Payment via loan

[PAG]

I have a contractor here who claims that he is with umbrella company. What he does is declare basic salary and the rest of the money he obtains is via loan. The umbrella co pays him money as loan and then eventually writes it off.

A. Is this legal ?? or a loophole ?
B. Would this not be considered as BIK?

[gingerjedi]

[PAG]

Can my company give a loan to some third party ?? And if they (individual or business) fouled ........ then can it be written off ??

[gingerjedi]

I'm no expert but I think you are asking for trouble there, money cannot just simply go missing from a company account and then written off as a bad debt... we would all be doing it if it was that simple.

[IR35 Avoider]

If it was from the outset the intention of both parties that the "loan" not be paid off, then by definition it is not a loan.

In that scenario I think both the "lender" and the "borrower" are commiting a criminal offense.

Edit: If he's not paying a commercial rate of interest on the loan it is a BIK.

[PAG]

This is how it works .....

An independent discretionary trust has been set up as a vehicle through which our participants may be provided with tax efficient payments. As a consultant, you become an employee of TakeMeToJail Limited. We then hire your services to an independent UK company, such as Computer Contracts Limited, which in turn, provides your services to employment agencies or the end users of your skills and expertise, under a service agreement with TakeMeToJail Limited.
As a TakeMeToJail employee you receive a monthly salary related to market rates and subject to PAYE and National Insurance deductions.
The income arising from the services that you provide is reviewed on a monthly basis with the aim of identifying the appropriate allocations that may be paid into the discretionary trust. The trustees may then, at their discretion, advance amounts in the form of interest free loans on a monthly basis.
The tax treatment of these interest-free loans is very efficient and compliant with HM Revenue & Customs guidelines. You would no longer need your own limited company or be VAT registered – therefore associated costs are eliminated. You would also no longer need the services of an accountant.

Any thoughts .....

[Crossroads]

Been done to death here.

Main issues:
- discretionary trust, so you have NO control over whether you see "your" money once you have earned it.
- picture a scenario where the umbrella goes under (say following HMRC investigation and subsequent bill). You have £xxk loans from them. Administrator rocks up and recalls the loans...

Most I have looked at "promise" to pay 80-90%...you can get close to this with a properly run Ltd...

[bangface]

An independent discretionary trust has been set up as a vehicle through which our participants may be provided with tax efficient payments. As a consultant, you become an employee of TakeMeToJail Limited. We then hire your services to an independent UK company, such as Computer Contracts Limited, which in turn, provides your services to employment agencies or the end users of your skills and expertise, under a service agreement with TakeMeToJail Limited.
As a TakeMeToJail employee you receive a monthly salary related to market rates and subject to PAYE and National Insurance deductions.
The income arising from the services that you provide is reviewed on a monthly basis with the aim of identifying the appropriate allocations that may be paid into the discretionary trust. The trustees may then, at their discretion, advance amounts in the form of interest free loans on a monthly basis.
The tax treatment of these interest-free loans is very efficient and compliant with HM Revenue & Customs guidelines. You would no longer need your own limited company or be VAT registered – therefore associated costs are eliminated. You would also no longer need the services of an accountant.

Any thoughts .....

TakeMeToJail Limited=T*kp*y Limited but may as well be TakeMeToJail Limited. They are part of a group of connected offshore ebts, avoid at all costs...

[PAG]

TakeMeToJail Limited=T*kp*y Limited but may as well be TakeMeToJail Limited. They are part of a group of connected offshore ebts, avoid at all costs...

Agree. For the benefit of the rest, the company I was taking about is TEKPAY (google it if you want to know more), well I call it TakeMeToJail Company.

[ASB]

Even if the scheme is sucessful you would not be out of the woods.

"The income arising from the services that you provide is reviewed on a monthly basis with the aim of identifying the appropriate allocations that may be paid into the discretionary trust. The trustees may then, at their discretion, advance amounts in the form of interest free loans on a monthly basis."

If the contacts were not good from an IR35 point of view this would probably enable HMRC to challenge any income from the trust as IR35'd anyway. It wouldn't be a great leap to suggest that income received from the trust was in effect remuneration for services provided from worker to client. Then it's potentially caught.