When it comes to successfully running a company there are countless elements to consider. From recruiting world-class staff to implementing sales and marketing strategies, and creating a business plan – all of these items are vital pieces of the puzzle that make up a successful business model.
Within that list of points to consider are tax havens. While there are tools such as tax calculators and online advice to help us budget around our taxes, some businesses prefer to move their assets offshore in an attempt to curve steep taxation. In this article, we explore exactly what tax havens are and how they can prove to be useful within businesses.
What is a Tax Haven?
Simply put, tax havens are designated countries that offer themselves as a place where non-residents can escape high taxes, in exchange for the individual or business bringing funds and assets into their jurisdiction. This encourages foreign investment across tax haven countries.
Are Tax Havens Legal?
There can be many misconceptions about tax havens being illegal, however, this is false. While having offshore bank accounts is entirely legal, the confusion comes into play if businesses or individuals choose to hide the funds within these bank accounts from HMRC in order to evade paying taxes that are owed. Not disclosing these assets is illegal.
What is Tax Avoidance?
According to the official GOV website, “tax avoidance involves bending the rules of the tax system to try to gain a tax advantage that Parliament never intended.” Most tax avoidance schemes are unsuccessful and can lead to serious consequences, including having to pay life-changing penalty fines and being marked as a high-risk taxpayer. This would result in all of the individual’s future tax affairs being continually scrutinized going forwards.
What Are the Benefits of Tax Havens?
The majority of Western nations have steep tax brackets which means high earners and businesses get taxed a considerable amount on their income. As the name suggests, the main benefit of putting your assets into a tax haven is reducing taxation. Offshore bank accounts also have much stricter privacy, with some tax havens having non-disclosure laws in place. This can offer protection when it comes to the likes of audits on your business and disclosure on your assets. If you’re unsure of whether you should consider moving funds across to a tax haven, be sure to seek professional advice from experienced industry leaders who can answer any questions you may have.