loan element tax free unbrella company

[nancy]

Hi all

I am new to contracting and searching for brolly company. Found one that offer around 60% of income i can actually take home and with 130£ fees. But there is one other that is using loan element which allows me take home 80% of income. Pls see below. Just wonder if this is legal to do it this way as this sounds extremely attractive with the returns. And if this is no good. Any other good ones recommend? And wat items am i liable to claim my expenses, ie accomodation.. Please advice.

Regards
Nancy

"Bromley Management Services circumvents the whole issue of IR35 as you would be 'employed' ...versus the Self Employment option where you would have to comply with IR35 etc. You would be employed by us on a commercial salary and given a discretionary (TAX FREE) loan (not the typical dividend payment given by composite companies where 19% corporation tax applies). You simply pay a 5% management fee that includes any interest charges for the loan.



How Bromley Support Services works

Part of your income is fully taxed. A base salary is agreed upfront before you start. The rest of your income (loan element) is tax free. We secure the validity of the loan in several ways; you pay 1% above the Bank of England base rate, you’re given an official loan offer and you’re issued monthly loan statements. The loan offer is typically fixed in £25k increments which are drawn against every time you are paid. When the total of loan payments nears to £25k, a new loan offer is issued. Even though the interest rate is currently at 6.25% (1% above base), we actually offset this within our 5% management fees...so you only pay 5% across the board. We have no set up or cancellation fees, and there are no binding contracts in respect of how long ! you use us.

You wouldn't need to bother about offsetting your expenses as most of your salary is tax free to start with. The other advantage with Bromley Support Services is that we sort out all your tax and NI for you up front, so you won't get any surprise tax bills later on. If asked to file your taxes by the Revenue, you would simply declare earnings on the low base salary, also featured on the P60 we issue each year. "

[BrilloPad]

I believe the loan thing has been totally blown out out the water by HMRC.

Try searching these boards for montpelier. I use them and highly recommend - though alot here don't like them.

[NotAllThere]

When I first went contracting many years ago, there were no brollies, and no internet to ask questions and find advice. I survived. Twenty years of experience says: Go ltd. It's the ONLY sensible option.

If I was to ever have the misfortune to live in the UK, I wouldn't work any other way.

[tim123]

How Bromley Support Services works

Part of your income is fully taxed. A base salary is agreed upfront before you start. The rest of your income (loan element) is tax free. We secure the validity of the loan in several ways; you pay 1% above the Bank of England base rate, you’re given an official loan offer and you’re issued monthly loan statements. The loan offer is typically fixed in £25k increments which are drawn against every time you are paid. When the total of loan payments nears to £25k, a new loan offer is issued. Even though the interest rate is currently at 6.25% (1% above base), we actually offset this within our 5% management fees...so you only pay 5% across the board. We have no set up or cancellation fees, and there are no binding contracts in respect of how long ! you use us.

OK, so what they are saying is that they are charging you 6% interest on the loan (which stops it being a BiK) and they then use as their management fee.

OK, don't see a problem with that. But when happens in year two when you will still have to pay the interest (to stop the loan being a BiK in that year), but ordinarily there would be no expectation of a management fee on this money for this year.

The problem with using loans is that to avoid them becoming a BiK you have to pay the interest FOREVER and very soon that interest payment is more than the tax saved.

A loan scheme works (reasonably) well if you have a very large amount of income in one year and none in the next, so that you can defer the income to a later year to save some tax.

It doesn't work if you have the same income every year for 10 years.

tim

[temporarylogon]

oh no, not again



Oh dear, It's Payscheme Plus having yet another lame plug under a thinly disguised name. Surely some of you old timers would have noticed this (ok, yes I know it is the weekend and most posts happen only on client's time, paid of course :-) )


From "Bromley Support Services" website we see:-

Bromley Support Services
Kings House, Home Park Estate, Station Road,
Kings Langley, Hertfordshire WD4 8DH
Tel: 0845 620 9264


and from "Payscheme Plus" we see, er the same:-

Payscheme Plus
Kings House, Home Park Industrial Estate, Station Road
Kings Langley, Hertfordshire WD4 8DH
Tel: 0845 620 9257


Apart from the dodgy loan bit and the offshore bit, MSC legislation looks very applicable for these schemes. PSP could offer no clear reasons why it wasn't caught, which is why I jumped ship a very very long time ago. Have a quick search of the board under payscheme or batchworth.

[Friendly Accountant]

Loan?

I've come across other loan schemes that involve an EBT but there is no reference to one on the Bromley website. Does anyone know if they use an offshore EBT for the loan?

Additionally - what guarantee is there that the loan won't be called?

Interestingly, although the web-site says they've been around for 10 years, the company was only incorporated in 2005!

[TheFaQQer]

Additionally - what guarantee is there that the loan won't be called?

There is none. And as tim123 says, you need to pay the interest on the loan until the loan is repaid.

It's all well and good saying that they offset the loan interest from their management fees - how do they work when they are getting no management fees?

[Flash]

Offshore Loan Scam

First you con a bunch of stupid, greedy contractors into assigning over their income stream to you. You then 'loan' them back their own money. [Which is okay, because 'nudge nudge, wink wink' you are never going to call the loan.]

Stupid greedy contractors tell their mates about this brill scheme where you get your income as a 'loan' - and dont have to pay tax. More stupid greedy contractors join up.

Meanwhile you are charging a small admin fee on all the income flowing through your off-shore company. Great!

Eventually, the Inland Revenue takes an interest in the arrangement. "Oh - ho", says Hector, "Looks like some tax evasion going on here."

Suddenly the stream of stupid greedy contracts dries up [even the Aussie temps!]. Then you stop paying people [some issue with your payment system or something].

So you are now sitting on a small pile of management fees, plus 1-2 months of contractor fee income. Double Great!

However, Hector is now taking an even more avid interest in you. Apparently if these 'loans' were never going to be called, then they are not loans after all but 'gifts'.

So you now have two options:
a) Admit that you have been party to a big tax evasion scheme;
b) Decide the loans were real loans after all.

Hmm. Tricky one this. NOT!

You let all your stupid greedy contractors known that, well, the loans are real loans ... and you now expect the money back.

This has a double benefit: there was never any tax evasion AND you now have a huge asset [all those loans you've now called]. You now sell the loans on to some debt collectors [at, say 50% of value] who are good with baseball bats and bailiffs.

So you are now sitting on a small pile of management fees, plus 1-2 months of contractor fee income, plus half of all the contractors income over the last few years. And all in some dodgy off-shore company - where your name isn't even on the door. Quadruple Great!!!!

Grab the cash: champagne, yacht, Bentley. Job done.


Best thing is - it is all legal. If done right, you haven't broken any laws.


Meanwhile, the stupid greedy contractors now end up owing some complete b@st@rds a huge amount of money, get forced into bankrupcy, house foreclosures ....

[Torran]

nose meet poo