BN66 - Time to fight back!!!

[DonkeyRhubarb]

Confusion over the 10% fee

sorry to come to the party late - but am a tad confused - there are the two 4%'s - those of you early joiners who pay 6 and owe 4 if the scheme works (and there seem to be some of you who have in the mena time had things passed and pay the 4 only to have years reopeend...)

and then there are those of us who joined paying 10% witht he promise from day 1 tht in the 'unlikley' event of a failure we would get our 4% back. I am in the latter group...... so dont think the 4% argument shows anythign about what MTM think or predict as an outcome - its jsut that they worked out they could keep the case rahter than dishing it out. Whehter those of us in that camp ever see the 4% ... who knows.

I wasn't aware of this. So if MTM lose the case, they would:
a) forfeit the 4% that the early joiners like me had as a loan
b) have to repay the 4% to people who had returns re-opened
c) have to repay everyone else who joined later that paid the 6+4% up-front

For some reason, I had assumed that the 10% fee introduced later (c) was non-refundable. Do you have it in writing that the 4% is refundable?

So, in other words, if they win they collect 10% of everyone's gross income; if they lose they only get 6%. This makes a huge difference. I don't know how accurate the following estimate is but if we assume it's in the right ballpark, then MTM could collect an extra £14M if they win!

Assumptions
Average of 1000 contractors in the scheme
Average duration of 5 years
Average annual gross income £70,000

Total combined gross income = 1000 * 5 * £70,000 = £350M

MTM's fees
Win (10%) - £35M
Lose (6%) - £21M

[BrilloPad]

I know I pay 10% and it is NOT refundable.

[DonkeyRhubarb]

I know I pay 10% and it is NOT refundable.

That is what I thought. When I joined I regarded the 4% loan as an act of good faith by MTM demonstrating their commitment to fight it all the way (ie. no win/reduced fee). I was a bit suspicious when they stopped offering the loans after a year or so, and I never got a satisfactory answer as to why they did this.

As it stands now, there is much less incentive for them to defend the scheme. If you refer back to my previous figures, I suspect of the est. £30M they have collected in fees, only about £2M is outstanding in loans, which is not much in the grand scheme of things.

[scott_free]

BUT what I am a tad unhappy bout is what have they now moved us onto? can anyone get an answer on that - as it seems to be loan based - but we havent signed loan agreements. Does anyone have detail on this? as at the mo we seem to be 10% for ??????

What’s the general consensus regarding the loan based scheme, pros and cons. Anyone had any experience in using one/been investigated ?

[DonkeyRhubarb]

What’s the general consensus regarding the loan based scheme, pros and cons. Anyone had any experience in using one/been investigated ?

I worked with a few people who were in the Castlemaine scheme a few years ago which involved foreign currency loans. They seemed fairly happy with the arrangement but I don't know if it ever got investigated.

With HMRC's crackdown on avoidance schemes, everything is risky these days. It is fair to assume that they will act against any scheme that is notified to them, so the best policy is to cover your a*se accordingly (take out a CTD, invest the money).

If you can operate outside IR35, a Ltd Co might be a safer option.

[elpinar]

I cant find any promise of the 4% repayment in the files i have on line - but will need to look through all the paperwork I have at home as it was definitely told to me as part of the deal.

The thing I don’t get/like with the loans – is they don’t get written on your tax return which to me takes things to a different place – its one thing to write it down and have the powers that be disagree with the box you entered it in – but they were told …. It strikes me as completely different to say you only have an income o f 20k a year – just seems dishonest somehow – or am I missing the point.

And am a little aggrieved that if this is how it is we were not told it up front s now I am committed on this new way till November – when if I had been given all the details id have probably opened out at that point – so I am currently paying 10% (so a tidy sum) for the privilege of being in something I would not have chosen to go into ……

[DonkeyRhubarb]

I cant find any promise of the 4% repayment in the files i have on line - but will need to look through all the paperwork I have at home as it was definitely told to me as part of the deal.

The thing I don’t get/like with the loans – is they don’t get written on your tax return which to me takes things to a different place – its one thing to write it down and have the powers that be disagree with the box you entered it in – but they were told …. It strikes me as completely different to say you only have an income o f 20k a year – just seems dishonest somehow – or am I missing the point.

And am a little aggrieved that if this is how it is we were not told it up front s now I am committed on this new way till November – when if I had been given all the details id have probably opened out at that point – so I am currently paying 10% (so a tidy sum) for the privilege of being in something I would not have chosen to go into ……

Do you know if MTM have disclosed the new scheme as a tax avoidance scheme to HMRC?

If they have, then when you file your tax return you will have to enter the scheme number on the SA form. In which case, HMRC will pretty soon be asking what else you have received in addition to the £20k that has been declared.

I don't believe that non-preferential loans, charging a commercial interest rate, have to be declared on your tax return, so strictly speaking this can't be deemed as tax evasion.

As I said before, any scheme should be regarded as highly risky in the current climate, and if you can go Ltd then you are probably much safer doing this.

If I was still contracting, I would not rule out using a scheme but I'd put all the tax "saved" into a CTD just to be on the safe side, and reckon on not being able to touch the cash for about 10 years.

[BrilloPad]

As I said before, any scheme should be regarded as highly risky in the current climate, and if you can go Ltd then you are probably much safer doing this.

I still think ltd will come under attack. It is only the schemes that keep the heat off them.

Very odd that government/HMRC think it is fine to profit from the labour of others - but not your own labour.

[Lewis]

I am constantly amazed when I read this thread that you are moving to a new scheme whilst be investigated on an old one. Out of interest I did a beer mat calc on a £100K contract, 10% fees, 20K salary and the rest as "loans". I came up with about 83% take home.

Now with a Ltd you can get 75%-80%+ depending on circumstances. Highest is when you are married with non-working wife/husband and you max out both your lower tax bands.

Plus you can get IR35 insurance that pays out tax, penalties and interest in the event of the case being lost (QDOS Consulting's TLC35 product).

Why do you guys take such risks for a few grand a year?! I understand that years ago IR35 was considered much more of a risk. But with the IR35 score currently at 1462 wins to 6 loses for PCG memebers plus products like TLC35 the difference in risk between an off-shore loan scheme and Ltd is order of magnitudes apart.

Plus, dare I risk the moral argument, at least you are paying something to the the country rather than the 10% to Montpelier.

Surely going limited has got to be better than just putting the money in a CTD and hoping you won't get caught. Go Ltd and sleep easy!

[DonkeyRhubarb]

I still think ltd will come under attack.

This government is running out of time to implement further legislation. Assuming they get booted out at the next election then a PSC should be safe for a few years.

It is very inefficient for HMRC to investigate PSCs on a case by case basis. The only reason for doing it is to spread FUD amongst the freelance community. There is no way it could be justified in terms of tax recovered.

On the other hand, the schemes are a much easier target because they can scoop up a whole bunch of people in one go, and target substantial sums of revenue.