back to article BBC encourages rebellious Welsh town to move offshore

A bunch of small Welsh business folk are playing the likes of Amazon and Google at their own game, by proposing to move their tax domiciles offshore – with the connivance of the publicly funded Beeb. According to an upcoming BBC documentary – The Town That Went Offshore – five businesses based in Crickhowell, Powys have banded …

  1. elDog Silver badge

    Way to go, beeb! Increase your viewership at home. Any way to help us smaller left-pondians?

    Are there any off-shore places around the USofA that could also serve as tax havens for us non-billionaires (really only have a couple of hundred$ to invest)?

    I know about Bermuda, Bahamas, Turk/Caicos but I'm thinking of some place where the "authorities" really don't want to go for a working vacation. Perhaps Baffin Island, or a nice bank in the Aleutians.

    1. Swarthy Silver badge

      Re: Way to go, beeb! Increase your viewership at home. Any way to help us smaller left-pondians?

      The problem with a news or media outlet doing an "expose" on off-shoring is that, since all left-pondian media is commercial, they'd be cutting their own throats. The only tax avoidance techniques that would get shown are the ones that have already been closed off; if an avoidance technique can be applied by the working class, it will get shut down, and then the media companies won't be able to use 'em.

      As the BBC is publicly funded, and presumably tax-exempt, they have nothing to lose showing off these shenanigans. Unfortunately, Auntie Beeb is British, and probably not too familiar with USA Tax law.

    2. Phil O'Sophical Silver badge

      Re: Way to go, beeb! Increase your viewership at home. Any way to help us smaller left-pondians?

      some place where the "authorities" really don't want to go for a working vacation

      I think Alcatraz is vacant these days, is that offshore enough? Still handy for a cappucino and decent broadband.

    3. Anonymous Coward
      Anonymous Coward

      @elDog

      You forgot the Cook Islands (also known as 'Crook Islands' by New-Zealanders).

      They just ignore foreign tax law and court orders

    4. Gwaptiva

      Re: Way to go, beeb! Increase your viewership at home. Any way to help us smaller left-pondians?

      Jon Oliver did just that a few months back: Just start the Church of Small Convenience (Stores)

    5. Anonymous Coward
      Anonymous Coward

      Re: Way to go, beeb! Increase your viewership at home. Any way to help us smaller left-pondians?

      There's a branch of Bank of Montreal in Iqaluit on Baffin island and there may be other national banks there. But since Baffin Island is in Canada, you won't be getting much tax avoidance there. 20 years ago you could just walk in an open an account but everything has been tightened up now.

      Not aware of any banks in the Aleutians, but since they are mostly in the US, that's not really going to help you either.

      Geography studies are your friend.

  2. Yet Another Anonymous coward Silver badge

    Public service announcement

    These are perfectly legal tax arrangements - as Google/Apple/Amazon keep telling us - so the BBC mandate to inform and educate is being served.

    1. Zog_but_not_the_first Silver badge
      Thumb Up

      Re: Public service announcement

      Nicely put.

    2. Flatpackhamster

      Re: Public service announcement

      It'll certainly be the first time since they ruined The Sky at Night.

      1. Anonymous Coward
        Anonymous Coward

        Re: Public service announcement

        I suppose you could just about trust them on things like sheepdogs, steam rollers or weather.

  3. Evil Graham

    Offshore eh?

    They won't be laughing when they can't watch themselves on iPlayer.

  4. spacecadet66

    Question from a Yank: what's a "smokery"? A store that sells tobacco and such? A butcher shop specializing in smoked meat? A place eternally on fire?

    1. Juan Inamillion

      I think you'll find it refers to a link between 'Amsterdam', 'coffee shop' and 'the smoker' - if you catch my drift...

      1. JohnMurray

        Only if downwind......

    2. x 7

      what's a "smokery"?

      a business which makes smoked food, usually fish or meat, though other foods such as cheese can be smoked.

      Theres a been a bit of a comeback of these in the UK in the last ten years, with the opening of a number of shops with their own in-house smoking ovens, producing artisan foods

    3. Jos V

      spacecadet, I think as a west-pondian, you would call these smoke houses, wildly available in your southern states for most of the part I think. Originally used for food preservation, but becoming more popular again.

  5. Marketing Hack Silver badge
    Trollface

    Fearless prediction....

    We're going to see some actual changes in tax law, now that small businesses that have no time or money for pressing the flesh of the political class are getting into the tax avoidance racket.

    Fearless prediction #2--the change in tax law will manage to ensnare small businesses, but mysteriously let major multinationals continue with their current dodge.

    (We REALLY need that cynical SoB icon)

    1. Ian Emery Silver badge
      Paris Hilton

      Re: Fearless prediction.... number 3

      HMRC will come down on these small business's like a tonne of bricks - while continuing to allow Amazon, Talk Talk, Google, Vodaphone et al, to carry on as usual.

      Currently worrying about friends in the OTHER Paris.

      1. h4rm0ny

        Re: Fearless prediction.... number 3

        >>"HMRC will come down on these small business's like a tonne of bricks - while continuing to allow Amazon, Talk Talk, Google, Vodaphone et al, to carry on as usual."

        But that's the point of the exercise the town is carrying out. They are attempting to position themselves under the same protections these big players use as a means of highlighting the problem. It's a practical version of "if you argue this, then you have to include that".

        Having read an article on this some of the local shopkeepers highlight how the tax avoidance affects competition. An independent café may not be able to afford to compete with Starbucks when the latter doesn't have to pay the same tax rate. That's what is motivating the town which has a very high proportion of independent shops to do this.

        The government tries to create some special circumstances for these big players. But they can't outright legislate "Vodafone doesn't have to pay tax", they have to set up some criteria that Vodafone can fulfil but others can't. This town are manoeuvring to tick the same boxes. The town are happy for the government to "come down on them like a tonne of bricks". The aim is to catch the bigger players in the same shower of bricks.

        1. Anonymous Coward
          Anonymous Coward

          Re: Fearless prediction.... number 3

          The government tries to create some special circumstances for these big players.

          That might be easy to believe, but it is not really true. The basis of multinational tax avoidance is that successive Westminster simpletons have progressively over-complicated to the UK tax legislation to the point that there's now around 17,000 pages. Alloy that with the various treaties that the same simpletons signed without thinking the consequences through, and any organisation with access to clever and expensive tax accountants and tax lawyers can drive a coach and horses through it. Obviously small business doesn't have that resource, whereas Google, Amazon and Starbucks et al do.

          The only sensible solution would be to rip up the tax code and start again, with a limit on the length. How likely is that? MP's and (in particular) civil servants just aren't clever enough to understand that their obsession with micro management is the direct cause of this sort of tax avoidance.

  6. John Tserkezis

    How about I offshore some of my workload? I could get someone in India to read the Reg articles for me.

    Sure it'll cost me money, and it won't be as fun, but look at how much "work" I can get done!

    1. Marketing Hack Silver badge

      @ John Tserkezis

      People will notice when the quality of Commentard posts increases in our absence...

    2. therebel

      Somebody did that a few years ago.I believe it was an American guy paid about $70k per year and he outsourced his own job to someone in China at a cost of about $30k or something similar. Here's the story.

      http://www.bbc.co.uk/news/technology-21043693

  7. jonathanb Silver badge

    Will it work?

    I would be interested to see what these tax arrangements are. Off-shore structures generally only work when the owner is non-resident, or non-domiciled and doesn't need to bring the money back into the UK for living expenses.

    1. Dr_N Silver badge

      Re: Will it work?

      I think your are confusing (personal) income taxes with (company) corporate taxes.

      1. jonathanb Silver badge

        Re: Will it work?

        I'm not. Avoiding UK corporation tax is not as simple as registering a company in another country.

        If it is controlled by persons resident in the UK, you need to pass an economic justification test to avoid UK corporation tax. Richard Branson for example owns a hotel in the British Virgin Islands, so there is a good reason for having that in a BVI registered company. If the hotel was in another country, then it wouldn't pass the test.

        The other problem is the place of establishment test. If you are selling stuff in a shop in the UK, that is always taxable in the UK. You can try and move bits of the business not related to the selling activity elsewhere, thus reducing the profit made in the UK. Starbucks for example has an office in Switzerland that deals with importing coffee beans. Their coffee buyers are highly skilled people, so they can command a very good profit margin on selling these beans onto the UK stores. The reliable, high quality of the beans these people secure is absolutely fundamental in getting people through the door to pay premium prices for their coffee. The important thing though is that you do need to have the people that do this in Switzerland, otherwise you don't pass the economic justification test, or the place of establishment test.

        1. Stretch

          Re: Will it work?

          thank you starbucks employee

        2. JohnMurray

          Re: Will it work?

          If it's such high quality, why is it so bitter?

          1. herman Silver badge

            Re: Will it work?

            "If it's such high quality, why is it so bitter?"

            Because of the high quality chicory root that is used to cut the coffee?

            1. Anonymous Coward
              Anonymous Coward

              Re: Will it work?

              That's what she said ;)

        3. John H Woods

          Re: Will it work?

          "The reliable, high quality of the beans these people secure" -- Some Starbucks employee

          Well, if only you guys would turn the damn roasters off a bit sooner, we might be able to tell if that's true.

          1. jonathanb Silver badge

            Re: Will it work?

            I guess sarcasm doesn't come across very well in text communication; but this is argument Starbucks would run with HMRC.

        4. LucreLout Silver badge

          Re: Will it work?

          @jonathonb

          If it is controlled by persons resident in the UK, you need to pass an economic justification test to avoid UK corporation tax.

          Correct, but that doesn't have to be as complicated as you expect it might.

          I don't own any property but the house I live in, but lets use it as an example because its easier to follow. Lets say I buy a few of BTLs - one in Spain, one in Sweden, and one in the UK. Where should the holding company be registered? It doesn't follow that it must or even should be the UK.

          We can complicate that further if I split the companies business up slightly such that I have a holding company, a services/facilities company, and a rental company within each jurisdiction in which I operate. Where should I base the group level entity to which they are all subsidiaries? Most of the business is not transacted in the UK. Most of the assets are not based here. Most of the income is not based here, and nor are most of the operating costs. Its further complicated if I have a property in a jurisdiction for which we don't have a double taxation treaty.

          The other problem is the place of establishment test. If you are selling stuff in a shop in the UK, that is always taxable in the UK.

          Also correct. However, I'd bet U2 sell more CD's in the UK than they do in the netherlands, which is where they hold their IP/rights. Purely by coincidence, Holland has the most favourable EU regime in this regard.

          There's nothing to stop me having an offshore company sell things to the onshore company at a price that reduces the onshore profit margin and so tax payable, provided I use the prevailing market price or sell something that only that company owns, such as the IP rights to my corporate logo, branding etc.

          Working around the tax laws isn't hard, but it is a lot of effort. Its much easier to achieve with an international corporate structure - you just need an economic reason to have one. Economies of scale make tax arbitrage work, because the costs are relatively fixed.... which is why it works better for Amazon than Billy's Newsagent.

          I'd encourage everyone do their own research on tax minimization, and determine for themselves how much effort they wish to make. Don't be put off by scaremongering - they rely on fear to reduce the numbers of people taking part in the game.

        5. Anonymous Coward
          Anonymous Coward

          Re: Will it work?

          > Starbucks for example has an office in Switzerland that deals with importing coffee beans. Their

          > coffee buyers are highly skilled people

          Sadly, the baristas are barely-trained chimps who can't make a decent cup of coffee even to save their lives.

    2. Pax681

      Re: Will it work?

      "

      Will it work?

      I would be interested to see what these tax arrangements are. Off-shore structures generally only work when the owner is non-resident, or non-domiciled and doesn't need to bring the money back into the UK for living expenses."

      2

      As an individual you may be right but a company.. that's different

      step one have a business.

      step two -A set up an office in Amsterdam as your eu head office

      step two-B set up an office in Dublin as your EU HQ

      Step three.. benefit from pulling a Double Dutch or Double Irish like Amazon etc

      step 4 ?????

      step 5 PROFIT

      you don't have to be offshore.. your business HQ does

      step three

      1. Yet Another Anonymous coward Silver badge

        Re: Will it work?

        Transfer the commercial rights to the name of the village to "name of village" Cayman Holdings inc.

        They charge your store loads of dosh for the rights to the name.

        Stores all make a loss and pay no tax.

        Offshore company makes you an interest free loan to buy your next house/car/etc - with all that dosh they have.

        1. jonathanb Silver badge

          Re: Will it work?

          There is 20% withholding tax on royalty payments to the Cayman Islands. 25% tax on the loan you receive back. This is going to cost you more in tax than doing nothing.

          1. LucreLout Silver badge

            Re: Will it work?

            There is 20% withholding tax on royalty payments to the Cayman Islands. 25% tax on the loan you receive back. This is going to cost you more in tax than doing nothing.

            And what of other jurisdictions? Why route to the Caymans from the UK? A bit like flying to elsewhere in the EU and then onto New York to avoid APD, you can route corporate transactions elsewhere first to avoid the withholding tax.

            You obviously have a considerable understanding of tax laws, so I'm puzzled why you view that tax arbitrage isn't possible? My former employer excelled at this sort of structuring - I'm sure you can guess their name, though obviously I'd prefer you didn't announce it here.

            Are there costs and losses involved? Yes, always, but you can get that down below the cost of tax once you have a large enough input. The butcher on his own can't make it work, but banding the town together should start to hit the level of input that this becomes economic.

      2. jonathanb Silver badge

        Re: Will it work?

        You buy stuff from a local farm, and sell it in your shop. That is taxable in the UK, because the activity takes place there. What is your head office or HQ going to do for the UK established business that it can bill it for, and more importantly, make a profit on?

        By the way, the Irish loophole has now been closed. Existing companies get to continue using it for another couple of years.

        1. Pax681

          Re: Will it work?

          Make your UK business a franchise or subsidiary

          set up your main office/hq in Amsterdam.

          it sell/supplies e products for sale to your business exclusively at really high rates.

          these must be sold at rates that technically wipe out profits.

          other shenanigans and chicanery applies

          the double Dutch certainly does exist still.

        2. LucreLout Silver badge

          Re: Will it work?

          @jonathonb

          You buy stuff from a local farm, and sell it in your shop. That is taxable in the UK, because the activity takes place there.

          Farm UK Ltd sells to Caymans Farm Inc, which sells to Johnny's Butchers Caymans Inc, which sells to Johnny's high-street mean emporium UK Ltd. The economic activity is now dispersed. Complicate that with a third jurisdiction and some other suppliers to the UK entity, and it's difficult to narrow down exactly where the economic value gets added - is it growing the cow, the branding on the packaging, the sale to the public?

          What if you Amazoned is up a gear and instead of taking orders in the butchers and getting cash over the counter, you have a sales terminal at which the public order their meat direct from an offshore entity which then orders it form the uk entity to provide to the customer?

        3. This post has been deleted by its author

    3. herman Silver badge

      Re: Will it work?

      You don't bring the money back. You take out a loan with the foreign money as collateral and write off the finance charges as an expense.

      1. LucreLout Silver badge

        Re: Will it work?

        @Herman

        Yup, you nailed it.

  8. Oldfogey
    Pint

    Nice little place

    I stopped in Crickhowell recently for a spot of lunch, and it is a nice little town with some attractive local shops. Well recommended if you are passing that way.

    So what we have here is basically a stunt. The town needs a bit of publicity, the Beeb needs a programme, and HMRC needs a mechanism to try and get the government to do something about tax dodging corporations.

    Bingo! Everybody's happy (except Starbucks).

    Oh, and there are a couple of nice coffee shops in Crickhowell.

  9. oceanhippie

    The government only wants rich tax dodgers.

    *sigh* a mix of incompetence and policy. The Govenmnet want tax dodging for the rich. After all they were mates at school and or they don't have the ability, political will, political capital and especially the election campaign fund capital to change the tax system.

    There's a huge row in Australia right now about tax changes, and there's not even a proposal yet, though there is probably a hidden agenda.

    Rich campaign doners and mates of the minister tax dodging is what the Govenmnet wants (secretly). What it does not want is ordinary people who don't have political connections to do it, they need to collect tax off the great unwashed. If everyone did the tax dodges then the country would go bankrupt.

    Speaking on behalf of govenmnets everywhere: please don't use our inability to write coherant or even sane policy against us. Just cos we shlurp all your data doesn't mean you shoud use encryption, just cos we can't write a tax policy that a bogan couldn't drive a bus through doesn't mean you should drive a bus through it. "Please pay us your taxes, even if you don't have to, now where's that expenses chit, and accompanying VAT claimback form"

    1. Pax681

      Re: The government only wants rich tax dodgers.

      too right bud, Cameron's own father made his 40 million fortune offshoring money in south American tac havens if memory serves me well

  10. Yet Another Anonymous coward Silver badge

    Step by Step guide for Canadians

    Courtesy of the Canadian equivalent of the BBC (although without any watchable shows)

    http://www.cbc.ca/news2/interactives/offshore-tax-havens/

  11. JeffyPoooh Silver badge
    Pint

    Trivial...

    Register the name 'Crickhowell Smoker' as a Trademark. Write up a bill of sale and transfer ownership of the trademark to your offshore corporation in the sunny tax haven. Take the business profits, stuff them in an envelope, scrawl 'Trademark Usage Royalty Payment' on the envelope, and transfer it to the offshore Trademark holder. Then deduct these payments as a business expense in Blighty.

    Four times a year, fly to the sunny tax haven to collect and spend your tax free profits. Of course, the profits can be converted to something portable and untrackable (diamonds, Bitcoin, modest cash), and moved back to Blighty. Or extracted from an ATM in Rio or NYC or Hong Kong, for a nice vacation.

    Absolutely trivial. No need for anything any more complicated.

    1. LucreLout Silver badge

      Re: Trivial...

      @JeffyPoooh

      Four times a year, fly to the sunny tax haven to collect and spend your tax free profits. Of course, the profits can be converted to something portable and untrackable (diamonds, Bitcoin, modest cash), and moved back to Blighty. Or extracted from an ATM in Rio or NYC or Hong Kong, for a nice vacation.

      At this point your avoidance becomes evasion. However, if you loan the money from the company back to yourself, it does not. Or you could wait until retirement and then sail the world spending the money offshore where no tax becomes due.

  12. codejunky Silver badge

    So?

    Good for the town but so what? I cant imagine google, starbucks or amazon will give this a single thought and so they shouldnt. As long as it is above board then this is a good thing. Bigger businesses have more money to throw at solving these political problems, so a group of independents getting together to suffer less disadvantage from the government is a good thing.

    What I am more bothered about is the belief that the gov should be demanding more tax from people instead of reducing it. The crazy idea that the gov is somehow entitled to other peoples earnings only makes it easier for the gov to destroy jobs and tax people out of work (and a living). Hopefully this trend will change and hopefully people will realise they are not getting one over big companies nor the gov by managing their tax bill (legally) but instead acting in the best interests of the people.

    1. h4rm0ny

      Re: So?

      >>"What I am more bothered about is the belief that the gov should be demanding more tax from people instead of reducing it"

      I'd be more okay with the taxes if the government spent them in better ways. But the Department of Health is corrupt and funnelled billions to friends of friends in the form of outsourced and flawed projects; the UK war in Afghanistan cost us over thirty billion and with Iraq I don't know how much that will be. We spent a fortune bombing Libya to try and install a West-friendly regime there. We'll be paying those off all these for a long time to come.

      Meanwhile our roads fall apart and our public transport network gets worse every year whilst costing more. Not to mention how much we must be paying Atos to be sending the odd disabled person to their death.

      Whilst nobody likes paying taxes, I think the real disconnect is with what the government spends it all on.

      1. Intractable Potsherd Silver badge

        Re: So? @ h4rm0ny

        "Whilst nobody likes paying taxes" - I'm definitely odd on this one. I have no problem paying income tax. In fact, I think the income tax rate is currently too low for anyone earning more than £35k. I think that fixed taxes such a VAT are wrong, since they penalise the low paid more than the well-paid.

        I know this runs completely contrary to the current free-market "All tax is theft" vibe, but I don't care!

        1. codejunky Silver badge

          Re: So? @ h4rm0ny

          @ Intractable Potsherd

          Out of interest why is the £35k income tax rate low in your opinion? How do you decide what is a good tax rate? As an arbitrary figure with little meaning it could be someone rich or not so. Up north that could be good but in london very little.

          And I too dislike VAT for its effects on the poor.

    2. terry doyle

      Re: So?

      "What I am more bothered about is the belief that the gov should be demanding more tax from people instead of reducing it."

      Exactly. First they take 50% in P.A.Y.E. and then when you try to spend whats left they take a further 25% in V.A.T.... that leaves the effective tax at 62.5%! What exactly is the government doing that they need that amount of workers hard-earned wages for?

      Crazy!

  13. Anonymous Coward
    Anonymous Coward

    when Time Computers went bust and the £19 million cash vanished (allegedly to Dubai) I did some digging into the corporate structure. Managed to find around 45 companies dotted around the world: UK, Ireland, Caymans, British Virgin Islands, Bermuda, Bahamas, Isle of Man, Jersey........

    Besides the companies there were four international accounting/auditor/financial advice companies acting as nominees plus lawyers in the BVI, Bermuda and Jersey also acting as nominees.

    That didn't include the companies involved in the Supanet internet business - they had their own structure.

    After all this time I've lost the details......but suffice it to say that when at the time I started placing the information online their in-house legal team tried tracking me down and were issuing threats to anyone who they thought knew me. If they'd caught up with me I'd have had worse than broken legs.

    As to where the money went? Never managed to pin it down (nor did the auditors), but the in-house rumour was always that it went to a bunch of Islamic fundamentalists with violent sympathies

  14. herman Silver badge

    The FSF method

    For card carrying geeks, there is always the old Non Profit Charity trick pioneered by Richard Stallman and copied by Apache, Mozilla, all the BSDs and others. What that amounts to, is to donate your software project to a charitable organization and cost it at umpteen million dollars so that your actual company never ever makes a profit again...

    1. x 7

      Re: The FSF method

      theres an even better charity method, perfected by a chap I used to work for. He was a master at painting restoration, and a walking encylopaedia regarding attribution of old European paintings.

      He used to wander the secondhand junk shops of Europe, buying up old paintings for peanuts - often just for the scrap value of the frames.

      By the time they were shipped back to the USA and cleaned they were often re-identified as old masters, usually Dutch, and in several cases Rembrandts. They were then promptly donated to a museum he had founded, valued at the going rate for Dutch Old Masters. In doing so they could be offset against personal taxation.

      I won't name him, but if you google "Chemist Collector" you should get an idea

  15. wanderlust25

    Rate your offshore provider, offshore bank, etc.

    There is a new website where you can leave actual reviews of offshore banks, registered agents and formation services. www.OffshoreReviews.com I was able to leave a review of an offshore bank I've used for many years.

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