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Contractors using offshore intermediaries beware!

Fair warning, lads – if you’re a contractor and you use an umbrella company or other offshore intermediary to source jobs, HMRC is eyeing you very closely.

Well not you specifically – let’s be honest, most of us aren’t going to directly draw the ire of the taxman – but the Government is deep into a consultation on offshore employment intermediary taxation at the moment, with responses closing after this Thursday. The new consultation applies to proposals to clamp down on offshore tax avoidance, and you know as well as I do that HMRC has had a bee in its bonnet about this for months now.

Now there’s nothing wrong with using an offshore intermediary if you’re a contractor – in fact the lion’s share of those of us who do source clients in this way are acting completely legitimately. However, it just takes a few bad apples to spoil the whole bunch, and there are some unsavoury types working all the angles and finding ways to wriggle out of their fair share of taxes by using an offshore arrangement, and now there are proposals to change National Insurance and income tax to purposefully target any offshore employer who uses a worker that does business of some kind in the UK.

Now I’m not going to say that people should be able to find ways out of their tax responsibilities – I’m all for everyone paying what they owe. If I’ve got to send off my hard-earned cash to the taxman, it’s a sure bet that I want everyone else to have to do so as well. But is this new arrangement really going to be necessary?

I mean let’s look at this in a cost/benefit analysis. Sure, you can put these new rules in place and you’ll start to see some more revenue coming in from those handful of bastards that are weaseling out of paying their taxes through some strange offshore arrangement, but how much is it going to cost to put these new rules in place – is it going to be worth the expense to push something like this through?

And not only that, why won’t the government go after more big-ticket offshore tax avoidance instances like those perpetrated by large multinationals? They funnel hundreds of millions of pounds out of the taxman’s reach every year – HMRC would reap a massive reward if they went after just one of these companies, and probably much more than they’re going to with this new scheme of theirs, don’t you think?

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