TAX PLANNING – HOW IT WORKS?
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International tax planning works in a similar way to domestic UK tax planning in that it considers all of an individuals or company’s circumstances followed by a plan that both mitigates tax exposure and maximises asset protection. What often surprises people is what properly set-up structures can achieve. In fact, what SCF aims to achieve is to afford the tax benefits normally reserved for multi-national companies or the super-rich to normal successful people and companies and at affordable rates.
The tools at our disposal include what is known as ‘tax treaty’ shopping, moving profits from high to low tax environments and/or considering the tax residency status of individuals. Of course, there are obstacles to overcome and certainly the days of a consultant setting up a tax-free offshore company are now virtually dead for those residing in the developed world. However, what is often possible especially for those carrying out international work is to greatly reduce corporate taxes and often control individual tax exposure.
ANTI-AVOIDANCE PROVISONS MAKE PROPER TAX PLANNING ESSENTIAL
Over the last decade there has been a significant tightening of anti-avoidance provisions both in the UK and generally amongst developed countries throughout the World.
In the case of the UK, many of the traditional benefits enjoyed by non-domiciled but ordinarily resident individuals have dissipated but notwithstanding this, considerable benefits still remain especially for those who have recently made or intend to make the UK their home. However, to avail of these, expert advice is required and SCF has been successfully advising this constituency for over 30 years.
TRADITIONAL OFFSHORE COMPANIES HAVE LITTLE USE SAVE AS INTERMEDIARY AND/OR HOLDING ENTITIES
Offshore or ‘International Business Corporations’ (IBC’s) established in traditional havens such as the British Virgin Islands, Belize or even our own Channel Islands have far less practicable use than ever before. The reason, especially for trading companies, is that these jurisdictions either have no or limited tax treaty networks and often fully expose those using them to the full rigors of applicable anti-avoidance rules AND maximum withholding tax on dividends and/or income or worse.
SCF has access to a wide range of professionally qualified staff encompassing certified accountants, chartered accountants and specialist international tax lawyers based both in and outside of the United Kingdom. In fact, it is our belief that SCF is uniquely positioned to provide a full range of domestic and international accountancy, legal and tax planning services perhaps not available outside of the largest accountancy firms but at a fraction of the cost. We also believe that being smaller gives us a more personalized relationship with clients and probably explains why we still have so many of our original clients still with us after more than 30 years in business.
NEW SUBSTANCE OVER FORM TESTS
Since the 17 July 2013 the UK has had ‘substance over form’ legislation similar to that introduced many years before in countries such as Canada. In the UK, it is called the General Anti-Abuse Rule (GAAR) and enables HMRC to review structures to ensure that they have substance and have not been created merely to avoid taxation. GAAR is not a replacement for previous anti-avoidance legislation, such as the controlled foreign company (CFC) legislation, but complimentary and seeks to ensure that technicalities cannot be used to avoid legitimate tax liabilities.
The consequence of the above certainly does not mean that companies and individuals cannot plan and/or seek to mitigate their tax exposure but rather that structures must be part of an overall personal or business strategy that independently makes sense notwithstanding any pecuniary benefits.