Sanzar Partnership? New IOM company

[kryten22uk]

Hi all, just been recommended to post here by some guys over on PistonHeads. Was just wondering if anyone had any further comments on this firm? Anyone joined and got first hand experience? Looking tempting.

Also, www.taxdesign.co.uk seems to be offering something almost identical. The difference is that they offer 90% return, and you are self-employed with a contract of services with the trust, as opposed to being an employee. They then have UK firm with which the end client deals. Anyone like to comment on the pro's and cons of this tweak to the business model? I prefer the idea of being self-employed, as its simpler to back out or to revert to Ltd if all doesnt go well.

My circumstances:
I've been contracting for a while under a the Ltd route, but am deciding that this method is equally risky what with the HMRC so hot on ripping contracts up these days, so why not benefit from a different tax planning method.

Cheers and thanks for all the advice I have gleaned so far.

[nabeelfarid]

Hi,

Just came across your post and was wondering if you are workign with Sanzar or Taxdesign, would you like to comment on these firms or about any other firms

Regards,
Nabeel

[kryten22uk]

Hi,

Just came across your post and was wondering if you are workign with Sanzar or Taxdesign, would you like to comment on these firms or about any other firms

Regards,
Nabeel

Do you mean me? I'm operating via Ltd at moment, but coming close to joining Sanzar.

[nabeelfarid]

Hi
My name is Paul Mihailovits, I am the Managing Director of The Sanzar Partnership in the Isle of Man. As The Sanzar Partnership is being discussed here, I thought I should respond to try to clear up some of the general misconceptions that exist.

I’ll try to share my personal opinion on some of the points I noticed raised here
• General IOM misconceptions like being ‘dodgy’
• Other Schemes and the Special Investigations unit of HMRC
• Permanent Establishment
• IR35 regulations and Managed Service Company (MSC) Legislation
• Being investigated and Insurance against this
• Declaring a share of profits & tax credits against any UK tax payable

Hopefully I can clear up some of the pre-conceptions people might have & also distance The Sanzar Partnership from those ‘dodgy’ entities that people worry about.

General IOM misconceptions like being ‘dodgy’
Financial Regulation
The Financial Supervision Commission http://www.gov.im/fsc licenses & supervises all banks, investment businesses, collective investment schemes and building societies. The FSC is also responsible for the companies’ registry and has introduced a regulatory regime for corporate services providers. The IOM is heavily regulated, for example with particular recent focus on Anti-Money Laundering. All this means overall, that the IOM is probably more heavily regulated than the UK.

‘Dodgy’
Some of us may have heard horror stories or heard 3rd hand about someone having been involved in something dodgy in the IOM. The truth is that there are legitimate ways of doing business in the IOM that make excellent use of the Double Tax Treaty. The IOM has legitimate trade in excess of £Billion per annum and most high street Banks have a presence here. My personal view is that the regulations change regularly and to keep up with these changes takes vigilence, time & money. I know that there are some Tax Avoidance Schemes that at one time were operating according to the interpretation of the law at that time, but as individual cases come before the courts & legal precedents are set or HMRC rules change, they have not kept abreast of these developments, so are now operating what I might personally interpret as in an ‘unsafe’ or ‘at risk’ way.

One example could be interpreted around the use of Employee Benefit Trusts (EBT's) in the IOM.

Other Schemes and the Special Investigations unit of HMRC (Anti-Avoidance Group)
There are some other companies who operate schemes utilising EBT's. Essentially, you contract through their company and it loans you back your money. This being an example of a Tax Avoidance Scheme that the company has registered with HMRC (receiving a Scheme Number). There are some variations in detail, but I shall generalise for ease.

In my personal opinion, the problems with EBT's fall into 3 major categories:

1. Loans given out by the EBT to you the individual.
Briefly, I understand that the theory is that the tax loophole exposed by using an EBT tax avoidance scheme is that as it is a loan made payable to you, you do not have to pay tax on it in the UK. Gordon Brown, when Chancellor, created a task force to look into these specific Tax Avoidance Schemes.

See the HMRC website here for more information on HMRC’s view of EBT’s:
http://www.hmrc.gov.uk/practitioners...d-v-dextra.htm

2. It is a loan – what happens to the individual if the company wants their loan back?

I believe that some other companies utilizing EBT loans ask you to sign a legally binding Loan Agreement. Once signed, you have no legal recourse should they ask you to repay it. Statements like “We won’t ask you to repay it” or “we can’t imagine we would ask you to repay it” are likely. The truth is you have signed to say that you will repay the loan if asked.

3. A Benefit in Kind when the EBT closes, or if you leave it?

In my opinion, if the EBT should ever close or you leave it, what happens to the loan? Should the loan be written off by the Trustees, then it’s no longer a loan and the individual has therefore received a large chunk of money that hasn’t had tax paid on it? Cue HMRC knocking on the door. Similarly, if you leave the EBT for any reason, then how does the loan close down?

Our Senior Tax Counsel has advised The Sanzar Partnership at length how to structure our Partnership and Trust so that it conforms legally to the Treaty and does not expose employees to any of the risks mentioned above. We do not employ the use of EBT’s or loans and as such we are not designated as a Tax Avoidance Scheme.

Permanent Establishment
The term ‘Permanent Establishment’ is a key tenant of the Double Tax Treaty and in our Tax Counsel's opinion, a significant area where we have excelled and some other companies might be at serious risk.

The interpretation of this is that the employer MUST NOT have a permanent establishment in the UK. If the contractor is employed in the UK, by a UK company and monies are sent ‘offshore’ then quite rightly HMRC will come after all of that income as being earned and paid to a UK company. Obviously, this will be taxed in the UK.

The Sanzar Partnership does not have, nor ever will have ANY establishment in the UK, either by presence or indirect agency. All of our employees (not partners) work directly for The Sanzar Partnership, an IOM based company and therefore we do not fall foul of the Permanent Establishment rule.

IR35 regulations and Managed Service Company (MSC) Legislation
I’d like to clear up some inaccurate opinions posted here about us. Because The Sanzar Partnership is an employment business and as an individual becomes an employee of the company, the IR35 status of the contract becomes irrelevant. To be precise, individuals are NOT partners of a partnership, they are employees (in the very real sense) of The Sanzar Partnership.

Additionally, as the Sanzar Partnership is NOT a Limited company, we therefore do not fall within the reaches of the MSC Legislation which came about in 2007. This is something that many agencies are asking us about and something we can satisfactorily answer.

Being investigated and Insurance against this
There seems to be a lot of misplaced fear about ‘investigations’. HMRC perform 200,000 business and 80,000 individual investigations per annum. HMRC investigates contractors who have been operating their Limited Companies incorrectly, Umbrella Companies who have untenable Expense Policies, it investigates offshore schemes that are utilising ‘old’ legislative solutions and it also investigates legitimate scenarios too.

It would be wrong of me to imagine that current or future employees of The Sanzar Partnership might not be investigated, as I have no idea what their current, previous history or personal circumstances are? However, what I can say is that should an individual be investigated as a direct result of being in the employ of The Sanzar Partnership, then we would indeed support that individual throughout, and if that led to court action, we would indeed continue to support that individual. Obviously, I would assume that such action by HMRC would threaten our way of operating and hence we’d be committed to resolving positively.

I’d like to point out that our Senior Tax Counsel is a leading QC in international tax matters, and the majority of his case load is spent representing the Inland Revenue. If matters were ever to end at the high court, our QC would be fighting our corner against the Revenue, something that should give great comfort.

Finally, we are in the process of completing the purchase of an Insurance policy, underwritten by Lloyds of London that would cover us and any individual to the value of £1m. We expect this to be in place soon, as belt and braces to reinforce our affirmation of support.

Declaring a share of profits and tax credits against any UK tax payable
Previously mentioned in the thread was an assumption that the share of the profit paid by The Sanzar Partnership is ‘immune from tax’. The reverse is true.
The share of profit is a share of the profit of an Isle of Man resident business. The profit of the partnership is therefore liable to tax in the Isle of Man but is considered exempt from UK Income Tax under paragraph 3(2) of the Double Tax Treaty (1955) between the Isle of Man and the UK. In reality this means that the tax paid in one jurisdiction is honoured and deemed paid in the other. The rate of taxation in the Isle of Man relevant to the Partnership's profit is 0%, but classified as tax paid nonetheless by HMRC in the UK.

Additionally, we help our employees complete the relevant sections of their self assessment tax returns that relates to monies received from The Sanzar Partnership. We have a ‘Tax Pack’ that is available, which describes how the tax forms are completed – with examples completed by our QC.

We also have a ‘Legal Pack’ that describes the due diligence that we performed in the many months prior to The Sanzar Partnership starting to trade.

Both of these packs are available to prospective employees, but we require individuals to sign a Non-Disclosure Agreement before we share these documents. The reason being that the documents expose Intellectual Property that is unique to The Sanzar Partnership that came about after investing a significant amount of time and money, so of course, we are a little sensitive to sharing this information with potential competitors

I hope the above has helped to clear up some of the issues discussed in this thread and the personal opinions I have expressed here are to my knowledge accurate and current. I’d be happy to answer other questions directly, so please contact me via our website that was mentioned in the first posting to this thread.

Regards,
Paul Mihailovits

Does anyone here currently working with Sanzar?

[nabeelfarid]

Hi Kryten22uk, just wondering why you want to switch from Ltd. to Sanzar? Especially when most of the replies on this thread seems to go against Sanzar? I would like to know your thoughts on it please

Regards,
Nabeel

[BrilloPad]

I am using Montpelier who are IOM. Highly recommended. PM me if you want more details.

[ChimpMaster]

Brillo -

What's your return?
Can you divulge a little on how they operate, i.e. is it salary + loans?
How do you view the risk as compared with Ltd/IR35?
Is the scheme registered with HMRC?

Cheers.

[BrilloPad]

Brillo -

What's your return?
Can you divulge a little on how they operate, i.e. is it salary + loans?
How do you view the risk as compared with Ltd/IR35?
Is the scheme registered with HMRC?

Cheers.

I pay 5k + 10%

Its complicated - really need to attend presentation - but basically they have a limited company who invoice the agency. That money goes to IOM. Comes back as self employed salary and trust earnings. They believe it is legal - I dont want to divulege all I know as HMRC will read this but it complies with certain tax judgements. HMRC are in a real hole as they can declare it closed than all is legal to date. they have trouble fighting it via courts so are stalling - and put pressure on some of those who operate. I know some who are being investigated and som who have operated for years with no trouble. With interest of 7% some just pay up.

There is a risk - main thng is can you hold your never if/when HMRC get shirty. I think Steed left people to twist in the wind!

I dont believe the scheme is registered - I certainly doubt it.

To HMRC reading this - it is obvious you will lose as you keep stalling. But montpelier will force you into court.

[malvolio]

Brillo -

What's your return?
Can you divulge a little on how they operate, i.e. is it salary + loans?
How do you view the risk as compared with Ltd/IR35?
Is the scheme registered with HMRC?

Cheers.

One minor point you might like to consider and that probably has not been explained too clearly. If you get paid through a series of repeated loans and are UK resident for tax purposes, you are evetnually liable for all due taxes when the original loan is repaid. So unless you are lined up to live and work forever, I should have some serious savings tucked away for when you retire. Or even simply leave the scheme...

HTH

[BrilloPad]

I pay 5k + 10%

Its complicated - really need to attend presentation - but basically they have a limited company who invoice the agency. That money goes to IOM. Comes back as self employed salary and trust earnings. They believe it is legal - I dont want to divulege all I know as HMRC will read this but it complies with certain tax judgements. HMRC are in a real hole as they can declare it closed than all is legal to date. they have trouble fighting it via courts so are stalling - and put pressure on some of those who operate. I know some who are being investigated and som who have operated for years with no trouble. With interest of 7% some just pay up.

There is a risk - main thng is can you hold your never if/when HMRC get shirty. I think Steed left people to twist in the wind!

I dont believe the scheme is registered - I certainly doubt it.

To HMRC reading this - it is obvious you will lose as you keep stalling. But montpelier will force you into court.

I should add that most people in CUK do not like IOM schemes...