The three little piglets had each developed very different characters as they grew up. Whilst they all had inherited the entrepreneurial flair of their mother, who had established a successful family business as a UK based pig stye manufacturer their fierce rivalry between them made them all more determined than ever to take a different approach from each other in the pig stye trade.

Each of the piglet brothers had branched out into different areas of the pig stye trade leveraging off their mother’s contacts and growing up in the industry.

The youngest Joshua had a struggling UK stye manufacturing business. In recent times with problems in the Middle East the cost of importing the core components had risen markedly. Indeed, with the UK government increasing the minimum wage and the cost of national insurance, Joshua’s UK manufacturing business was under great pressure from cheaper stye imports from China being imported into the UK by one of his brothers Frank through his Dubai company.

Under the current UK Government, Joshua could only see things getting worse. He had built his business by his own sweat and hard work. He had taken risks with his hard-earned and taxed money to build his business, with the possibility of losing everything, but with threats of further taxation such as equalising Capital Gains tax with Income Tax and reduced allowances Joshua started to feel that the tax burden was suffocating his business. The government approach of “who can we tax to pay benefit for others” seemed to be a direct threat to Joshua’s business.

Joshua met with his friend Jack (who runs a successful egg supplier) at the Pub. Jack mentioned to Joshua that he had heard of people reducing their tax costs by leaving the UK and setting up a company in a low tax jurisdiction. Joshua had been considering this but wasn’t sure how to go about it. He had heard that advice was costly and Jack said, there is no need to pay for expensive advisors as he had done some research on the internet and all Joshua needed was an address outside of the UK and a company in a low tax area. Joshua could carry on his business and lifestyle as always but pay no tax in the UK just by telling HMRC that he no longer lives in the UK.

Being impulsive a few days later, Joshua hopped on a plane to a low tax area, met with an estate agent and found a property to rent. He then set up a low tax company called House of Straw Limited, with himself as sole director and shareholder.

His plan was to then run down his UK stye manufacturing business and start to transfer its trade to the new offshore company.

When Joshua got home the doubts started to creep in, was it as simple as Jack suggested? It sounded too good to be true. Indeed, Jack’s advice was at times questionable such as the time when he made a previous suggestion that they should both set up a business supplying ham and eggs to restaurants which would be terminal business opportunity for a piglet. On reflection, before he went further Joshua decided to approach Sandstone Tax for advice.

The Sandstone Tax specialist confirmed to Joshua that without proper planning the big bad Wolf at HMRC might blow down Joshua’s House of Straw proposal with serious implications for Joshua.

Whilst relocating from the UK is a pragmatic approach to tax planning just renting a non-UK address would not be enough – the Sandstone Tax advisor pointed out that it had to be a genuine relocation.

The Sandstone Tax specialist asked if Joshua was really planning to live in his new location. Joshua said in reality he liked to be near to his family and friends, enjoying his pub nights with Jack, and he was needed daily at his stye manufacturing business.

The advisor explained to Joshua that there are statutory residence rules that would affect his tax residency. Staying more than 180 days in the UK would make Joshua UK tax resident even if he had a residence elsewhere. Indeed, this amount of time reduces further if there are other factors such as available accommodation, family ties and work interests which could reduce the amount of time Joshua could be in the UK to as low as 16 days.

Looking at the offshore company Joshua set up, the advisor pointed out that although it may pay little or no corporation tax in the jurisdiction concerned the fact that it was owned and managed by Joshua would make it fully taxable in the UK whilst Joshua was resident in the UK.

Finally closing down the UK business and transferring it to the new offshore company would likely crystallise a tax charge and fall under the UK Transfer of Assets Abroad provisions which are specifically designed to penalise and deter such behaviour. In a worst-case scenario this could see Joshua charged with tax evasion which is a criminal activity that could see him go to jail.

Joshua listened carefully to the advisor and asked how the big bad wolf at HMRC could question his residency and the validity of his new company. The advisor pointed out that HMRC has many means to check on residence from looking at things such as social media, mobile phone usage and even Strava apps as well as UK ports of entry data to establish how long he was really staying in the UK. With regard his new company, HMRC regularly monitor property and other registers to identify where non-UK companies are involved transactions.

The Sandstone Tax advisor concluded that whilst the Joshua’s initial plans would fail relocation can be advantageous if done properly and with appropriate advice, but the decision is also a lifestyle choice. Joshua had been terrified of though of HMRC huffing and puffing with the possibility of jail and felt he had a lucky escape after talking to Sandstone.

The middle piglet brother, Frank, had taken proper advice on his relocation and had always wanted to leave home and seek his fortune abroad. Frank restructuring and sold his UK interests whilst he was starting his new life in the United Arab Emirates.

At first, he enjoyed the UAE lifestyle and the benign location fitted well with his business through his new UAE company, House of Wood Limited, which involved sourcing prefabricated styes and selling them to stye suppliers in the UK. For three years things had gone well and his business was booming. Then the Middle East conflict arose, and things became much more difficult.

Facing having to return to the UK Frank was concerned about the implications. Frank had heard from Joshua how the advisor at Sandstone Tax had been able to help and gave them a call.

Frank told the advisor of his problems in the region and that he was considering an imminent return to the UK. The advisor pointed out that if Frank did go back to the UK within five years of his moving abroad, certain income and capital gains accrued whilst he was non-resident would come back into the UK tax net and he would face a tax bill. In this respect Mr Wolf at HMRC could blow down his House of Wood structure.

A good option would be to relocate to the Isle of Man to which he could freely move to as a UK citizen. The Island is renowned for its beautiful scenery and quality of life. It’s favourable tax position (low-income tax, no capital gains tax and zero percent corporation tax) would provide the ideal environment to protect his international business and wealth. Frank could be within the British Isles with access to the UK without being in the UK. The island could be a base for life or just for a period of time whilst he considered his next steps.

The third brother John, had already spoken to Sandstone Tax about leaving the UK and relocating to the Isle of Man.

In discussion with Sandstone Tax and his local tax advisors John had established a plan to efficiently transfer his UK business to his children.

Being too young to retire and not really wanting to yet, Sandstone Tax looked at the value that John was taking with him with his move. Whilst John had been involved in stye manufacturing it was clear that in recent years he had used his experience and knowledge to concentrate on design of high tech styes – with innovations such as solar power to provide “green” airconditioned stye for the modern eco-friendly pig. It was soon realised that John could set up a stye design bureau on the Isle of Man employing local staff who could also help with the sourcing, import or specialist parts from abroad. This stye design service, which would be set up under John’s new company House of Stone Limited could then sell its technical designs to stye manufacturers in the UK including his own family firm.

The big bad wolf at HMRC did write to John about his relocation but with the assistance of Sandstone Tax his challenge against House of Stone Limited ran out of breath as they accepted that John had made a genuine move to the Isle of Man as was no longer UK resident. The big bad wolf also accepted that John’s new business is being operated properly from the Isle of Man by John and had real substance with offices and staff employed locally. House of Stone Limited had stood solidly against the big bad wolf of HMRC’s huffing and puffing and went on from strength to strength as the successful business thrived in its new environment.

John and his wife love living on the Island and whilst careful to watch the length of their visits to the UK, they use it as their base from which to build their business and explore the world.

With Frank joining John, the piglet brothers expanded their Isle of Man activities to include a stye manufacturing business (focusing on flat pack mail order styes) and were pleasantly surprised about the available support from the Isle of Man Government. Joshua continued to live in the UK and run the UK manufacturing business utilising the innovative design work of House of Stone whilst also marketing the new flat pack products from the Far East.

With each brother being in a better environment supportive of their life and entrepreneurial plans and they all lived happily ever after.

‍