What Is Income Tax?

Income tax is a direct tax imposed on the financial income generated by all entities within a jurisdiction. For individuals, it is usually based on wages, salaries, investments, and other earnings. For businesses, it applies to net profits after deducting expenses. Governments collect this tax annually, and the amount owed depends on the taxpayer’s total income and applicable deductions or credits.

In most countries, income taxes are progressive. This means that people with higher incomes pay a larger percentage of their earnings in taxes compared to those with lower incomes. This system is designed to ensure fairness and help reduce income inequality. For example, in a progressive system, someone earning $30,000 per year might pay 10% in taxes, while another person earning $150,000 could pay 25% or more.

Types of Income Taxes

There are two main types of income taxes: personal income tax and corporate income tax.

Personal Income Tax: This is paid by individuals on their earnings from wages, salaries, investments, and other sources. Most countries allow deductions and credits, such as those for dependents, education expenses, or charitable donations, which reduce the total taxable income.

Corporate Income Tax: This tax is imposed on companies based on their profits. Businesses can often deduct operating expenses, salaries, and other costs before calculating their taxable income. Corporate tax rates vary widely by country and can significantly affect investment and economic growth.

Importance of Income Tax

Income taxes play a vital role in funding government operations. They provide the money needed to maintain schools, hospitals, public safety services, and infrastructure such as roads and bridges. They also help support social welfare programs that aid the unemployed, elderly, and disabled. Without income taxes, governments would struggle to provide these essential services.

Moreover, income tax policy can influence economic behavior. For instance, offering tax deductions for education or home ownership can encourage individuals to pursue higher education or buy property. Likewise, lower corporate tax rates can attract foreign investment and stimulate job creation.

Challenges in Income Tax Systems

Despite their importance, income tax systems face several challenges. Tax evasion and avoidance remain significant problems, reducing government revenue and creating inequality. Complex tax codes can also lead to confusion and make compliance difficult for individuals and businesses. Governments constantly work to reform tax laws to make them simpler, fairer, and more efficient.

Conclusion

Income taxes are an essential part of modern society. They fund vital services, promote economic stability, and help ensure that citizens contribute fairly according to their means. Understanding how income tax works empowers individuals to manage their finances better and participate responsibly in the economy. As economies evolve, tax systems must continue to adapt—balancing fairness, efficiency, and growth for the benefit of all.

Most US tax payers overpay their taxes.
The 2015 IRS tax code has 74,608 pages, and it is constantly changing.
You should always pay your tax bill.
You should never pay a bill that isn’t yours to pay.
Here’s how it works.

Don’t just send your numbers to your CPA firm and wait to get your tax news. I’m involved in conversations with the owners and executives of early education companies most every day. Many times I hear that these smart, successful people are not telling their CPAs about expenses that can be written-off on their company tax returns. Here are some of the most commonly missed.

1. Software / Subscriptions:

In some years, the IRS has allowed this item to be expensed in one year. In others, it has been allowed under Depreciation. If you are trying in increase the market value of your EEC (Early Education Company), ask your CPA if it can be included in Depreciation. Part of increasing the market value of your EEC (Early Education Company), is creating the highest EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) possible. Subscriptions to magazines can be deducted as well. It may not seem like a lot of money to worry about, but none us drive down the street throwing $100 bills out the window. Tell your CPA. Keep the money.

2. Auto Expense:

You have three options here.

1. Mileage – This is an easy one to skip, because nobody wants to keep up with it. However, the IRS allows write-offs for mileage, tolls and parking. The 2015 IRS mileage reimbursement rate is 57.5 cents per mile.

2. If your company is leasing a car for you, you can deduct the lease payments.

3. If your company is buying the car, you can deduct the interest on the car loan and depreciation on the vehicle.

3. Home Office:

The key to this one is that you must have a room or part of a room that is designated solely as your office. Your CPA should ask you what percentage of your home is “office space”. If, for example, your office equals 10% of the total square footage of your house, then your CPA should also write-off 10% of your rent or mortgage, insurance, utilities… etc.

4. Furniture:

Office-furniture purchases can be expensed or depreciated. Either way, it’s still better for you. Again, adding it to depreciation increases your EBITDA and helps to increase the market value of your EEC.

5. Office Supplies:

Most people remember the supplies purchased for the centers or schools, but not everyone keeps receipts for the supplies used at the home office. It’s easy to overlook these supplies because they are sometimes purchased in smaller quantities when you’re running personal errands. However, paper, pens, sticky notes add up over a year.

6. Office Equipment:

At work or in the home office, printers, copiers, computers, scanners, routers, fax machines, power strips are also tax deductible. Again, these items can be expensed in one year or depreciated over a few years… whatever is best for you.

7. Travel / Meals and Entertainment:

Hotel rooms travel (plains, trains and automobiles) and tips to your cab driver or the bellboy are all 100% deductible. Restaurant bills are 50% deductible.

8. Insurance:

Your EEC can pay for your health insurance, and it is 100% deductible. There are conditions here, but ask your CPA.

Remember, a dollar saved is the same as a dollar earned. You work really hard for your money. There is no reason to give it away after you’ve done that hardest part of the work.

(Legal Disclaimer: Always consult the proper professionals before taking action. By and before the use of the information provided herein, reader agrees that BFS® is not responsible for viewer’s actions related to said information.)

According to that concern I have some standards that may be applied to tax reform proposals for my country.

1. Will tax reform improve the performance of the economy?

By far the most important aspect of economic performance is the rate of economic growth because that growth determines future living standards. The most important way the tax system affects economic growth is through the rate of saving, investment, entrepreneurship and human capital investment.

2. Will tax reform affect the size of government?

Tax reforms that more closely tie the payment of taxes to expenditures will promote a more effective and efficient government. A new large broad-based VAT, may just be piled on top of the existing taxes and used to raise revenue to grow government. This is what has happened in many European countries and is a major detriment to their economic performance.

3. Will a new tax structure affect cooperation between local and central tax powers?

Tax reforms can affect the tax system in many ways. Some types of tax reforms would implement taxes heavily relied on by state and local government, e.g. retail sales taxes (or VAT). We should favor those that strengthen central and devolve authority and resources to state and local government and private institutions to the extent possible.

4. Will a new tax structure likely endure?

We have had 5 major tax reforms or fundamental tax reforms in the last two decades, approximately one in every legislature. We should be concerned that we might move to a better tax system only to undo it shortly thereafter. In 1993, the trade-off was lower rates for a broader base. That was slightly undone in 1998, and dramatically so in 2003, whereas in the last three years, rates have been reduced. A more stable tax system would reduce uncertainty and, in its own way, be less complex.

5. Over time, will tax reform contribute to a prosperous, stable democracy?

Are we likely to see a change in the ratio of taxpayers to people receiving income from government? We now have a much higher ratio of people who are net income recipients to people who are taxpayers than in any previous time in our history, reflecting not only transfers but other features of the income tax itself. Fortunately, that number is still well under 50 percent. But as we move through time, as the retired population grows, the baby boom generation and Albanian emigrants abroad approaches retirement and then retires, the fraction of the population in any given year who are receiving more than they are paying will grow. We must deal with this both on the tax side (underground economy, chary of too many off the income tax rolls) and, especially, on the transfer payment side and do so soon, or we will get into a spiral of higher benefits, higher tax rates, a weaker economy, and ever-greater political conflict between taxpayers and transfer recipients.

Key decisions for design tax system

With these standards (questions, we can ask in designing a tax system, what are the major decisions that need to be made?

There are four decisions: the choices of tax base, tax rate(s), the unit of account and the time period of account (see insert). We outlined above why it is important to keep the rate(s) as low as possible to minimize the distortions to the economy.

What about the tax base?

It is generally understood that a pure income tax would tax saving twice: first when it is earned as part of income and again when it earns a return in the form of interest or dividends. An alternative way to think about this is that present consumption is taxed once while future consumption is taxed twice because the bulk of saving is done for the purpose of future consumption, for example, during retirement.

Most fundamental reforms are designed to redress the severe distortion of saving and capital formation caused by the current system of income taxation. Most other countries rely much more heavily on taxes on consumption so-called indirect consumption taxes such as sales taxes and value-added taxes and income tax systems that exempt large amounts of saving from the tax base – thereby leaving most households’ tax base as income minus all saving (i.e., only that part of income that is consumed). Most of their corporate taxes have various features that allow more rapid write-off of investment.

Now consider the separate corporate and personal income tax and a individual putting his saving in corporate equities. The individual first pay taxes on his own income, their consumption plus saving. That is tax one. He save some of that after-tax income in the form of corporate equities. But the corporation pays corporate taxes (on behalf of the family as a shareholder). That is a second tax. Then the individual pays taxes again when it receives dividends or capital gains (in this case one has to net out inflation, deferral, the possibly lower tax rate, incomplete loss offset, and so on to determine the true effective tax rate). That is a third tax on the saving. If the individual is fortunate enough to accumulate over its lifetime enough to leave a taxable estate, the saving may be taxed a fourth time. Of course, there are numerous exceptions to this rule.

The empirical studies developed in last two decades by finance experts, strongly endorses an (explicitly or implicitly) integrated business and personal tax which taxes broad consumption at low rates. There are several approaches to implementing such a system.

What is likely to be gained by moving to one of these tax systems? Will it be worth the substantial political capital and transition costs to various families, firms, industries, and economic disruption that accompany any major tax change? The answer, in my opinion, is that the gains are potentially quite large. Some of these experts estimates long-run gains in consumption of 10% from replacing the current corporate and personal income taxes with a broad-based, direct or indirect tax on consumption or consumed income. This occurs because the increased saving and capital formation increase wages and future income. These are large potential gains, on the order of a decade’s worth of per capita consumption growth.

While income tax changes for 2011 do not ultimately have much impact on high-net-worth taxpayers, new transfer tax rules have the potential to dramatically reduce their tax burdens.

Gift And Estate Tax Changes

Facts

In recent years, the gift and estate taxes have not been unified. This meant that while an individual could leave a $3.5 million estate to his heirs without incurring any transfer taxes, he could make lifetime gifts of only $1 million before paying gift taxes, which recently ranged as high as 45 percent.

The two transfer taxes have been reunified, and the transferable amount has increased. In 2011 and 2012 only, individuals can transfer up to $5 million free of transfer taxes, either during their lifetimes or at death. If the first spouse to die does not transfer this amount to third parties, the executor can make an election on the estate tax return to allow the surviving spouse to take advantage of the unused portion. This feature, known as portability, does not apply to the amount exempt from the generation-skipping transfer tax, which affects transfers to recipients who are more than one generation below the transferor.

These changes significantly reduce the number of individuals the gift and estate taxes will impact for the next two years. However, it’s prudent to remember that the current rules apply only through the end of 2012.

Opportunities

For many people, the ability to transfer more wealth without incurring tax will shift the focus of estate planning from primarily financial motives to a greater emphasis on non-financial goals. Individuals now have more flexibility to decide who should receive which assets, and whether those assets should pass in trust or outright, without regard to the tax consequences.

The new rules also make lifetime transfers much more appealing. Because the rules are not permanent, and predicting future legislation is nearly impossible, it may be prudent to transfer as much as possible now. Under current legislation, on January 1, 2013 the $5 million that can be passed free of transfer taxes will revert to $1 million, and the top transfer tax rate will increase to 55 percent from 35 percent.

While saving tax can be a great motivator, some still hesitate to make large lifetime gifts. However, doing so can provide the donor with the additional pleasure of seeing the recipient enjoy the gift. If there is any concern about giving large amounts outright to beneficiaries who might not be ready to handle the associated responsibility, trusts can help control the beneficiaries’ access to the funds.

For the highest of high-net-worth individuals, the decision to make lifetime gifts should be easy. For wealthy individuals with fewer assets, the decision to give can be more difficult. A financial planner can run various cash flow projection scenarios to determine an appropriate amount. By considering adverse scenarios, which assume low investment returns, high spending and long life expectancies, a financial planner can help clients determine a minimum amount to retain in order to avoid outliving their assets.

Although married couples can bestow a total of $10 million free of transfer taxes, they can also use a variety of techniques, such as intra-family loans to grantor trusts, grantor retained annuity trusts, charitable lead trusts and transfers of family limited partnership interests, to greatly increase the amount of assets transferred.

Even individuals who have no intention of making gifts during the next two years should review their estate plans to ensure that their objectives are being met, given the recent changes in the law. Many estate plans developed under the old rules would, under the new rules, place more money than necessary in trusts that impose unnecessary restrictions on the assets. But if you change your estate plan, keep in mind that the law currently keeps the new rules in place only through 2012.

Lessons

Many planners, including those of us at Palisades Hudson, recommended that clients consider making taxable gifts in 2010 to take advantage of the 35 percent gift tax rate that was scheduled to increase to 55 percent in 2011. In our case, we waited until the end of the year before having our clients make any taxable gifts. This strategy proved very helpful, because when the law was changed in December, it became advantageous to delay making any taxable gifts until at least 2011. We advised therefore our clients to wait.

At the end of 2009, few anticipated that large estates would face no estate tax at all in 2010. Within the last few years, estates with very similar sizes and structures have incurred wildly different estate tax liabilities.

Given this uncertainty and tendency toward rapid change, it is important that estate-planning documents give executors as much flexibility as possible.

Income Tax Changes

Facts

The biggest news in income taxes for 2011 is not what has changed, but what has stayed the same. If the Bush-era tax cuts had expired, the top federal income tax rate would have increased to 39.6 percent from 35 percent, and the long-term capital gains tax rate would have increased to 20 percent from 15 percent.

The existing income tax rates have been extended through 2012, and although the Making Work Pay tax credit (up to $400 for individuals and $800 for married couples in 2010) has expired, a cut in payroll taxes resulted in an increase in most people’s take-home pay. For 2011 only, the Social Security withholding rate, which applies to the first $106,800 of earned income, has decreased from 6.2 percent to 4.2 percent. This cut means that, as long as a taxpayer earns more than $20,000, she will have more money in her pocket each week during 2011 than she did in 2010.

These changes, together with other small modifications to certain deductions, tax credits and miscellaneous tax rules effective in 2011, will have little overall impact on the average high-income earner. However, for self-employed individuals, a number of tax changes affecting small businesses could substantially reduce current tax burdens. The Wall Street Journal has compiled a detailed account of the 2011 changes and tax extensions, available here.

Opportunities

By extending existing income tax rates through 2012, the government provided some certainty to individuals who converted their traditional IRAs to Roth IRAs during 2010. A special rule, applicable in 2010 only, allowed taxpayers to defer the tax on 2010 IRA conversions by reporting half of the income in 2011 and half in 2012. This option was much less appealing when income taxes were scheduled to increase in 2011. Now, all else being equal, the option to spread the tax over 2011 and 2012 should be the choice for most taxpayers.

A traditional tax-planning strategy involves accelerating deductions and delaying income to minimize the amount of taxable income in the current year, and thus postpone tax payments. Conversely, when tax rates are scheduled to increase, accelerating income and delaying deductions becomes the appropriate game plan. To the extent possible, taxpayers should try to shift income to 2011 and 2012 and delay deductions until 2013. Deductions are worth more when taxes are higher, and gross income is worth less.

Despite the tough stock market from late 2007 through early 2009, investors who diligently sold positions at a loss and reinvested in similar securities to maintain their market exposure now have huge unrealized gains in many of their positions. Planning to sell these investments before 2013 could be a logical strategy in many cases. In addition, taxpayers might also consider selling their homes within the next two years, if they are contemplating moving and would recognize a large gain. Accelerating capital gains will also avoid subjecting them to a new 3.8 percent Medicare tax that will be applied to the investment income of high-income taxpayers beginning in 2013.

Lessons

Despite the expectation that income taxes might increase on the highest-income earners, many people did little during 2010 to avoid exposing their incomes to higher tax rates. While a variety of legitimate reasons exist to avoid accelerating income when there are pending tax increases, in the face of uncertainty, many people felt paralyzed and simply chose inaction instead of proper planning.

Because of Congress’s decision, this paralysis caused no damage this time around. In fact, had taxpayers acted to trigger income in 2010 before the scheduled 2011 tax increase, the strategy might have boomeranged when the December legislation extended 2010′s lower rates for two years.

But with a burgeoning national debt and chronic budget deficits, the government probably will be looking to raise taxes in the future. During this two-year reprieve, taxpayers should develop plans to minimize taxes and maximize after-tax income over the long term.

1. Health-Related Contributions

If you happen to utilize a medical insurance policy that has a large deductible, then chances are you or your job established a medical care Flexible Spending Account (FSA) or Health Savings Account (HSA) that you will add routine payments to. These savings accounts are excellent due to the fact that all deposits are viewed as above-the-line IRS write-offs. The highest tax-deductible payment for last year was $3,050 for individuals, and $6,150 for families (and a $1,000 restriction for catch-up deposits). You should report your tax-deductible HSA contributions with IRS Form 8889, and complete contributions on Form 1040. Keep in mind that insurance vendors state your FSA/HSA contributions to the IRS with Form 5498-SA.

2. Using Your Personal Vehicle For Business

Although you cannot subtract the cost of commuting back and forth from your house to your job (the IRS considers commuting a “personal” travel expense), you can write-off business-related vehicle transportation. If you drove your own motor vehicle during the course of your job (e.g., to reach clients, travel between multiple office locations or a non-permanent job site), you could meet the criteria. The two fundamental ways of deducting costs are:

-The Actual Expense technique, which lets you subtract your real automobile expenditures from last year.

OR

-The Standard Mileage Rate approach, which is often used as an alternative to real expenditures, represents the median price of driving an automobile. For 2011, the standard mileage rate is: 51 cents/mile (from January 1 through June 30, 2011), and 55½ cents/mile (from July 1 through December 31, 2011).

Generally, if you are using a newer model car for business travel, the Actual Expense approach would give you a higher write-off, since you are able to subtract true costs of ownership including devaluation, lease expenditures, etc. Take into account that whenever you drive your vehicle for both job-related and personal travel, you can only write off the work-related expenditures; thus, keeping details regarding these travel expenditures is crucial. The laws regulating this write-off are often complicated, so consult a tax expert for details.

3. Write-off the Start-Up Expenses of Your Business

Almost all people emphasize small business tax write-offs on companies that are currently functioning. Yet, there is a deduction for those who are only just getting started on their companies. The money spent to create a company from the beginning are classified as “capital expenses”. These kinds of expenses can consist of costs for putting together a business office, travel, marketing and advertising, and so forth. Lots of people mistakenly presume that capital expenses are not tax deductible. They are, however on condition that most of these expenses must amortized. For 2011, you can write off roughly $5,000 in capital start-up expenses (other lingering expenses in excess of $5,000 have to be amortized and distributed over upcoming years). In case you began a home business your expenses may not exceed $5,000, making this write-off particularly useful.

4. Career Search Costs

The Internal Revenue Service features a whole section committed to income tax suggestions for jobless people. For instance, you can find tips describing how to subtract employment search expenses on your 2011 tax returns.

Indeed, if you have been without a job and/or searching for a new occupation, you could be in the position to write-off a portion of the expenditures you had (see Form 1040 Schedule A for further details). Yet, not every expense associated with a job search are deductible, as many qualifications exist. Chiefly among them, your expenditures will need to be for an occupation search within your present vocation; career search costs outside of your present occupation will not be tax deductible. Next, it is possible to write-off certain employment-related resources, like recruiting agency costs, but once again, your search must be within your existing occupation. As well, you can deduct the amount you spent editing up and sending your résumé to potential employers. Finally, you may well be eligible to subtract expenditures sustained by traveling to look for work, but only if the travel occurred mainly for that purpose.

It’s also important to note that, in order to get a job search tax deduction, your job-related expenditures will need to be greater than two percent of your adjust gross income (AGI). Keep in mind that the IRS doesn’t give search related tax deductions if an extensive length of time has passed between when you were last employed and when you started hunting for work. In addition, the job search tax deduction will not apply to first-time job hunters. Last but not least, in case you obtained unemployment benefits, or got funds from some other source, the government may well calculate this as income which should be reported.

5. State Taxes: Income vs. Sales

In many states, you are expected to pay either state and local tax fees, or state and local product sales taxes. Selecting the income tax write-off is generally much larger for most of us simply because this tax is more expensive than sales tax in most locations. However, do not be fooled into selecting the state incomes taxes by default. In the event you bought an expensive object last year, like a car/truck, or some other big-ticket item, you should consider this in your sales tax formula. For quite a lot of people, selecting the sales tax option results in extra money in their pockets, compared to using income taxes. You should work with the sales tax calculator supplied through the IRS (on their web site) to assist you in determining which tax deduction is right for you.

Yet another valuable tax idea: this one is actually in relation to your 2012 taxes. It is important to file a new W-4 form with your boss promptly. Here is why this is important: Payroll withholding is calculated by your W-4 form, and decides the amount of every pay check that is paid to the federal government. For many people, just how much we obtain in our payroll check isn’t the sum that’s most valuable to us. How’s that? Once you acquire a tax refund it signifies the IRS took an excessive amount from every payroll check. Many of us hope to have obtained some of that cash for the whole of the entire year, when we actually could have it. Equally, in case you have to pay the IRS, it indicates the IRS held onto too little money from your payroll check. Very few people want to pay that back in a single sizeable check each year. Declaring the latest W-4 allows you to re-establish what amount the IRS really should be getting from every salary. As an example, for those who anticipate a refund, changing your W-4 will mean extra cash in every single pay check. And in case you anticipate you will be required to pay taxes, modifying your W-4 will result in less income in each payroll check, but also less anxiety come tax season.

When should you report a new W-4? Do it today. First of all, because Congress approved a tax-extender bill leading to lowered social security taxes which could save two percent on your salary (it might not look like a lot, but a small amount is better than nothing). And further, if you have had a baby, a home loan, or got divorced after you filed your last W-4, you ought to update your tax withholding amount, and extend those income tax reductions throughout the year.

Note though that this tax exemption only applies if the company retains the cash until the shareholder is non UK resident or if the cash is retained overseas. Any extraction of the proceeds would be taxed to the extent that they were remitted to the UK. So whether a simple dividend is paid or if the company is liquidated and a capital distribution is paid the cash would need to be retained offshore. If you wanted to enjoy the proceeds in the UK you’d need to think about methods of remitting the proceeds with minimal UK tax implications.

A big problem with using an offshore company is in ensuring it’s controlled from overseas. If it was controlled from the UK it would be UK resident and as such taxed in full on any capital gains realised. If the company owns UK assets it makes it more difficult to avoid the company being classed as UK resident.

Inheritance taxUsing an offshore company is a big advantage for inheritance tax purposes, as it converts a UK asset into an overseas asset. As non UK domiciliaries are not subject to Inheritance tax on overseas assets they can then avoid tax on the UK property owned by the offshore company. One point to note here is that it’s important that the company shares pass on registration. They will then be classed as located where the share register is – which if this is outside the UK will ensure that the shares are excluded property.

Income taxA directly owned foreign holding company can at the most only achieve only a a partial avoidance of UK tax. Income tax, unlike capital gains tax is still taxed on UK source income. Therefore even if an offshore company is used, UK tax will still be charged on UK income.

However there are benefits to be obtained from using an offshore company. For example there can be a saving of higher rate tax as non resident companies are subject to the lower or basic rate of tax in respect of UK source income. Note though that you can obtain some income (eg UK bank interest) free of UK tax. This is because tax on this income is restricted to tax deducted at source if the recipient is a non resident.

SummaryAn offshore company investing in the UK can look to achieve the following tax benefits:

Avoidance of capital gains tax
Avoidance of inheritance tax
Partial avoidance of income tax
Anti avoidance rulesAside from the company residence position – which is always an issue where you have an offshore company with UK shareholders there are also the anti avoidance provisions to consider.
Note that there is also the related issue that if an individual exercises control over the company and makes it UK resident there is a risk that he may be a shadow director and any benefits provided to him (or his family) from the company would be charged to income tax.

The main anti avoidance provision that applies to income is S739. Although there is an exemption for non UK domiciliaries this does not apply to the company’s UK income.

Therefore if the offshore company had UK investment income this provision would deem the income of the company to be that of the person establishing/transferring to the company originally.

Another useful point to note is that S739 applies to any foreign registered company.

When can the anti avoidance rules be avoidedOne is where the UK individual buys a company that already has the UK investments in it. Provided he doesn’t inject any further assets to the company he shouldn’t be within the scope of the legislation (as he’s not made a transfer of assets resulting in income accruing to the company).

Secondly there is the motive defence which applies where the transfer was not for the purposes of avoiding UK tax, and was for a wholly commercial purpose. One case where this is more easily satisfied is where a non domiciliary established the company before coming to the UK.

When can the offshore non resident company be used as a tax shelter for UK investments?It can be used to avoid UK Inheritance tax It can be used to avoid UK tax on any capital gain It can be used as a partial shelter for UK income if S739 is avoided in one of the above ways.

However any extraction of the income or proceeds from the company to the UK would be subject to UK tax. Therefore ideally income/proceeds should be retained overseas.

Lee J Hadnum is a rarity among tax advisers having both legal & chartered accountancy qualifications. After qualifying as a prize winner in the Institute of Chartered Accountants entrance exams, he went on to become a Chartered Tax Adviser.