T. or P.A.Y.E. scheme to operate the only tax return required is a self assessment which can either be completed by the individual or by an accountant. You will still need to maintain accounts for possible inspection by the Inland Revenue.

The Invoicing Agent takes over your contract and invoices the client or agency for the work you have done. This is then transferred directly to your bank account less a handling charge.

We will produce more information on this option shortly.

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