Loans from EBTs and other Trusts
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  1. #11

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    22% Would be OK as long as we were still able to claim travel and such expenses as well.

    I think the people who see contractors as getting easy money and just overpaid disguised employees have never contracted.

    A few of my friends want to become contractors. I am more than happy to help them and give advice. But I also tell them not to assume it is a gravy train and be prepared for the fact that you will sometimes be without work and will inevitably start feeling the pressure on your rates.

    There are two types of Contractor.

    1. The Real Contractor
    2. The Accidental Contractor

    The accidental contractor usually goes back to permie as soon as they can, for whatever reason, be it motivation, ability, security etc. They usually just fell into a contract because they didn't have a permanent role. They have usually left a permie role but not of their choice.

    The Real Contractor is one who has decided to take a risk and contract permanently using their skills (including sales skills i.e. interviews) and in my opinion should be rewarded for the risk. They have usually left a permie role by their own choice.

    I wonder what HMRC's view is of contractors who have worked for them? I know a few. Do they give them a free pass?

  2. #12

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    Yes tax avoidance is legal, and no-one gets prosecuted, the question arises on how you interpret the rules, so if the tax man disagrees with you he'll give his estimate and you have to take him to court. But it's a civil law case. If you have a water tight case you don't need to fear taking the tax man to court because you'll win, or will you? Now these schemes depend on finding loopholes because of poorly defined rules that can be interpreted in a way for which it clearly wasn't intended. But obviously if this is the case this means the taxman can interpret this rule also in his favour. Now you might win, but in those cases expect the taxman to interpret in his favour, and make you challenge it.

    Just a fact of life which too many contractors don't understand but should, i.e. beware of tax scheme operators, because your liability could be huge, and no this isn't tax evasion, just a normal dispute with the tax man, and you'll only find out whether it's legal when the judge decides.

    You can't really expect the taxman simply agree with the tax scheme operator.
    Last edited by BlasterBates; 24th January 2011 at 11:39.
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  3. #13

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    Quote Originally Posted by BlasterBates View Post
    Yes tax avoidance is legal, and no-one gets prosecuted, the question arises on how you interpret the rules, so if the tax man disagrees with you he'll give his estimate and you have to take him to court. But it's a civil law case. If you have a water tight case you don't need to fear taking the tax man to court because you'll win, or will you? Now these schemes depend on finding loopholes because of poorly defined rules that can be interpreted in a way for which it clearly wasn't intended. But obviously if this is the case this means the taxman can interpret this rule also in his favour. Now you might win, but in those cases expect the taxman to interpret in his favour, and make you challenge it.

    Just a fact of life which too many contractors don't understand but should, i.e. beware of tax scheme operators, because your liability could be huge, and no this isn't tax evasion, just a normal dispute with the tax man, and you'll only find out whether it's legal when the judge decides.

    You can't really expect the taxman simply agree with the tax scheme operator.
    Also, it's important to remember that the scheme providers aren't doing it to save you money, they're doing it to make money for themselves. If they can get a 10% fee for having a QC agree that a particular application of a piece of legislation could be made to work - not that it can work, only agreeing that it could work - and that means people start giving them money for no effort, then fine, that's what they'll do. If it goes wrong (as it just has), their only interest in preserving their income stream. The one thing they don't do is risk their own time and money. (That's also why they'll hide behind NDAs and never put anything in writing; they don't want the details of their interpretation out in the wild or everyone would be doing it)

    And furthermore, EBTs and the like are perfectly legal and valid investment vehicles, so nobody's breaking any laws, least of all the providers themselves who are running legitimate businesses. The only debate is about how much tax you should be paying - and that is 100% your problem.
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  4. #14

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    I've just noticed ChoicePremier advertising on CUK. Their website says that they offer ~80% return by paying a market rate salary and then the rest in Forex loans.

    The FX loans don't fall under the remit of the 09/12 legislation because they are repaid by the now well-known devaluing currency method.

    I for one am very, very surprised that this kind of scheme is still operating, let alone advertising for new members!

  5. #15

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    Quote Originally Posted by ChimpMaster View Post
    The FX loans don't fall under the remit of the 09/12 legislation because they are repaid by the now well-known devaluing currency method.
    Odd, I thought the devaluing loans thing was shot down years ago. Mind you I was working with a contractor in 2005 who was trying to sort out a massive tax demand (70+k) resulting from these loan schemes so maybe my view was coloured a bit.

  6. #16

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    Quote Originally Posted by ChimpMaster View Post
    I've just noticed ChoicePremier advertising on CUK. Their website says that they offer ~80% return by paying a market rate salary and then the rest in Forex loans.

    The FX loans don't fall under the remit of the 09/12 legislation because they are repaid by the now well-known devaluing currency method.

    I for one am very, very surprised that this kind of scheme is still operating, let alone advertising for new members!
    I was sure that I read that the FX schemes had been closed down, or at least legislation on them is pending and so I assume the 9/12/10 date would apply anyway.
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  7. #17

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    Quote Originally Posted by ChimpMaster View Post
    I've just noticed ChoicePremier advertising on CUK. Their website says that they offer ~80% return by paying a market rate salary and then the rest in Forex loans.

    The FX loans don't fall under the remit of the 09/12 legislation because they are repaid by the now well-known devaluing currency method.

    I for one am very, very surprised that this kind of scheme is still operating, let alone advertising for new members!
    80% return?

    You can get better than that in your own LTD company as long as you can play the long game and retain profits for the future.

  8. #18

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    Quote Originally Posted by prozak View Post
    80% return?

    You can get better than that in your own LTD company as long as you can play the long game and retain profits for the future.
    Indeed those were my thoughts too.

    I also thought that the Forex Loan idea had had its day several years back.

    Get this though: ChoicePremier's fees are 12%!!

  9. #19

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    Quote Originally Posted by ChimpMaster View Post
    Get this though: ChoicePremier's fees are 12%!!
    12% of the invoiced value? Ye gods. Is their 80% retention quote 80% of total value or 80% of value minus fees?

    Especially nuts as the one taking the tax risk is the contractor, to the provider it's money for old rope.

  10. #20

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    From their site: As a Choice Premier employee you receive a monthly market rate salary that is subject to PAYE and National Insurance deductions.

    Then: The amounts arising from the services that you provide are reviewed on a 6 weekly basis with the aim of identifying the appropriate allocations that may be loaned to you, as an employee. Choice Premier may then offer you a loan in a foreign currency.

    So, my question is, are they then paying you much less than market rate in order to be able to offer you the loan in which case the opening statement is wrong or is your loan just going to be really small

    Can't help feeling I have got to be missing something here
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