The rich and famous have the same tax problems as you or me. They may not be able to afford an accountant on retainer, but they know how to take advantage of loopholes in our nation's convoluted system with a few simple techniques that won't get them caught.
The United Kingdom is known as a country that has strict tax laws. This article will discuss the various possibilities and techniques for reducing your UK taxes, depending on what you are looking to achieve with these new strategies.
You might be surprised by how many celebrities or successful business people there are in the world today who manage to avoid some of their UK tax obligations or at least substantially reduce them without getting caught – while most average taxpayers have pretty high rates which can reach 50% of income paid just through direct taxation alone! And yes, it's true: if you're willing to do whatever it takes (within legal limits) then following suit doesn't seem impossible either.
Here's some of the techniques that the Rich & famous use:
Make the most of your offshore status
People like Mohammad al Fayed make tremendous use of their non UK domiciled status. If you're an overseas national and were born overseas (typically your father will also have been a non UK domiciliary at the date of your birth) you can avoid paying any tax on your overseas income and capital gains. The main condition to this is that you need to keep the income or proceeds outside of the UK. As you'd expect though there are ways around this to enable some of the proceeds and income to be brought into the UK free of taxes.
Make the most of your spouses offshore status.
If you're lucky enough to have a husband or wife that is either non UK resident or non UK domiciled you can use their offshore status to your advantage. This is what Philip Green did (the billionaire owner of BHS). His wife is a resident of Monaco and he ensured that she extracted dividends from his UK companies free of UK (and overseas) tax. This saved him paying UK tax of around £200Million that he would have otherwise had to pay if he'd extracted the dividends.
Using a tax efficient holding company.
Famous bands such as U2 and the Rolling stones make use of some of the best offshore tax companies to avoid paying tax on much of their income. U2 for example used to fall within the Irish tax regime which had a longstanding tax exemption for artists. When this loophole was tightened up, they moved their holding company to the Netherlands to take advantage of tax free royalties. There are lots of other countries that can also offer tax efficient holding companies such as Spain, Denmark and Cyprus.
Using tax efficient trading companies.
Multinationals such as Coca Cola make good use of a string of offshore companies to ensure that they can redistribute profits within the group to reduce the overall 'effective' rate of corporation tax. (It is reducing this effective rate that is the main focus of many in house tax lawyers lives!)
Actually move overseas Celebrities such as James Blunt, Michael Schumacher and Boris Becker have all moved offshore to ensure they have only limited UK tax obligations. They've based themselves in Switzerland and are local residents. The beauty of Switzerland is the 'fiscal deal' which allows the tax liability to be fixed at an artificially low amount.
So there you have it – some ideas to get you thinking about how you could use the offshore tax planning techniques of the rich and famous. For more detailed articles on offshore tax visit www.wealthprotectionreport.co.uk