EBT or not EBT

[bigbrainbrad]

Thanks for the comments on this, over the past couple of weeks I have managed to do some further investigation which I hope is useful...

1) This has already been tested in Court and passed. HMRC will claim victory, but that is down to their ability to shut down loop holes, making contribution by UK companies to an EBT a taxable event. They are unable to do this if they do not have jurisdiction, Isle of Man for example, or further a field such as Switzerland etc etc.

2) It would be impossible for HMRC to tax loans from trusts, companies, foundations or any other entity for that matter, as this would likely cover mortgage payments, credit cards etc.

3) As an employee of the 'offshore' umbrella company, it seems sensible to assume that they will charge a day rate on my behalf to the agency or end company. I simply receive a full UK salary from the umbrella company and they make a contribution to an EBT on my behalf...

4) Now this is where I found it to get interesting. Most of the existing EBT's are not set up correctly to navigate these issues, as they manage all control aspects of payment to contractors, including loans from the EBT - this negates the discretionary nature and ties everything together. If you have a very clear separate line of communication with your umbrella company and Trust and have all appropriate paperwork, there is not a court in the world that could find against this (or at least in my humble opinion).

Anyway, just wanted to share the above, based on my research, I will likely go ahead and use an EBT, happy to share further thoughts if anyone is interested...

BBB

[LisaContractorUmbrella]

"This has already been tested in Court and passed. HMRC will claim victory, but that is down to their ability to shut down loop holes, making contribution by UK companies to an EBT a taxable event."

Huh? So does that mean it was tested in court and then HMR&C closed the loophole which means it will now be classed as tax avoidance and leave anyone using it liable for a massive tax bill at some point?

[DaveB]

Thanks for the comments on this, over the past couple of weeks I have managed to do some further investigation which I hope is useful...

1) This has already been tested in Court and passed. HMRC will claim victory, but that is down to their ability to shut down loop holes, making contribution by UK companies to an EBT a taxable event. They are unable to do this if they do not have jurisdiction, Isle of Man for example, or further a field such as Switzerland etc etc.

Can you give us the case details? When, where, judges ruling etc?

Payments from the brolly to the EBT are irellevant. Jurisdiction doesnt matter if they decide on investigation that the loans are in fact disguised income. As a UK resident you will be liable for tax on that income. Doesn't matter where the EBT or brolly are based.

2) It would be impossible for HMRC to tax loans from trusts, companies, foundations or any other entity for that matter, as this would likely cover mortgage payments, credit cards etc.

It would be if they decide it counts as income, which is entirely possible when they start digging into the scheme. A loan to buy a house or a car is clearly a loan for a purpose. A loan from a trust set up soley to provide loans for the sake of distributing income in a different thing altogether.

3) As an employee of the 'offshore' umbrella company, it seems sensible to assume that they will charge a day rate on my behalf to the agency or end company. I simply receive a full UK salary from the umbrella company and they make a contribution to an EBT on my behalf...

Basing complex tax avoidance structures on vague assumptions is going to get you into all sorts of trouble.

4) Now this is where I found it to get interesting. Most of the existing EBT's are not set up correctly to navigate these issues, as they manage all control aspects of payment to contractors, including loans from the EBT - this negates the discretionary nature and ties everything together. If you have a very clear separate line of communication with your umbrella company and Trust and have all appropriate paperwork, there is not a court in the world that could find against this (or at least in my humble opinion).

If the loans are discretionary there is no compulsion on the trust to actually give you the money. You are placing an awfull lot of faith in the trust managers that they will do so. If there is a reasonable expectation on your behalf that they will provide the loans then there is no discretion on behalf of the trust. Doesnt matter how you divide it up the end result is the same, especially if you have the details of the arrangement in writing.

You do have a written contractual agreement on how your hard earned cash is going to be managed and how it is going to get to you, don't you?

Is your opinion that of a qualified QC with experience of taxation legislation and a track record of successfully defending these schemes in court?

Anyway, just wanted to share the above, based on my research, I will likely go ahead and use an EBT, happy to share further thoughts if anyone is interested...

BBB

So is this where you come back and post in a week or so to tell us how wonderfull XXX scheme is and how we should all be using it?

You'd have saved a lot of time if you'd just come out and tell us which scheme you are fronting for.

[Emigre]

This Board is full of threads about EBTs and loans. Why do we need another? Why couldn't the others just be read instead?

The last entry by OP reads exactly like any marketing piece for a new scheme. I think we're all supposed to post here one after another "Who are you going with?" or "Who is it....please?"

The first post by OP was in one of the sticky threads.

Sorry, fed up explaining myself

[NotAllThere]

This Board is full of threads about EBTs and loans. Why do we need another? ...

Because those promoting EBTs will keep using this board as an advertising forum, by pretending to be real contractors asking questions about EBTs.