How about a Contractor Owned ManCo?

[Sergeant Murphys Cosh]

What I don't get is why, if this legal method exists, would anybody bother with the illegal methods?

[nodric]

What I don't get is why, if this legal method exists, would anybody bother with the illegal methods?

My thoughts on this:

None of the other schemes out there are illegal. WTF I hear you say?

They are not compliant.

They simply do not afford 'you' their client, tax compliance, and transparency.

It is not they that break the law, it is you who uses them

They try and sell you that it’s all compliant, but if you know that you have to declare you Worldwide income, but they put your money in an offshore tax haven, don’t you have to wonder why?

If it’s all compliant and transparent why don’t you show the funds in a normal bank, and declare them on your tax return? Read their small print. I bet it says somewhere that your personal tax declaration blah blah, is your problem.

To setup a tax transparent and compliant structure for the collective is complex, and needs skill. While ever there are so many contractors out there willing to pay 4/5/6% or more of their monthly invoice to wash their money offshore, and who will ignore the potential consequences, then why should they even worry about your personal compliance.

There are plenty of contractors who fall into that category, but the risks are getting greater, and the penalties more severe.

If a new way of doing things is born, you can guarantee it will be copied, and the old ways will fade away. Then it will come down to who you trust, and who gives you the best service. I wouldn’t doubt that I’ve got all the other ManCos collective heads scratching about this anyway.

In the end, if you want to pay no tax and SS at all, then work in the black, offshore everything, and eat plenty of roughage while using one of the old school ManCos.

If however you are happy to work in the white, pay your dues and demands, but want to reduce those dues to the minimum, then use the methods that exist to do so.

[wind]

In fact I will be structured that way myself, regardless of any collective solution. Given I supply advice and services beyond day to day contracting,

I wonder what will you be doing with you BVBA, will it loose it's purpose and you will close it or you see further advantages of still owning it ?

[Sergeant Murphys Cosh]

In the end, if you want to pay no tax and SS at all, then work in the black, offshore everything, and eat plenty of roughage while using one of the old school ManCos.

Two things.

i). How does SS get paid under this scheme? It doesn't, right? Meaning you need to provide your own pension & health insurance? (That doesn't make it a problem, just a caveat to be aware of).

ii). I don't mean this in any rude or dis-respectful way, but how do we know we can trust you?

Only you know for sure if this scheme works the way you say it does. (And that's assuming you actually got it right!). Maybe you should issue a 'Certificate of 100% Compliance' for the collective solution, to give peace of mind. Gold-embossed, of course.

[nodric]

I wonder what will you be doing with you BVBA, will it loose it's purpose and you will close it or you see further advantages of still owning it ?

I foresee no tangible benefits in keeping it. However, others may.

If I take a salary from Cyprus, and it’s a big if, then I will declare this on my personal tax return, together with any dividends. Did I mention dividends are taxed at 15% in Belgium, with no SS

To gain 15% (and not 25% which is standard), the shares need to be named (your name on them), and have a cash value.

[nodric]

Two things.

I don't mean this in any rude or dis-respectful way, but how do we know we can trust you?

Only you know for sure if this scheme works the way you say it does. (And that's assuming you actually got it right!). Maybe you should issue a 'Certificate of 100% Compliance' for the collective solution, to give peace of mind. Gold-embossed, of course.

How does SS get paid under this scheme? It doesn't, right? Meaning you need to provide your own pension & health insurance? (That doesn't make it a problem, just a caveat to aware of).

SS is paid on your salary. If you pay yourself a salary you pay SS/NI in the country you are tax resident in.

In the collective solution, you would invoice for your monthly fees, either as a freelance independent, or as a MyCo. In the freelance case you would pay SS/NI on the total, and in the MyCo case you would pay SS on any amounts you subsequently paid yourself as a salaried employee.

Remember, the whole concept is to separate you from the bulk of the fees by you becoming a shareholder in the Cyprus company, to identify opportunities for contracts, and to pool your knowledge and resource with others, to support the delivery of such contracts. Any opportunity you identify and successfully secure, you do on behalf of the company, and therefore it is the company that delivers it.

Think about the wording of that very carefully!

With some finessing by Deloitte’s, this should even satisfy the UK’s MSC and IR35 legislation. Irrespective of the UK specifics, it will accomplish the main aim of lowering your tax and SS liabilities substantially.

You would never become a salaried employee of the Cyprus company.

Question Two

In short you don’t! BUT, that never stopped 1000s of contractors handing over their monthly fees to numerous other intermediaries every month. In fact they still do!

I started this thread by talking about a contractor owned ManCo, and that is still my goal, a ManCo owned by contractors through shares. Some may take a more proactive and managerial role, some may just use it to manage their career/contracts.

In the end you pays your money and takes your choice.

If after the company structure is established, the advice from Deloitte’s is scrutinised, you meet the directors, you talk to the lawyers, and you receive detailed written answers to all your questions, you are still not sure, then there’s always AFSS, Connexions reborn, and a long list of others eager for your trust (insert huge amount of sarcastic grinning here!)

The alternative? Set up your own IBC and avoid the risks of using a collective solution. If you need the expert advice and guidance of a collective solution, do your own due diligence, and make an informed choice.

In the end, the only sure fire way of controlling your own destiny, is not to put it in the hands of others, it’s just some need guidance. Many turn to the church for that guidance, and some turn to tax advisors

Please Note: No direct comparison or offence intended, although as all early forms of tax were imposed by societies controlled by religion, we could suggest they were inextricably linked, at least from an historical perspective. TANGENT

[Sergeant Murphys Cosh]

I foresee no tangible benefits in keeping it. However, others may.

If I take a salary from Cyprus, and it’s a big if, then I will declare this on my personal tax return, together with any dividends. Did I mention dividends are taxed at 15% in Belgium, with no SS

To gain 15% (and not 25% which is standard), the shares need to be named (your name on them), and have a cash value.

How often do you foresee a taking of the dividends?

[nodric]

How often do you foresee a taking of the dividends?

I would recommend a dividend every 3 months. This is to avoid it being treated as salary by the appropriate Hector.

The employment-related securities ('ERS') legislation in Part 7, ITEPA 2003 is among the most complex pieces of legislation on the statute book. In essence, your local Hector could consider a monthly dividend as pure tax avoidance, and could classify it as salary, and therefore shaft you for tax and SS/NI.

You could take a monthly dividend, but then the onus is on you, the shareholder, to demonstrate that this is not required to cover your general living expenses. The law is complex, and almost impossible to fight with a tax specialist on your side. Cost/Benefit analysis says you’ll lose one way or another.

Quarterly is the recommended minimum.

[Sergeant Murphys Cosh]

I would recommend a dividend every 3 months. This is to avoid it being treated as salary by the appropriate Hector.

You could take a monthly dividend, but then the onus is on you, the shareholder, to demonstrate that this is not required to cover your general living expenses.

There is no problem with taking divis monthly in the UK. In fact, my accountant even recommends it.

You just have to remember to i). fill out a divi declaration sheet at the time, ii). only take it out of the actual profits of the company (thus leaving enough for corp. tax).

[nodric]

There is no problem with taking divis monthly in the UK. In fact, my accountant even recommends it.

You just have to remember to i). fill out a divi declaration sheet at the time, ii). only take it out of the actual profits of the company (thus leaving enough for corp. tax).

Rather than start a debate about dividends here, I'll kick of a thread as ERS legislation is way beyond the scope of this discussion.

For my part, the frequency of dividends is a personal choice. I would support whatever the client desired.