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Overseas developers. Any loss to the public purse

I notice small scale property developers based in tax havens.

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I recently helped both my daughters with their first step onto the property ladder.  One in central London, the other not very far out.  Both were new developments were existing old property was demolished and replaced with new blocks of 10-20 very expensive flats.  I would very roughly estimate development profits at least £4 million.

In both cases the builder/developer had an address in a tax haven.

I am curious why this should be, is it as widespread as my above limited experience suggests and if so, is any UK tax income being lost.

Any thoughts before I ask Chanel 4 to investigate.

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By carlh
07th Nov 2016 11:53

Why get C4 to investigate, whats it got to do with you where the company is based, you do know it is legal to be registered anywhere.

As long as the job gets done well and safe, and is cleared/signed off by a building inspector it is none of your d*m business.

Move on, nothing to see here, these are not the droids you looking for.

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Replying to carlh:
By mrme89
07th Nov 2016 12:15

carlh wrote:

Why get C4 to investigate, whats it got to do with you where the company is based, you do know it is legal to be registered anywhere.

As long as the job gets done well and safe, and is cleared/signed off by a building inspector it is none of your d*m business.

Move on, nothing to see here, these are not the droids you looking for.

And if the job gets cocked up, you are left trying to sue a non-resident company. Doing so has complexities.

Also, depending on the nature of work, you may not want your business being associated with an aggressive tax avoider.

So if you plan to pay someone for some work, it is your damn business where they are based.

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paddle steamer
By DJKL
07th Nov 2016 12:05

Very common for a period however if I understand things correctly HMRC are already looking into tax treatment of many such past arrangements; the tax climate has, I understand, become a little more frosty in recent years.

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By Justin Bryant
07th Nov 2016 12:15

What's the difference between that company trading in the UK and any of the other 1,000s of tax haven companies trading in the UK? They would have registered for CIS and VAT etc., so I doubt HMRC are unaware of them already and I would be surprised if they are not fully tax compliant if there is a lender and the usual professional advisors etc. for such a project. Overseas professional corporate directors in the tax haven would not act otherwise.

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By Ian_mcdonald
07th Nov 2016 13:19

Interesting responses. I seem to have touched upon a sensitive subject.

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By Portia Nina Levin
07th Nov 2016 13:46

Either the builder/developer is genuinely non-resident, and the tax haven is being used to avoid tax in their country of residence,

Or, the builder/developer is actually UK resident and is channelling their work through an offshore vehicle incorrectly thinking that they are escaping UK tax, when, in fact, the transfer of assets abroad legislation is likely to apply.

As Justin says though, it is unlikely that the directors in the relevant jurisdiction would be prepared to act in these circumstances, following Dimsey & Allen.

This may work for remittance basis users though if set up properly.

Up to 2014/15 non-residents with developments in the UK were not taxable on their development profits in the UK if the relevant double tax treaty defined a permanent establishment in terms that excluded a building site that lasted for less than the length of the building work undertaken, and the sales were made through an agent.

That has been addressed by new legislation in FA 2016 though. So now even non-residents will be taxable on the profits of their UK developments... or so HMRC thinks...

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