Re: There are an estimated 4.6 million contractors in the UK.
If an Isle of Man company trades in the UK, it has to pay tax in the UK.
Yes, on its UK profit, which is after its MANX costs such as wages under the UC are deducted.
Where offshore stuff works legally is where they move an economic activity offshore.
That's a very idealistic view of "legally", and frankly I'm afraid you're very wrong about that too. My division makes billions out of knowing this stuff better than the tax man (both foreign and domestic).
It can work for bit multinationals, but for a one person band where the capital requirements are basically a laptop and maybe a car, not so much.
There's an independent coffee shop in the next town over from me legally based in the channel islands for tax purposes. Literally a one family band. This sort of thing isn't half as hard as you'd expect to set up (and no, I didn't configure it for them as a sideline).
How many one person IT contractors earn more than that?
All of mine. Some of them quite a lot more. Most contractors in the City will be doing that even if they're taking a full chew of holidays.
UK tax is 19%. So, even if what you say is true, the break-even position is £126,316.
It would be if I ignored things like the CGT exemption in IoM and instead used an offshore entity to make the gains and retain the profit thereby increasing the value of my shares in it, which when disposed of will be zero rated for tax. You're also assuming a single legged tax structure when you should be considering a web.
I'm limited in how much I can say about tax arbitrage for professional reasons, but in the entire time I've posted here, there's only one other contributor that probably knows as much or more than I do about this, and its very possibly I work(ed) with or for him.