How Gravita saved a client more than £100,000 in an offshore tax dispute

At a glance

About our client

Graham Cole has spent his career working on offshore oil production platform projects, typically joining at the design stage and staying involved as the work moves through tendering, construction in shipyards and eventual deployment offshore. His career has taken him across the UK, the US and Asia, often working on major international projects on a contract basis.

The challenges

Graham built his career in the oil industry, working offshore on international assignments across multiple jurisdictions. This created significant complexity in his tax affairs, particularly as he moved between the US, Singapore, and the UK.

During his time overseas, our client established an offshore company, investing £250,000. While working in Alaska as a contractor, his income was sometimes paid directly to him and sometimes routed through this company. Importantly, he declared and paid tax on all of his earnings in the US, regardless of how payments were made.

When our client returned to the UK in the 2015-16 tax year, he became UK resident once again. Some years later, HMRC received information through its international data sharing network suggesting that our client had failed to report approximately £200,000 of dividend income from his offshore company.

On the face of it, HMRC’s position seemed correct. The company accounts showed the payments as dividends, and as a UK resident individual, our client appeared liable to UK tax of around £80,000, plus interest and potential penalties, taking the total exposure to over £100,000.

How Gravita helped

From our conversations with the client, we established that the paperwork did not reflect the true position.

The company had never traded and held no independent income. The funds in question were, in substance, our clients own earnings from his overseas work, income on which he had already been taxed. Amounts paid into the company were effectively loans from our client, not profits generated by the company. As such, the “dividends” shown in the accounts were more accurately characterised as a return of his original investment.

We worked closely with our client to reconstruct the facts and presented a clear, well-evidenced explanation to HMRC, demonstrating why the accounting treatment was misleading and why no taxable dividend had actually arisen.

HMRC agreed with our analysis in full. The assessment was withdrawn, and our client had no additional tax to pay, saving him over £100,000.

This case highlights the importance of looking beyond the surface of financial statements. By combining technical expertise with a clear narrative of the underlying facts, we were able to challenge HMRC’s initial position and deliver a successful outcome for our client.

Facing a complex tax issue?

International tax affairs do not always fit neatly with the way transactions appear on paper. If you are facing an HMRC enquiry or have concerns about historic overseas income, assets or structures, our tax team can help establish the facts, assess your position and deal with HMRC on your behalf.