Offshore Umbrella Company
The Offshore Umbrella Company contractor is in good company. Many of the world’s top companies use offshore tax havens to save themselves tax. The Offshore Umbrella Company contractor is not in his own. For instance Microsoft paid just 7.2% tax last year by using Ireland as an offshore tax haven. What they do is that they have their costs in their home countries like America and their profits in countries with low rates of Corporation Tax. Microsoft got a $200 million credit from the tax authorities in the USA by spending money in R&D there. However, it paid very little in tax there as its profits were taxed in Ireland and in the Caribbean.
It is all perfectly legal and it is hard to stop. John F Kennedy tried to do it but companies are always one step ahead of the game. Contractors who use Offshore Umbrella Company options are finding the same. The UK Government are closing the Employee Benefits Trust option but the smart Offshore operators have already got out of those and set up fresh schemes. These schemes are completely legal. The problem for Governments is that they can’t stop other countries charging whatever tax rate they like. They also can’t stop companies setting up in these tax haven countries. Micrsosoft, or Apple. could simply get out of America altogether, if pushed too far, and operate as a foreign company in America.
Leona Hemsely, the head of a big hotel chain in America, once got into trouble by saying “We don’t pay taxes. Only the little people pay taxes”. This obviously got her into trouble. However, to a certain extent it is true. In 1952 American companies accounted for 32.1% of all tax paid in America. In 2011 it was 8.9%. Contractors using the Offshore Umbrella Company option are only following in the footsteps of the top companies and the rich like David Cameron’s father Ian and his father-in-law Lord Astor who use offshore companies to avoid tax. Chancellor Osborne also has a £4.5m offshore trust. Contractors who use these schemes are in good company.
For a selection of good Umbrella Companies check out Which Umbrella Company