Are Offshore Schemes Morally Wrong?

The offshore tax avoidance scheme used by Jimmy Carr has created considerable debate within the accounting profession. David Cameron’s comments that offshore tax avoidance schemes are “morally wrong” were unfair to Jimmy Carr as the scheme he was using is legal. Rather than lambast Jimmy Carr over his tax affairs, the government would be better placed implementing changes to close these offshore loopholes and make them illegal. 

The recent clampdown on tax dodgers has received considerable media coverage but is beginning to blur the distinction between tax avoidance and tax evasion. To make the distinction, tax avoidance is legal and is generally the result of careful tax planning. Tax evasion represents deliberate attempts to defraud the Revenue and is illegal. It is important to distinguish between the two and not allow tax avoidance schemes to be cast in the same light as tax dodgers. 

However, what is clear from the Jimmy Carr debacle is that the government will be targeting offshore schemes going forwards and may well introduce retrospective taxes should they close the loopholes. In our view, offshore tax schemes tend to look good until the HMRC catches wind of them and then you could spend time worrying about whether or not you will be liable for a hefty tax bill. Whilst the offshore schemes represent a modern form of tax planning and tend to be legal, they come at a premium. A large proportion of the tax saved using offshore schemes will be used to pay the higher premiums to advisors and so the total saving is often negligible. 

Offshore schemes are not without risk as a number of offshore companies have been closed down in the past. Jimmy Carr could well have lost the £3m he placed in the offshore trust should the scheme have been unwound. Contractors do not often review their payslips to work out their marginal rate of tax and so the perceived benefit is not always as significant as you may be led to believe. It is often better to employ more simple schemes which tend to be cost effective and can certainly minimise your tax without straining the boundaries of legality. This ofcourse depends on your attitude to risk. 

For details of effective UK schemes to minimise your tax liability please contact us at Tax@belsizeaccountancy.co.uk.

SME’s And The Olympic Games

With only 12 games to go to the Olympic Games there is a buzz of excitement around London. Despite delays at Heathrow, the closure of the M4 and staffing issues over security at G4S, London needs to be open for business during the Olympics. The large number of visitors to the UK pose an exciting opportunity for British SME’s. 

Neil Crockett of Cisco comments that 78% of SME’s in Canada wished they took further advantage of opportunities from the Olympics in Vancouver. Don’t let the same apply to you. 

Businesses will need to consider the impact of travel restrictions around London during the games. The closure of a number of lanes for the Olympic routes will affect many roads throughout London and businesses may well have to rearrange delivery times with suppliers. SME’s should also consider flexible working as this can provide significant benefit during the Games. Businesses that change their working practises may well be able to save costs during this time. 

A number of businesses have already benefitted from the Olympics. The Olympic Torch for example has been designed and manufactured by SME companies in the UK and looks spectacular. According to the Evening Standards Business Connections, approximately 20% of Olympic contracts were awarded to SME’s. The Olympics is the biggest show ever watched on TV will provide significant opportunities for companies throughout the UK. 

Britain’s Olympic bid was won in 2005 under Tony Blair’s Labour government who pipped the French to be awarded the world’s most prestigious event in 2012. The Olympic stadia have been delivered on time and under budget with the spectacular Velodrome and Acquatics Center a display of excellence in British engineering. The Games will be great for London with many exciting promotional events taking place throughout the city. Enjoy the games!!

JP Morgan Reports $4.4 Billion Loss

Investment bank JP Morgan reported a $4.4 Billion Loss in its second quarter results. The bank admitted “a material weakness” in its internal controls and was forced to restate its first quarter results. Traders have been engaged in risky transactions including a high profile “hedging“ of their balance sheet in the first quarter where the position has increased from an estimated $2 billion loss to closer to an astounding $5.8 billion.