UK is an Onshore and Offshore Tax Haven

A recent article in the Sunday Times relating to the amount of taxation paid in the United Kingdom by billionaires based in the UK or domiciled in the UK revealed interesting facts relating to the UK being used successfully as both an onshore and an offshore tax haven.

It seems that the constructive use of offshore trust and company structures protects British domiciled non-resident billionaires from paying income tax in the UK, and non-domiciled billionaires who live onshore in the United Kingdom benefit from a tax get-out clause by keeping their assets out of the UK and away from the clutches of HMRC.

Media and public response to the article in the Sunday Times has been most interesting to observe…

The Sunday Times article was contributed to by the leading accountancy firm Grant Thornton who were commissioned by the newspaper to estimate how much taxation was actually paid and legally avoided in the UK by British billionaires.  The findings which reveal the UK is an onshore and an offshore tax haven have angered most.

However, we believe those who are protesting so vociferously should take a step back and look at the bigger picture…

Taking resident British domiciled billionaires into the equation first – a number of these individuals and family groups were able to legitimately reduce their UK taxation burden by deriving an income in the form of dividend payments and thereby reducing their taxation rate from 40% to 25%.  This is an absolutely legitimate way to reduce their taxation burden but one that has been called ‘unfair’ in the British press following the publication of the Sunday Times article – but surely 25% of something quite substantial is better than 40% of absolutely nothing isn’t it?  And that is exactly what the UK would get if it closed this tax break because the domiciled and resident billionaires could very easily move overseas and restructure their affairs and legitimately avoid all UK taxation.

Those British domiciled billionaires who choose to do this and remain offshore entirely can actually spend up to 90 days in the UK annually anyway (subject to HMRC and the Special Commissioners challenging whether their pattern of presence in the UK matches their claims of non-resident status – see UK Non-Residents and the Offshore Tax Test for more information) so we think the media and the public should be careful what they wish for because if pushed into paying unlimited taxation, almost all in the upper echelons of the wealth bracket will pack up and ship out

In terms of non-doms like Roman Abramovich for example, these people are domiciled elsewhere but take residency in the UK.  For non-dom billionaires tax is only due on the income they remit to the UK.  Again, stop protesting – have you seen the house Roman Abramovich owns…just think of the council tax he has to pay!

The one argument that this article by the Sunday Times should restart is the one relating to placing a cap on income tax payable – because there are many wealthy expatriates who would love to return to the UK and contribute to the future prospects of the nation but who feel aggrieved at having to hand over 40% of everything they earn in income tax plus paying NI on top, and council tax etc., etc., and there are many more wealthy Brits still living in the UK whose talents and entrepreneurial flair are restricted because of the crippling amounts of tax they have to pay.

Why doesn’t the British government make the entire taxation system fairer to everyone and cap tax or have a far lower flat tax rate.  It has worked in countries like Estonia, Latvia and Lithuania for many years and it has brought many who were working outside of the law back into the tax paying fold.  Think about it Mr. Brown, it could mean you actually have even more money to play with.

Further Offshore Tax Havens Articles

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