DPP Business Tax

What Are Offshore Tax Avoidance Schemes?

Taxes serve an important purpose within an established economy and society, funding all different types of day-to-day life requirements. As a result, tax payments are a compulsory part of earning a wage, but some people have found ways around this system.

Finding ways to save money as an individual or as a business is always vital to survival, however, it’s easy to get mixed up in offshore tax havens that violate laws and financial requirements. To make sure you’re making the most out of your cash whilst keeping the tax authorities happy, it’s imperative you know the details of offshore tax havens and how this can easily blur into offshore tax avoidance.

To keep you up to speed, DBT & Partner’s team of experts has shared their knowledge to answer the key questions you have about offshore tax avoidance schemes, including:

  • What is an offshore tax haven?
  • Is an offshore tax haven legal?
  • Is using an offshore tax haven considered tax avoidance?
  • What are the penalties for tax evasion through an offshore tax haven?
  • What happens if I voluntarily disclose information about offshore accounts to HMRC?
  • What is the Serial Tax Avoidance Scheme (STAR)?
  • Who does the Serial Tax Avoidance Scheme apply to?
  • How can DBT & Partners tax evasion/avoidance solicitors help?

What is an offshore tax haven?

An offshore tax haven can also be referred to as an offshore financial centre and is usually characterised as a scheme or structure that’s sole purpose is to reduce the income tax people pay on their wages. This is to increase their take-home pay and usually involves an avoidance scheme is a structure which is set up for the sole purpose of reducing income tax and increasing pay by taking advantage of loopholes in the rules.

The country that they are in are usually ones with low or no corporate taxes that enable people in other countries to set up businesses there with few restrictions. They also often have limitations on what the general public can access regarding details about the companies themselves.

Is an offshore tax haven legal?

Offshore tax havens have the potential to be a criminal concern, but otherwise, they can be used in a way that’s both legal and legitimate.

If you’re a resident of the country in which the tax haven account exists and you have correctly declared all the taxable income you own, then your use of it is completely legal. This is also true if you run a business or own property in the same place that the account is in.

However, it’s incredibly important to remember that if you live and work in the UK then you must pay UK taxes, and there is no legal way to avoid this requirement.

Is using an offshore tax haven considered tax avoidance?

Similarly to their legality, offshore tax havens are slightly ambiguous in their legitimacy if you aren’t looking to commit tax avoidance. Certain uses of an offshore tax haven can result in tax avoidance, whilst others would be classed as a legal and legitimate way of using them.

What are the penalties for tax evasion through an offshore tax haven?

Using an offshore tax haven leaves you vulnerable to breaking the law and having suspicious bank account activity. This can lead to HMRC investigations into offshore tax avoidance concerns. Their tactics are regularly refreshed and revised and are the driving force behind employing more and more people to conduct investigations into offshore tax avoiders.

The importance of taxation is the motivator behind these efforts, which is also why the government introduced the Requirement To Correct. This scheme required everyone to ensure they had fully disclosed information about unpaid tax on income or gains that were held in offshore tax havens to HMRC by 30th September 2018.

From here, any individuals found to be using offshore tax havens, tax authorities were able to prove this with the financial information from these offshore accounts and issue the Failure To Correct penalty. This is a mandatory fine of 200% of the amount not disclosed to HMRC, and any other penalty that the investigators see fit.

What happens if I voluntarily disclose information about offshore accounts to HMRC?

The penalties handed out by HMRC to those who have not followed the Requirement To Correct can be lessened if the owner of the offshore tax haven account comes forward.

If they were to voluntarily disclose the relevant accounts after the 30th of September 2018, they will still face a Failure To Correct penalty, but it will be significantly reduced to reflect the honesty behind the disclosure. This reduction will also be impacted by how happy the person is to assist the investigation and their level of cooperation with HMRC.

If you’re considering voluntarily disclosing your accounts, you must speak with an experienced solicitor beforehand. A DBT & Partners specialist will be able to guide you through the process and support you to make the right decisions for your situation to get the most favourable outcome.

What is the Serial Tax Avoidance Scheme (STAR)?

The Serial Tax Avoidance Scheme (STAR) was incorporated into legislation by HMRC in an attempt to gain control over the number of tax avoidance schemes, such as offshore tax havens.

The legislation is described by HMRC as ‘forming part of a range of measures to clamp down on tax avoidance, to change the behaviour of those who engage in tax avoidance and to discourage them from using avoidance arrangements in the future.’

The overall aim is to impose sanctions and penalties on all individuals that are harnessing the power of tax avoidance schemes to reduce their liability to make tax payments.

Who does the Serial Tax Avoidance Scheme apply to?

Originally, the STAR was developed to only target serial tax avoiders, but it now applies to any taxpayer who has used one tax avoidance scheme in the past, such as an offshore tax haven.

Those who are located by the scheme will be given a warning and a suitable penalty and then monitored to ensure they are not using any other tax avoidance schemes.

However, if the individual uses another tax avoidance scheme at this time, HMRC may impose any of the following sanctions:

  • A penalty
  • Publishing your details as a serial tax avoided
  • Further sanctions

How can DBT & Partners tax evasion/avoidance solicitors help?

DBT & Partners are the go-to professionals for any individual or business facing a tax avoidance/evasion investigation. Offshore tax avoidance schemes such as tax havens can leave you vulnerable and in a difficult situation if HMRC becomes aware.

Choosing our team of specialists is the best way to get the most favourable result of the investigation thanks to our extensive experience handling these types of cases. We’re also able to advise you on ways you can take advantage of legal saving methods and point you in the right direction that will benefit you in the long term.

Get in touch with us today

Offshore tax havens and other tax avoidance schemes can be tempting, but can also land you in some trouble if they creep out of the legal loopholes they were designed to take advantage of.

Don’t struggle in silence – reach out to DBT & Partners’ team of tax avoidance scheme specialists and discuss your situation with our tax evasion solicitors for the most up-to-date and expert-driven advice today.

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