There are a number of websites which promote themselves as a legitimate service for lowering a freelancer or contractor’s tax paying responsibilities. Usually they will promise to leave you with take home pay of 80 to 90 percent of your earnings. Some of them also claim to be “HMRC approved.”
Now, Revenue and Customs is sending out a warning, saying they do not approve of such tax avoidance schemes.
The reason that offshore accounting schemes cite the support of HMRC is because they’ve received a scheme reference number. However, this does not equate to a pat on the back or an acceptance that they’re fulfilling their tax paying liabilities.
As HMRC explained in the latest edition of its Spotlights consumer protection magazine: “…the issue of a SRN does not mean either that HMRC ‘approves’ the scheme or that HMRC accept that the scheme achieves its intended tax advantage.”
This issue is a serious one, because potential customers of such schemes may be persuaded that a tax-saving scheme is safe and legitimate, when in reality they will quickly find themselves standing on shaky ground.
Once again the old adage applies: If is sounds too good to be true, it probably is. Only by following the spirit of the law, as well as the letter, can you be genuinely tax efficient and fully compliant with HMRC. With legislation in place like BN66, you always need to be looking over your shoulder when working via an offshore tax set-up. You can read more about the issue here.