concern about payschemeplus

**Underscore2** · 27 July 2005, 13:21

its a composite type set-up

most people on here don;t like the idea - and claim you'll go to jail soon. I'm using a similar compoany - so I'll see you there.

**insight14** · 27 July 2005, 13:33

Originally posted by Underscore2 View Post

most people on here don;t like the idea - and claim you'll go to jail soon. I'm using a similar compoany - so I'll see you there.

Have you had a look at how they acheive the 83%-91%?

Basically they take all your money, give themselves some (5% or something), then pay you minimum wage (which is not much over £5/hr) - on which you pay tax, NI etc. The rest of your money is then given to you as a "loan", which is written off by PaySchemePlus after a period of time.

The Inland Revenue have said that you are indeed liable for taxation on the "loan" money, and have identified this as one of the types of schemes they are targeting for investigation.

Having said that, a lot of contractors are using this method and hoping not to get investigated.

**Bagpuss** · 27 July 2005, 13:53

You can acheive about 80% using a Ltd if you do it the right way. th echances of being shafted by the IR are much smaller. AND the chances of someone fecking off with you money are zero. For the extra 3-10% is it worth the risk, I think not!

**Rebecca Loos** · 27 July 2005, 14:03

SithLord, this is the wrong forum to ask this question - people here don't really like anything that doesn't fall into the world as they know it (straight LTD or non dividend paying umbrella)

I am using something similar and so far am OK, but yes I guess if you get investigated, then I guess it depends whether their scheme has got all the little technical detail right (I think in the case of Payscheme+ they rely on the fact that the loan they give you, even though being an EBT loan, is not necessarily an employment-related loan).

Ask the same question on www.taxationweb.co.uk/forum to get a more technical answer.

I quote the opinion left by one of their esteemed contributors:

"There is a charge to tax under section 188 Income Tax (Earnings and Pensions) Act on loan waivers but this only applies if a loan is an "employment-related loan". There is a clear description in section 174(2) of the same Act of the circumstances in which a loan can be an "employment-related loan", and, perhaps surprisingly, a loan from an employee benefit trust is not directly included (although such a loan could could fall within the definition in certain circumstances). I imagine that it is on that basis that the scheme promoters would argue that no tax liability arises. "

Underscore perfectly summarised the situation I think.

**sithlord3k** · 27 July 2005, 14:09

I would like to thank everyone who answered, as all the advice given has been beneficial, so thank you !

**rootsnall** · 27 July 2005, 14:31

Originally posted by Rebecca Loos View Post

SithLord, this is the wrong forum to ask this question - people here don't really like anything that doesn't fall into the world as they know it (straight LTD or non dividend paying umbrella)

I am using something similar and so far am OK, but yes I guess if you get investigated, then I guess it depends whether their scheme has got all the little technical detail right (I think in the case of Payscheme+ they rely on the fact that the loan they give you, even though being an EBT loan, is not necessarily an employment-related loan).

Ask the same question on www.taxationweb.co.uk/forum to get a more technical answer.

I quote the opinion left by one of their esteemed contributors:

"There is a charge to tax under section 188 Income Tax (Earnings and Pensions) Act on loan waivers but this only applies if a loan is an "employment-related loan". There is a clear description in section 174(2) of the same Act of the circumstances in which a loan can be an "employment-related loan", and, perhaps surprisingly, a loan from an employee benefit trust is not directly included (although such a loan could could fall within the definition in certain circumstances). I imagine that it is on that basis that the scheme promoters would argue that no tax liability arises. "

Underscore perfectly summarised the situation I think.

Good clear description Rebecca, I think you should save that answer and auto send it everytime this comes up.

The narrow minded ones ( ie. me ) finally defeated a "I'm Ltd and can get 80% return" person last week, can somebody please prepare a model answer for this one.

**Bagpuss** · 27 July 2005, 15:46

Exactly how do these other schemes vary from the Dignatio scheme?

http://www.shout99.com/contractors/s...id=12770&n=100

http://www.shout99.com/contractors/s...pl?id=13136&n=

And what stops them keeping the money?

**Rebecca Loos** · 27 July 2005, 16:04

what stops any umbrella keeping the money? (doesn't really matter what scheme they offer)

**Bagpuss** · 27 July 2005, 16:23

Originally posted by Rebecca Loos

what stops any umbrella keeping the money? (doesn't really matter what scheme they offer)

That's one reason of many I wouldn't use umbrellas. Given Dignatio ended in tears with many contractors owed thousands of pounds I personally wouldn't use an EBT. I'm by no means risk adverse but I don't want a middleman who has initial access to my money when/if the sh1t hits the fan.

concern about payschemeplus