How Can British Entrepreneurs and High Earners Escape UK’s Taxation?

As the countdown is well underway to the introduction of the 50% taxation rate for high earners in the UK, we decided it was high time we explained how British entrepreneurs and high earners can escape the UK’s excessive taxation regime.  Some may call us unpatriotic for so doing – however, why should those who already contribute more to society be penalised for the failings of the current government?

The fact of the matter is, we’re in an economic hellhole in the UK because of successive chancellor’s failings, because of hedonistic and ridiculous banking practices, and because the British population was led to believe that bust would not automatically follow boom, and eternal credit and unsecured borrowing was apparently no bad thing.

This is not the fault of those who are doing well in life through their own hard work, so why should they be effectively penalised and made to pay for the mistakes of others?  We are not going to enter into a debate about this, our position is clear – what’s more, there are very practical and legitimate steps that high earners and entrepreneurs can take to reduce their overall taxation liability in the UK.

Step One – Leave UK and Move Abroad

This is quite possibly the most straightforward piece of advice that we can give anyone who doesn’t want to pay UK tax!  I.e., leave, become non-resident and not ordinary resident for tax purposes and that way you leave behind the vast majority of your tax liability to the British government!

Of course, this may not be practical for you.  If you’re in a high earning job in the UK you may well fear that you won’t find such a good position abroad.  But have you looked?  No, the job’s market is not in the best position ever – however, if you have core and in demand skills, you may well find that there are other countries searching for your skills.  For example, if you’re medically qualified or have solid IT skills, nations as diverse as Dubai and Australia may well be calling out for you and your talents. 

Alternatively, if you run your own business, can you place it in the hands of a strong management team and run the operations from abroad?  Or, could you divide your time between a low tax country abroad and the UK?  You are permitted to spend a certain number of days in the UK every year after you have expatriated and you still remain non-resident in Britain for tax purposes.  Naturally because you are high net worth the British government is likely to keep a closer eye on your comings and goings than they would on an expat retiree living on the state pension in Spain, but according to current HMRC rules you can become non-resident if: “you leave the UK to work abroad full-time, you will become not resident and not ordinarily resident in the UK if your absence and employment from the UK covers a complete tax year (i.e. 6 April to 
5 April), and you spend less than 183 days in the UK during the tax year, and your visits to the UK do not average 91 days or more a tax year over a maximum of 4 years.  For visits to the UK, days of arrival and departure are not normally counted as days spent in the UK.”

If you’re not too keen on leaving your business behind, why not take it with you?  Many countries are crying out and competing hard to win international business, and you will find nations where you can establish operations and pay far less tax than in the UK, where you are supported if you bring employment to the country and where you are aided and abetted by supportive business and banking environments locally.

A final alternative for you to consider is, if your business is booming in Britain, could you replicate its success abroad?  You could use the 50% tax rate as an incentive to make your move abroad and expand your business empire overseas.  If you want comprehensive advice about establishing yourself and your business overseas in a healthy tax environment, please get in touch as we can recommend companies to advice and assist you.

Step Two – Shield Your Assets

How is your money invested – if you’re simply using onshore portfolio solutions did you know that you can at least defer taxation through the utilisation of offshore solutions, even if you remain a tax resident in the UK?  This can allow you to defer until a time suitable for you to pay your tax.  What’s more, if you physically move away from the UK, you may well be able to legitimately avoid paying any taxation on any of your investments.  This will depend on where you’re located and where your investments are, because if you retain investments in the UK that will incur a tax liability and there is no double taxation agreement in place between the UK and your new nation of residence, the UK taxman will want his cut.

You need to think not only about how you’re going to invest if you do decide to move away from the UK, but where you’re going to live – because the amount of tax you owe and to whom will depend on your nation of residence and whether they tax you on your worldwide income and gains, or only that which is remitted to that country.  Clearly the latter is preferable.

In terms of protecting your assets, you can protect them not only from income and dividend taxation erosion, but from inheritance tax liability as well.  There are many solutions available to expatriates – and even resident Britons.  But you need to think well in advance about structuring your estate effectively if you do want to ensure more of your wealth is passed to your heirs than goes to the taxman.  Onshore solutions include gifting and trusts, although the latter solutions are becoming less effective and more expensive all the time.  Whereas offshore solutions for non-residents can be highly effective in protecting you, your estate and your heirs from ongoing taxation erosion.

Step Three – Change Your Nation of Domicile

If you want to go the whole hog and turn your back on the UK entirely you can change your nation of domicile.  This is very hard to do – but it is possible and it can be worth it for those Brits who retain no ties whatsoever with their homeland.

To lose your country of domicile you have to sever all ties with the UK – you cannot have physical assets in the nation such as a property, you cannot continue to have interests in a business in the UK.  You must not invest in the country, have a bank account or a burial plot there, you cannot school your children therein or visit very often at all.  You also have to securely nominate another nation as your new country of domicile, and prove you have massive and strong attachments to that country.  Those who consider taking this extreme step are usually those who really want to secure their assets for their heirs so that they can avoid British inheritance tax.

To take such a step is complex and it is imperative that you do it correctly – so seek guidance and advice from professional taxation advisers.

Step Four – Move Your Business Offshore

Are you in a position where you can take a step back from your business and also move it’s operational centre abroad?  If so, you may be able to reduce your overall personal and company taxation liability in the UK.  A number of high profile companies have already or are in the process of leaving UK following the chancellor’s decision to whack a higher rate of tax on those who are successful.  If you want to follow in their footsteps you need to think carefully about whether you’d be happy to make the move away as well – as this could have greater tax saving benefits for you.  But if you’re not prepared to leave the UK, are you comfortable with taking a lesser role in the day-to-day running of the business, as you will need to reduce your profile and income from the business if you truly want to save taxation.

There are creative and legitimate ways for British entrepreneurs and high earners to escape UK’s taxation regime.  If you want to know more, if you need advice, guidance, practical assistance or just a sounding board to brainstorm ideas with, please .(JavaScript must be enabled to view this email address) with us.  We have contacts with leading professionals best placed to assist you – and we will put you directly in touch.