Off-shore questions

I am a director of a UK company and use contractors to perform consultancy services. One of my contractors uses an off shore company as a vehicle to bill my UK company.

The question I have is what are the risks (from a tax perspective ' if any) associated with this type of transaction (ie the off shore dealing)?

Also if an employee of one company (off shore) who is also a director/shareholder/beneficial owner of a UK company bills the UK company (who he/she is a joint-director of), is this legal? By that it is meant is this allowed under current tax legislation or would this be deemed not to be an arms length transaction?
Stuart Avery