How they work is that money is received and paid offshore and is not taxed at the UK rate. The funds are then paid via an offshore company to the contractor as a ‘third party’ recipient ‘tax free’. UK contractor can use an offshore umbrella company if they can accept payments from UK agencies (which some can).
Among the first to take advantage of this were the Tory Party grandees. David Cameron’s father made his money this way by setting up schemes both for himself and others. Another to benefit is Chancellor Osborne who has funds held offshore in a family trust.
How they work is that most of the offshore umbrella companies and offshore schemes operate through a third party ‘offshore’ company for payments received. Because they’ve sent money offshore untaxed, i.e. the money they earn, that money is not taxable till they bring it back onshore. However, through the offshore structures, it never does.
Because they have that money offshore, the offshore umbrella companies that they operate through arrange the structure to make ‘payments exempt of tax’ to the contractor.
The use of offshore umbrella companies is a recognised way for savvy UK contractors to legally minimise their tax exposure.
The beauty of these schemes is that the contractor is able to gain the best of the offshore jurisdictions (Isle of Man, Jersey, Guernsey and Gibraltar) all through a recognised and professional offshore umbrella company that can receive payments from UK agencies.
For more details contact the Operations Manager on +44 (0) 208 9383 654. Omni Contractor Pay can assist Contractors to use an offshore umbrella company and reduce the amount of tax paid and increase their take home payments.