Argentia, anyone heard of them?

[DonkeyRhubarb]

Up until S58 came in those schemes were treated as avoidance, post S58 they are treated as evasion and as always having been evasion.

Except they're not being treated as evasion. If they were evasion, then at the very least we would be facing penalties, if not criminal prosecution.

[DonkeyRhubarb]

Up until S58 came in those schemes were treated as avoidance. post S58 they are no longer regarded as avoidance and as having never been avoidance. As DR has said, they haven't attempted to class it as evasion because they would never get it past the courts. What they are doing is bringing civil cases to recover what, IIUC, they are treating as civil debts rather than tax that has been purposely evaded.

Apologies, I jumped the gun on your post.

The above is spot on.

[DaveB]

Apologies, I jumped the gun on your post.

The above is spot on.

And apologies for editing after you had quoted

[ASB]

Not wishing to answer for DR, but I'm sure it was "correct" at the time. Trouble is, some of the income had a notional IOM tax credit applied, so it wasn't all taxed at UK rates of tax, which I think is what the revenue took exception to.

Everything to do with EBTs is taxed at UK rates, there's no IOM tax applied whatsoever. Take anything that people like LCU above say with a huge pinch of salt. Of course there are risks to any tax planning scheme, but people with alternative methods of working have a vested interest in ensuring that their scaremongering puts as many people off as possible.

Rules have been tightened. One significant issue is whether the company paying the money into the EBT can get relief on the contributions. Not quite sure where Sempra has got to on that point at the moment.

Further, there was some very specific change to the finance act related to EBT's and there use a few years ago. Though that is probably a clear indication that they did function as advisors intended.

So, let us assume that the payment to an individual from the EBT is just a loan (a view I accept), if interest is paid at a commercial rate then no benefit accrues (and the interest finds it's way back to the EBT, presumably for the benefit of the employee). The question is when the loan can be repaid or written off. If there is to be a writing off then this would normally result in a tax charge to the employee at the point of write off. However, due to the drafting of the regs it is far from clear that this will actually happen if the employee is no longer employed.

Personally I would expect 2 lines of attack in terms of changes to legislation:-

- Tightening the criteria as to what make the payments into an EBT deductible.
- Expanding the rules as to what constitutes the tax charge on the employee (or former employee) at the point of write off. If they were to do this then then wouldn't need any form of retrospection to catch already existing monies.

Of course you are probably much closer to an EBT than I, if you're happy with it that is of course fine. I personally think limited use of EBTs is probably reasonably safe, but it's the usual risk/reward issue. The maximum upside is finite; the downside could potentially be anything. I don't think they are a particularly high target - yet. They may well become so though.

[DonkeyRhubarb]

Not wishing to answer for DR, but I'm sure it was "correct" at the time. Trouble is, some of the income had a notional IOM tax credit applied, so it wasn't all taxed at UK rates of tax, which I think is what the revenue took exception to.

I've spoken to quite a few people in the business and what HMRC really don't like is the use of mass marketed, retail tax avoidance schemes.

The structure of the loan schemes may be totally different from the DTA scheme, but the net effect is the same in terms of the tax loss to the exchequer.

And by reckoning, when it comes to shear numbers of users, the loan schemes dwarf the dta scheme by at least 2:1.

As this article says, I think the jury is still out on what HMRC might do in a year's time.

http://www.olswang.com/budget2010/budget10_ei.pdf

[Vallah]

My view is that from next April, HMRC will deem loans from EBT's to be income. I'm pretty sure they won't be able to apply that retrospectively though. They'll just effectively shut them down, then turn their attention elsewhere. I'm not sure they'd have the stomach for another huge fight through the courts if they did try to retrosoectively enforce the change, particularly since the EBT scheme is more robust than partnership schemes that took advantage of taxation treaties.

While they clearly don't like mass marketed avoidance schemes, the fact that UK tax rates are being applied to both the basic salary AND the loan element makes it very hard for them to attack.

[DaveB]

My view is that from next April, HMRC will deem loans from EBT's to be income. I'm pretty sure they won't be able to apply that retrospectively though. They'll just effectively shut them down, then turn their attention elsewhere. I'm not sure they'd have the stomach for another huge fight through the courts if they did try to retrosoectively enforce the change, particularly since the EBT scheme is more robust than partnership schemes that took advantage of taxation treaties.

While they clearly don't like mass marketed avoidance schemes, the fact that UK tax rates are being applied to both the basic salary AND the loan element makes it very hard for them to attack.

Thats what makes the BN66 fight so important. If they win that one it sets precedent for any other schemes they want to close down and treat retrospectively.

[DonkeyRhubarb]

Thats what makes the BN66 fight so important. If they win that one it sets precedent for any other schemes they want to close down and treat retrospectively.

Yes indeed. And just look at the backlog they could clear up if they got the green light on retro.

http://www.whatdotheyknow.com/reques...incoming-49346

The Fraud and Avoidance section of the Specialist Investigations directorate have approximately 28013 persons with enquires open under Code Of Practice 8.

(Code of Practice 8 refers to cases of serious tax avoidance ie. schemes)

[Vallah]

Loving the use of "whatdotheyknow" DR, they must absolutely love you!

[nfoote]

So

So am I to understand that anything that might happen to these EBTs won't actually happen until April next year?

I failed to mention that myself and those that I've been talking to about Argentia aren't actually UK Citizens and are here on various levels of working visas.

For myself I will be here for the long term but some contractors (in and outside of IT) that I know are on lower visas, cannot setup Limited Companies and in some cases, will be leaving the UK before April next year.

In such cases, if they took a spin and ran the risk with EBTs and then left the UK permanently before April next year, would they still be at risk of the UK Gvt chasing them around the world looking to apply retrospective taxes and penalties should EBTs be deemed as always having been illegal?