Sanzar Partnership? New IOM company

[Cheshire Cat]

Ardesco highlighted some of the rules, however I think your position is somewhat different. You appear to be in an EBT based scheme. I would respectfully suggest you do some research from somebody other than the scheme promoter. With very limited exceptions EBT's have been made ineffective as a tax planning tool.

Essentially if you do not declare the income received (i.e. the "loan") you are guilty of a criminal offence.

If you do declare it the nice man from HMRC will seek to tax it as income (because that is what is, however it's dressed up and the law now allows him to do this).

If the loan is repaid then you will get some tax credit at that point.

If the company goes bust then the liquidators can call the loan.

As I understand, the "loan" is made from a trust set up in my name, rather than a ltd company. The administrators of the trust could recall the loan, in which case I'd be screwed. The taxman could ask that I pay tax on the loan as income, in which case I'd be slightly less screwed (it's not all gone on champagne and hookers) although I understood that trustees don't pay tax on loans from their trust?
Anyway, whichever way the scheme works my biggest doubt is about being represented should I be investigated and given a tax bill. My understanding is that I have legally reduced my tax liability, but it would still need a lawyer to argue the case, and my fear is that I would be left to fund this myself.
At least if I ran my own Ltd (again, legally reducing my tax liability) and paid IR35 insurance I'd have some legal redress if I got a letter from HMRC.

[ASB]

As I understand, the "loan" is made from a trust set up in my name, rather than a ltd company. The administrators of the trust could recall the loan, in which case I'd be screwed. The taxman could ask that I pay tax on the loan as income, in which case I'd be slightly less screwed (it's not all gone on champagne and hookers) although I understood that trustees don't pay tax on loans from their trust?
Anyway, whichever way the scheme works my biggest doubt is about being represented should I be investigated and given a tax bill. My understanding is that I have legally reduced my tax liability, but it would still need a lawyer to argue the case, and my fear is that I would be left to fund this myself.
At least if I ran my own Ltd (again, legally reducing my tax liability) and paid IR35 insurance I'd have some legal redress if I got a letter from HMRC.

But what's the point of reducing liability if you are not going to invest it in champagne and hookers ?

I think you highlight the major issues for users of these sorts of schemes. I very much doubt the legality of them is in any real doubt. It is defending their effectiveness.

Whether your providers can stay one jump ahead of HMRC remains to be seen of course, but it is by no means impossible It's just the downside should you ever lose - since it is you with the large bill not the providers.

[Friendly Accountant]

Do your homework

I will preface this with the comment that I am not fully aware of the intricacies of all of the schemes discussed here. I am aware of the EBT scheme and the mechanics associated with it. A few comments:

Ardesco - You are quoting HMRC Manuals in respect of loans with close companies. This legislation has absolutely nothing to do with the schemes being discussed.

To be honest with you all. Second guessing the legality and effectiveness of these particular schemes is a bit of a waste of time. I have been an accountant for 20 years. I have looked into the IoM EBT based scheme and had it explained to me by a tax expert. It was explained to him by the people who came up with the scheme. There might be 50 people in the country who can make an educated comment as to whether or not the scheme complies with all of the relevant legislation and really works. I am not one of them. At the risk of sounding condescending, none of you are in that group either.

What you need to do is assess the people behind the scheme that you are considering. Some of these are tax planning companies that have been around for many years and have defended a number of schemes against HMRC challenge. Some are not.

Cheshire Cat raises the point that you must be comfortable with. Will the scheme provider defend you in the event of challenge. Again, it comes down to the scheme provider. Do your homework. Look into their track record.

Someone early in the thread makes the comment that, if the scheme works, why aren't the providers shouting from the rooftops. Gee, I wonder.......why don't Coca-Cola make their recipe publicly available......maybe they don't want competitors getting their hands on it!

Anyway, my short bit of advice is....look into the provider. Don't bother debating the legalities of the scheme. It is beyond me, and it is most likely beyond you unless you plan to spend the next year pouring through tax legislation on a full time basis.

Lastly, with respect to the morality of these schemes. That is for each person to assess. Anyone who is not paying tax under PAYE or as a sole trader has taken some steps to reduce the tax they pay. My guess is that this covers the majority of the contributors to this thread. I think its OK, but again, whatever lets you sleep at night.

[Lewis]

I will preface this with the comment that I am not fully aware of the intricacies of all of the schemes discussed here. I am aware of the EBT scheme and the mechanics associated with it. A few comments:

Ardesco - You are quoting HMRC Manuals in respect of loans with close companies. This legislation has absolutely nothing to do with the schemes being discussed.

To be honest with you all. Second guessing the legality and effectiveness of these particular schemes is a bit of a waste of time. I have been an accountant for 20 years. I have looked into the IoM EBT based scheme and had it explained to me by a tax expert. It was explained to him by the people who came up with the scheme. There might be 50 people in the country who can make an educated comment as to whether or not the scheme complies with all of the relevant legislation and really works. I am not one of them. At the risk of sounding condescending, none of you are in that group either.

What you need to do is assess the people behind the scheme that you are considering. Some of these are tax planning companies that have been around for many years and have defended a number of schemes against HMRC challenge. Some are not.

Cheshire Cat raises the point that you must be comfortable with. Will the scheme provider defend you in the event of challenge. Again, it comes down to the scheme provider. Do your homework. Look into their track record.

Someone early in the thread makes the comment that, if the scheme works, why aren't the providers shouting from the rooftops. Gee, I wonder.......why don't Coca-Cola make their recipe publicly available......maybe they don't want competitors getting their hands on it!

Anyway, my short bit of advice is....look into the provider. Don't bother debating the legalities of the scheme. It is beyond me, and it is most likely beyond you unless you plan to spend the next year pouring through tax legislation on a full time basis.

Lastly, with respect to the morality of these schemes. That is for each person to assess. Anyone who is not paying tax under PAYE or as a sole trader has taken some steps to reduce the tax they pay. My guess is that this covers the majority of the contributors to this thread. I think its OK, but again, whatever lets you sleep at night.

How would one go about looking into the provider? Whenever I have had names mentioned to me, if I am lucky, I'll get a breif web page saying very little. I'm not really interested in joining a scheme like this but I'm curious as to how you would go about reasearching a company in this way. e.g. looking at their past schemes etc..

[ASB]

How would one go about looking into the provider? Whenever I have had names mentioned to me, if I am lucky, I'll get a breif web page saying very little. I'm not really interested in joining a scheme like this but I'm curious as to how you would go about reasearching a company in this way. e.g. looking at their past schemes etc..

Limited use and limited disclosure are very important to the providers. Ultimately contact providers and meet. As you progress down the track they will tend to yield a bit more info. Normally culminating in an NDA if they beleive you are actually prepared to join.

It makes it difficult to obtain information about something you are only potentially interested in though.

[BrilloPad]

I will preface this with the comment that I am not fully aware of the intricacies of all of the schemes discussed here. I am aware of the EBT scheme and the mechanics associated with it. A few comments:

Ardesco - You are quoting HMRC Manuals in respect of loans with close companies. This legislation has absolutely nothing to do with the schemes being discussed.

To be honest with you all. Second guessing the legality and effectiveness of these particular schemes is a bit of a waste of time. I have been an accountant for 20 years. I have looked into the IoM EBT based scheme and had it explained to me by a tax expert. It was explained to him by the people who came up with the scheme. There might be 50 people in the country who can make an educated comment as to whether or not the scheme complies with all of the relevant legislation and really works. I am not one of them. At the risk of sounding condescending, none of you are in that group either.

What you need to do is assess the people behind the scheme that you are considering. Some of these are tax planning companies that have been around for many years and have defended a number of schemes against HMRC challenge. Some are not.

Cheshire Cat raises the point that you must be comfortable with. Will the scheme provider defend you in the event of challenge. Again, it comes down to the scheme provider. Do your homework. Look into their track record.

Someone early in the thread makes the comment that, if the scheme works, why aren't the providers shouting from the rooftops. Gee, I wonder.......why don't Coca-Cola make their recipe publicly available......maybe they don't want competitors getting their hands on it!

Anyway, my short bit of advice is....look into the provider. Don't bother debating the legalities of the scheme. It is beyond me, and it is most likely beyond you unless you plan to spend the next year pouring through tax legislation on a full time basis.

Lastly, with respect to the morality of these schemes. That is for each person to assess. Anyone who is not paying tax under PAYE or as a sole trader has taken some steps to reduce the tax they pay. My guess is that this covers the majority of the contributors to this thread. I think its OK, but again, whatever lets you sleep at night.

Firstly, my hats off to Friendly Accountant. Really good post - we need more of these.

Secondly, I would like to thoroughly recommend Montpelier. I know many people in the scheme, some for many years. It is not for everyone. But montpelier have been thoroughly professional at every turn and I would recommend them to anyone. PM me for more details.

I might add that my understanding is that Montpelier are pushing HMRC to "put up or shut up".

[Bradley]

Considered response

What you need to do is assess the people behind the scheme that you are considering. Some of these are tax planning companies that have been around for many years and have defended a number of schemes against HMRC challenge. Some are not.

The people promoting these schemes to individuals are the last in a long line of people to get their hands on this product. Most of these schemes are initially thought up by in-house tax departments of the high-street banks and FTSE100 businesses. Some enterprising soul leaves their employ and sets up a boutique tax advice shop rebranding the schemes as their own and starts finding salesmen to sell the product on. By this stage the high street bank or big business has moved on to another scheme because there is a greater risk that HMRC will notice the strategy due to the fact that every Tom, Dick and Harry is promoting it. From that point of view it's a lot like the stockmarket - you don't want to buy into something that's already caught the notice of the market and is rising as a consequence. My point is that if we on this forum know about these schemes you can bet that HMRC knows all about them too and is waiting until the numbers make a big juicy target.

Cheshire Cat raises the point that you must be comfortable with. Will the scheme provider defend you in the event of challenge. Again, it comes down to the scheme provider. Do your homework. Look into their track record.

I've never seen any that would argue past special commissioners level i.e. you're on your own.

Someone early in the thread makes the comment that, if the scheme works, why aren't the providers shouting from the rooftops. Gee, I wonder.......why don't Coca-Cola make their recipe publicly available......maybe they don't want competitors getting their hands on it!

My point was that the only way they can defend it is to hope that it won't be noticed which means that they think it will fail close inspection by HMRC and will get defeated in court. Otherwise they'd be quite happy to defend up to House of Lords.

Anyway, my short bit of advice is....look into the provider. Don't bother debating the legalities of the scheme. It is beyond me, and it is most likely beyond you unless you plan to spend the next year pouring through tax legislation on a full time basis.

Ah! The Wesley Snipes defence! Wesley was advised it was OK not to pay tax. If they'd said stand with one foot in a bucket of water and whistle Dixie he'd have done it! Wesley ended up paying the tax and penalties and interest and may go to gaol.

Lastly, with respect to the morality of these schemes. That is for each person to assess. Anyone who is not paying tax under PAYE or as a sole trader has taken some steps to reduce the tax they pay. My guess is that this covers the majority of the contributors to this thread. I think its OK, but again, whatever lets you sleep at night.

The first part of what you say here is such a cop out. If you saw someone stealing from a shop your first instinct would be to stop that person. Just because you're professional doesn't mean that you should park your conscience at the front door when you arrive at work. I'd argue that you have a duty to actively discourage anyone using these schemes as it is just plain bad advice to welcome in years of aggressive Revenue scrutiny.

As regards the 2nd part, there is absolutely no parallel between say making a pension contribution and these schemes, and that my friend is the big difference. I think everyone would agree that living and earning in the UK but paying no tax is immoral - end of.

[Bradley]

respect

I might add that my understanding is that Montpelier are pushing HMRC to "put up or shut up".

Glad to hear it.

[IR35 Avoider]

I've never seen any that would argue past special commissioners level i.e. you're on your own.

My point was that the only way they can defend it is to hope that it won't be noticed which means that they think it will fail close inspection by HMRC and will get defeated in court. Otherwise they'd be quite happy to defend up to House of Lords.

When their scheme first appeared, MTM (Montpelier) said they would defend its users up to the House of Lords. I don't know if they still make that claim.

I think everyone would agree that living and earning in the UK but paying no tax is immoral - end of.

Half the UK population at any given time is a net recipient of government funds, i.e. they receive more in benefits than they pay in taxes. Presumably they are all in the frame for being immoral, assuming you didn't really mean to distinguish between tax on earned an unearned income, and that by paying tax you meant make a net contribution, i.e. you don't really think paying £1 of tax is sufficient to morally entitle you to (say) the £16K of free education and health-care a family of four with two school-age children gets.

[Ardesco]

When their scheme first appeared, MTM (Montpelier) said they would defend its users up to the House of Lords. I don't know if they still make that claim.



Half the UK population at any given time is a net recipient of government funds, i.e. they receive more in benefits than they pay in taxes. Presumably they are all in the frame for being immoral, assuming you didn't really mean to distinguish between tax on earned an unearned income, and that by paying tax you meant make a net contribution, i.e. you don't really think paying £1 of tax is sufficient to morally entitle you to (say) the £16K of free education and health-care a family of four with two school-age children gets.

What about those of us who pay for their children's education?