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Isle of Man has zero percent corporate tax on (most) money earned outside the Isle of Man, which includes money earned in the UK. If you're a non-resident citiz
by peteretep 7y ago
Isle of Man has zero percent corporate tax on (most) money earned outside the Isle of Man, which includes money earned in the UK. If you're a non-resident citizen of the UK, you can deposit your dividends from your Isle of Man company in your UK bank account, tax free.
For the time being, IOM companies have GB VAT numbers, and a banking system that integrates seamlessly with the UK one, as well as a postal system (quick, which country is 15 Hope Street, Douglas, IM1 1AQ, British Islands?). This makes the sales process to UK and EU companies painless.
So if you're a British citizen who's managed to convince HMRC you're not resident in the UK, this is a great way to pay very little tax. BUT WAIT, there's more!
If you _are_ resident in the UK, and a British citizen, but you can convince HMRC that you are in fact not _domiciled_ in the UK, you can pay HMRC £30,000 a year flat-tax, and only pay tax on the money you bring into the UK -- so if you keep it in IOM, or send it to Guernsey, it's tax-free, as long as you manage to avoid CFC regulations, which are left as an exercise for the reader.
None of this should be considered as tax advice, although if you genuinely don't live in the UK, and aren't anywhere else long enough to be resident (that DigiNomadLyfe), then the top three points should be of significant interest.
If you think the owner of the Daily Mail and similar glitterati[0] should be paying more tax than a Senior Developer in London, paragraph 4 needs some scrutiny.
[0] https://en.wikipedia.org/wiki/List_of_people_with_non-domiciled_status_in_the_UK https://en.wikipedia.org/wiki/List_of_people_with_non-domici...
- TazeTSchnitzel 7y ago> For the time being, IOM companies have GB VAT numbers, and a banking system that integrates seamlessly with the UK one, as well as a postal system (quick, which country is 15 Hope Street, Douglas, IM1 1AQ, British Islands?). This makes the sales process to UK and EU companies painless. I bet that's been used for VAT fraud with EU companies.
- peteretep 7y agoHow would that be easier than VAT fraud in the UK proper?
- pjc50 7y ago"Carousel fraud", involving moving goods in and out of the EU and reclaiming VAT, maybe? Or the private jet / yacht scheme I mentioned above. I remember when Amazon shipped all their CDs from Jersey to avoid VAT too.
- ollie87 7y agoNot just Amazon either. Play.com based their entire business on this.
- ed_balls 7y agoThe more complex steps it has, the harder to investigate.
- pjc50 7y agoExamples: https://www.theguardian.com/uk-news/2018/nov/09/eu-takes-action-against-isle-of-man-over-tax-loophole-on-private-jets https://www.theguardian.com/uk-news/2018/nov/09/eu-takes-act... / http://www.iomtoday.co.im/article.cfm?id=43959&headline=European%20Commission%27s%20ultimatum%20over%20Manx%20VAT%20practices§ionIs=news&searchyear=2018 http://www.iomtoday.co.im/article.cfm?id=43959&headline=Euro...
- jsmith99 7y ago'Resident but not domiciled' is a very old system in the UK based on things like which country you have purchased a burial plot in. It's kept around because its a handy way to persuade oligarchs to live in the UK: they only get taxed on non UK income if they bring it into the UK, otherwise its tax free. It was reformed several years ago to make it very hard for actual UK people to use. It is very difficult to give up UK domicile, and even if you manage to (by proving you no longer have any links) then HMRC will deem you UK domiciled anyway if you ever become UK tax resident. People who've been resident in UK for too many years are also deemed UK domiciled now.
- peteretep 7y ago> then HMRC will deem you UK domiciled anyway if you ever become UK tax resident This appears to be not true in practice, reading the list of notable people with non-dom status.
- jsmith99 7y agoThe rules only changed in the 17/18 tax year. Also most prominent non doms have never previously been UK domiciled (eg the Goldsmith family have inherits non dom status for generations) or currently live and are tax resident abroad.
- pavlov 7y agoAfter living in the UK for a year and encountering this tax system firsthand, I'm convinced that one of the main reasons for Brexit is that rich people in England are worried that EU tax harmonization could one day take away their sweet loopholes and convenient neighborhood tax havens. I've personally benefitted from the system as a "resident non-domiciled" foreign citizen. But on the whole it's not fair to British taxpayers, and it's not fair to the rest of Europe to be a punching bag for this secret agenda whose enacters care more about continued personal enrichment than national or European economies.
- nicoburns 7y agoThis is my main reason for supporting the European Union. Individual countries aren't big enough to have serious power against tax-avoiding corporation/citizens. But the EU is.
- sgt101 7y agolike China!
- cookieswumchorr 7y agoIt's about balance. Government and business need to fight and balance each other out
- philpem 7y agoWhat do you mean - we were always at war with Oceania...
- anoncake 7y agoChina is a dictatorship.
- JamesSchriver 7y agoYour perspective is utterly befuddling. You think it’s not fair, yet nothing at all stops you from paying more taxes to make your contribution a fair one instead of benefitting from the “loopholes”. The only thing that is not fair is the tax enslavement of people who cannot manage to free themselves of that enslavement; not, in the twisted perspective you share with so many, that it is unfair that not more people are subjected to proportional and ever increasing enslavement by taxation. Your perspective is simply not a healthy or logical one. The solution to the majority of people not being free, is not to take the freedom from more people, it is to make more people free of proportional enslavement by taxes. I know you will surely feel compelled to rebut with something akin to “taxation is for the common good”, but not only is that all just codependent subjugation that is common to people who defer to abusers, but nothing is more “common good” than for people to keep the fruits of their work and labor instead of it being stolen to fund the lifestyles of the rich and any number of people they want to squander other people’s money on to curry personal advantages. Taxation is slavery “pivoted”, rebranded, redesigned, relaunched, reimagined. Never were people as taxed and robbed as the middle class are today in the west. They pay immense tax on their work, then they pay tax on spending that taxed money, then they pay tax on the things they were taxed to buy with taxed money they earned, then they pay tax on money they saved, and they pay tax on using money that was taxed to earn it when they buy gasoline to get to work where they will be taxed on the money they earn to pay for necessities to go to their taxed job. The amount of compounded and nested taxation of the middle class in particular is utterly immoral, depraved, and evil.
- throwaway925 7y ago£30.000 is already too high considering that the taxpayer has earned every penny and doesn't owe anything to anyone
- rorykoehler 7y agoI guess the tax payer will be happy not to use any of the infrastructure and services their tax money pays for if they don't pay taxes?
- ximeng 7y agoThe concept of “owing” money to people comes in part from the consequences if they are not paid, including use of force. The concept of a country is in large part due to the area in which force can be applied to ensure people pay taxes, in return for services including security.
- notahacker 7y agoIt's also worth pointing out that the same sets of rules backed by use of force are integral to ensuring that companies and property exist, contracts get fulfilled and so people get paid the salary in the first place and get to keep the possessions they buy with it.
- marcus_holmes 7y agoI lived for four years in the IoM, had an amazing time (until Bushy's closed anyway). But in the process, I opened an IoM bank account to pay my salary into. I carried on using this account for years afterwards (it was with the IoM branch of a UK bank). I benefited from not paying any tax on the interest on my savings account, because tax haven. Not a huge perk, but a nice one anyway. And then, in the wake of the tax haven scandals around 2005/6, the HMRC wrote me a nice letter explaining that, while I had obeyed all the rules at the time, they were retroactively changing the rules and I needed to declare all the interest I had earned on my offshore account over the last 8 years. The final bill came to about fifty quid, so no major damage done. But the lesson has stuck with me. HMRC can and will change the rules at any time, and apply them retroactively. Getting super smart about taxes, especially by using loopholes and tax havens, can be counter-productive. Unexpected tax demands are not fun.
- lawlessone 7y ago>The final bill came to about fifty quid, I'm thinking you weren't really who they wanted to target anyway.
- marcus_holmes 7y agoindeed :) But still a good lesson.
- nikanj 7y agoSometimes it feels like the taxman is very keen on targeting Joe Ordinary who saved fifty quid, and completely ignoring the billionaires who evaded tens of millions in taxes.
- VBprogrammer 7y agoAt a guess this might not be far from the truth. For sub a few hundred pound almost no one would bother fighting it. Above a few hundred thousand almost everyone will. At best they'd have to expend a lot of time and money to get a fraction of the original amount back.
- adolph 7y agoHMRC: Her Majesty's Revenue and Customs (HM Revenue and Customs or HMRC)[3] is a non-ministerial department of the UK Government responsible for the collection of taxes, the payment of some forms of state support and the administration of other regulatory regimes including the national minimum wage.
- the_watcher 7y agoCan you actually use the money while you're not living in UK? To use a simple example, say I'm a British citizen living in the US who is a freelancer (let's assume I'm non-resident, not just non-domiciled). Let's say I have US citizenship as well to get around any immigration issues. I create a company in the Isle of Man (assume I meet whatever qualifications are needed to do this). Can I just deposit my checks in the UK bank account, pay no taxes, and use the money in the US without violating any British laws? What about when traveling to the UK or EU? I'm almost sure I'd be violating American tax law, but I'm now curious how to put this into practice.
- peteretep 7y ago> Can I just deposit my checks in the UK bank account, pay no taxes, and use the money in the US without violating any British laws? What about when traveling to the UK or EU? Yes, but this isn’t particularly surprising — I’d expect it to work the same way everywhere. The Brits would love you to deposit your money into their banking system, and if you’re not resident in the UK and the income hasn’t arisen in the UK there’s no tax basis for it there. In your scenario, the problem is American CFC rules, where they’ll effectively declare your IOM company to be an American company, and tax it on that basis. Also if you’re tax resident somewhere (the US in your example), they’ll usually tax your worldwide income (although jurisdictions vary). Finally, though, if you’re an American citizen, it doesn’t matter where you’re tax resident, you still owe the IRS.
- the_watcher 7y agoYea, I knew that American tax law has provisions that (in theory) protect against this being legal. Do professional athletes in Europe become resident in the Isle of Man at all? I know they use Monaco in somewhat similar manner.