Tax Havens in the UK

The term ‘offshore’ actually comes from the Channel Islands which are the UK’s primary tax havens and which are physically located offshore from the UK; but when it comes to tax havens in the UK there’s more to it than ‘just’ Jersey and Guernsey.

This article presents an examination of the UK’s primary tax havens and their main features and benefits for individuals and companies seeking ways to legally reduce their tax burden and benefit from the general offshore advantages offered.

Isle of Man - The Isle of Man has its own government but is a dependency of the British crown meaning that the UK looks after its foreign affairs and defence but apart from that it remains strictly hands off allowing the government of the Isle of Man to manage the important things like taxes!

The jurisdiction has been an offshore haven for many years and as a direct result has a highly sophisticated structure of compliance and control in place to protect investors and those who have interests in the Isle of Man, this provides massive investor confidence and has resulted in the island becoming one of the safest and most attractive worldwide tax havens.

In terms of the taxation benefits of investing or incorporating in the Isle of Man, they are impressive and manifold.  There are no capital gains taxes, turnover taxes or capital transfer taxes and there is no stamp duty.  There is VAT and income tax however but the latter is levied at a maximum rate of 18% and the government are reducing this rate of tax all the time.  The current lowest rate of tax has been reduced recently to just 10% and a plan is in place to remove the income tax burden on corporations to zero over the next four years.

The Isle of Man is one of the first jurisdictions worldwide to begin implementing sophisticated offshore ecommerce legislation for businesses wishing to move all or some of their ecommerce operations out of the scope of high taxation.

Jersey - Another self-governing crown dependency of Britain, Jersey’s external affairs are managed by the UK government.  Jersey has worked to establish itself as a leading player in the ‘offshore’ sectors of banking, investment funds and trust creation and it is a sophisticated, well regulated jurisdiction with a pedigree that attracts serious inward investment.

The key to obtaining the offshore taxation benefits offered by Jersey for anyone other than a Jersey based IBC is non-residence.  The main structures benefiting from Jersey’s tax breaks are trusts, IBCs, exempt companies and limited partnerships.

Guernsey - Guernsey is structured in exactly the same way as Jersey in terms of its position with the UK and its governmental controls and it is home to the Channel Island Stock Exchange.  The main business sectors in Jersey are insurance, banking, investment funds and trusts and as with Jersey there are a number of specific company types that can be formed to benefit from the taxation breaks offered by the jurisdiction.

Gibraltar - Although Gibraltar is physically located in Spain it is an offshore tax haven of the UK.  It is self governing but remains a dependent territory of Great Britain and is actually one of the oldest of Britain’s dependent territories to have gained offshore status.

In Gibraltar there are no capital gains taxes, wealth taxes, sales taxes or VAT but there is income tax, withholding tax, stamp duty, property tax, estate tax and import duty and unless an individual resident in Gibraltar has gained High Net Worth Individual or Expat Executive status his taxes are likely to be quite high.  The offshore advantages Gibraltar has to offer are limited to certain company structures.

Ireland - Ireland is a separate country from the UK in its own right but has been included here because of its close links with the UK.

Ireland is a fully fledged member of the EU, is the fastest growing economy in the EU and yet it is offshore! 

The government of Ireland saw a way to diversify and thereby massively grow, expand and strengthen their economy through the use of certain offshore structures such as the Shannon Free Zone, the International Financial Services Centre in Dublin and the implementation of a maximum 12.5% corporate tax rate.  As a direct result the government has succeeded in making Ireland one of the most attractive tax havens in and around Europe and the gateway to Europe for many US companies.

Now it is leading the way ahead of jurisdictions like the Isle of Man with the creation of attractive structures, benefits and tax breaks for those involved in ecommerce.