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BN66 and full empoyment status

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    #11
    err I would get out of that scheme like now....

    That is a fool proof tax scheme right?

    Well that loan is just that, a loan....

    How do you know how often these guys haven't wound up the company and started a new one?

    ...and when they wind it up, they'll call in the loans, and what can you do?

    Be afraid .....be very afraid.
    I'm alright Jack

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      #12
      Totally agree with BB - this is an obviously artificial scheme which has been designed to avoid paying tax - exactly what HMR&C have taken issue with in the recent BN66 case.

      With these particular schemes, if the loan is written off it becomes taxable or it remains an outstanding loan which can be recalled at any time so your position is never secure.

      With regard to applying future legislation retrospectively - in these type of circumstances it is not only possible but extremely likely.
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        #13
        Originally posted by LisaContractorUmbrella View Post
        Totally agree with BB - this is an obviously artificial scheme which has been designed to avoid paying tax - exactly what HMR&C have taken issue with in the recent BN66 case.

        With these particular schemes, if the loan is written off it becomes taxable or it remains an outstanding loan which can be recalled at any time so your position is never secure.

        With regard to applying future legislation retrospectively - in these type of circumstances it is not only possible but extremely likely.
        well in that case (with regards the writting off and becoming taxable) surely its more of a tax deferral scheme? ...

        not sure about the future legislation retrospectively.. since they are not attempting to clarify (read - change) an existing law, the more likely scenario would be a closure of the loophole going forward, like they have done to just about every other loophole EXCEPT for the BN66 one...

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          #14
          Originally posted by RockTheBoat View Post
          well in that case (with regards the writting off and becoming taxable) surely its more of a tax deferral scheme? ...

          not sure about the future legislation retrospectively.. since they are not attempting to clarify (read - change) an existing law, the more likely scenario would be a closure of the loophole going forward, like they have done to just about every other loophole EXCEPT for the BN66 one...
          depending on the scheme's set up it could be considered tax deferal but that in itself is not acceptable to HMR&C. PAYE is paid monthly or weekly and, if you work through a Limited Company you will actually paid tax in advance of it being due after the first year of trading. It is therefore highly unlikely that HMR&C would view paying your tax every few years or so as anything other than avoidance.
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            #15
            Originally posted by BlasterBates View Post
            err I would get out of that scheme like now....

            That is a fool proof tax scheme right?

            Well that loan is just that, a loan....

            How do you know how often these guys haven't wound up the company and started a new one?

            ...and when they wind it up, they'll call in the loans, and what can you do?

            Be afraid .....be very afraid.

            I know of one scheme that has wound up, and started a new company and 3 years later - they still havn't recalled any loans. In fact, they have done this twice now, and not one loan has been recalled.

            Probably because they have no power to...that belongs to the Trust. Which is the key element of an "EBT".

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              #16
              Even if the loan-based schemes run until the day you die, the tax is still due, it just comes out of your estate before any leftovers (yeah, right...)go to the family, unless you manage to do something very clever to avoid it (like giving it all away). Or, were they so minded, HMRC could tax you now on the perceived benefit to you of having the loan capital available for use.

              Walk away. Like someone else said, if you live and work here, you pay tax here. Anything else is now very risky unless you are a major donor to Gay Gorgon's support organisation.
              Blog? What blog...?

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                #17
                Don't be misled by trying to apply BN66 to your scenario. In the JR, HMRC did not even really attempt to back up their case law assertions, they had been pretty much torn to shreds. What they did do was to persuade the judge to accept that they have a right to create retrospective tax legislation if they feel it is justified. The judge backed the argument that by using legal tax planning you are seeking to lower your tax burden below that accepted as the norm and this can be unfair. If HMRC don't like what you are doing, they can retrospectively legislate against it. Don't be distracted by the fact that it was DTA, or offshore trusts etc etc in the BN66 case. Now you could argue that that HMRC would only do this if they feel that the planning is aggressive, unfortunately it is HMRC who will decide that, not you and not your advisors.

                That's why this judgment is causing so much concern, and really needs to be tackled, it is too sweeping. Can you imagine if you are a tax efficient company considering setting up in the UK what you would be thinking at the moment? You have shareholder value to consider, you want to legally maximise your profits, you have lots of highly paid accountants to make sure your money is used efficiently. Can you be certain that in ten years time, HMRC are not going to retrospectively legislate against you? Doubt it.

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                  #18
                  If you indulge in tax avoidance you take a risk it is a simple as that, and you just need to put enough aside to pay a bill if the worst comes to the worse.
                  Last edited by BlasterBates; 2 February 2010, 08:20.
                  I'm alright Jack

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                    #19
                    Originally posted by malvolio View Post
                    Even if the loan-based schemes run until the day you die, the tax is still due, it just comes out of your estate before any leftovers (yeah, right...)go to the family, unless you manage to do something very clever to avoid it (like giving it all away). Or, were they so minded, HMRC could tax you now on the perceived benefit to you of having the loan capital available for use.

                    not quite true as you are making a big assumption that it is written off at death. as it is a Loan (and thus the same as a mortgage, credit card debt etc), it would actually have the effect of reducing your estate before tax.

                    and the bit about perceived benefit is laughable come on. that would be like them taxing you now for the potential capital gains that x investment that you made might make over the next 10 years. a loan is a loan, not income

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                      #20
                      Is it really a loan if it never gets repayed?
                      I'm alright Jack

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