BN66 and full empoyment status

[malvolio]

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.

[sal626]

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".

[LisaContractorUmbrella]

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.

[RockTheBoat]

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...

[LisaContractorUmbrella]

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.

[BlasterBates]

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.

[cojak]

from what I know there have been two cases recently where HMRC actually lost trying to argue that the loans were anything but that. so for now they are "safe", so long as you have the paperwork in place and your I's dotted and t's crossed (having a formalised loan agreement, )

If the loans are "safe" doesn't that mean that one sunny day your 'employer' can demand that you repay the loan?

Just a thought...

[RockTheBoat]

Hi All,

To follow up with examples.

A man is in full time employment by an offshore company using a trust scheme. He is paid part of his salary and pays PAYE and NI on that. The rest of the salary is made of loans via a trust to him which are owed at a future date.

Can somebody help with the pros and cons of this method? Can the tax man use BN66 and previos legislation against him?

Again, help and advice appreciated.

no that tax man cannot use BN66 as this specifically applies to the use of double tax treaties etc between the Uk and other regions. it does not cover loan schemes

as far as previous legislation goes, I believe there is none preventing you getting a loan from a trust that you will be paying back at a later date. so in this case they cannot retrospectively "clarify" a previous law. from what I know there have been two cases recently where HMRC actually lost trying to argue that the loans were anything but that. so for now they are "safe", so long as you have the paperwork in place and your I's dotted and t's crossed (having a formalised loan agreement, )

[Melver]

Hypothectical Example

Hi All,

To follow up with examples.

A man is in full time employment by an offshore company using a trust scheme. He is paid part of his salary and pays PAYE and NI on that. The rest of the salary is made of loans via a trust to him which are owed at a future date.

Can somebody help with the pros and cons of this method? Can the tax man use BN66 and previos legislation against him?

Again, help and advice appreciated.

[LisaContractorUmbrella]

If he really is a full time employee, wouldn't any tax shortfall be the employer's responsibility?

PS For any penalties and interest anyway.

If the deduction was made from the individual and not paid to HMR&C then yes but if the calculation itself was incorrect no.