The structure of contractor offshore solutions vary, but the most common utilise Employee Benefit Trusts (EBT).
These have been used for decades to provide tax-efficient benefits to the employees of a company.
They do carry some risk for contractors, who are advised to conduct their own due-diligence.
^ TopEBT - How they work
Contractor Employee Benefit Trusts (EBTs) – how they worked
Contractors used Employee Benefit Trusts (EBTs) as offshore tax solutions until legislation removing the tax benefits was introduced in December 2010.
Contractor offshore tax solutions: understanding the risks and the benefits
Understanding the risks and benefits of offshore solutions that cut tax enables contractors to take informed decisions that suit their risk profile.