EBT & other loan schemes

[dezze]

Draft legislation published today that effectively kills EBT schemes from today. See http://www.hmrc.gov.uk/budget-update...tax/wms-aa.pdf AND http://www.hmrc.gov.uk/budget-update...plan-notes.pdf at page 443 tp 489.

This does appear to mean that any existing loans already paid will not fall under the new legislation.

[malvolio]

This does appear to mean that any existing loans already paid will not fall under the new legislation.

As I've said many times before, those in a scheme in good faith already won't be chased for supposed back taxes owing which, given the grief of BN66, is something of a relief. Retrospection is never good, especially when applied to taxation.

But look at the anti-forestalling measures: as of yesterday, anything you receive from any such scheme will be taxed in full as earned income.

[Alan Jones]

As I've said many times before, those in a scheme in good faith already won't be chased for supposed back taxes owing which, given the grief of BN66, is something of a relief. Retrospection is never good, especially when applied to taxation.

I don't disagree with the rationale/legality/correctness of your statement BUT there is nothing to stop HMRC attacking previous years if they have evidence that the loans were not genuine i.e. side letters/emails saying that loans are NOT repayable OR will be written off. There are a couple of EBT schemes with at least 1000 contractors. I think HMRC will take a closer look at these.

[BobTheCoder]

It does look like it's not necessarily the last some people may hear of EBTs, if you have one then it is probably still prudent to have some form of paying back any liability you may be exposed to, see the "Current Law" paragraph:

Existing casework and litigation
Some of the types of transaction which will be chargeable to tax under this measure (including
the earmarking of funds held in a discretionary trust) are not accepted by HM Revenue &
Customs (HMRC) as effective in avoiding tax under the present law. HMRC will continue to
challenge such transactions under the present law, including in litigation where necessary

[ChimpMaster]

Draft legislation published today that effectively kills EBT schemes from today. See http://www.hmrc.gov.uk/budget-update...tax/wms-aa.pdf AND http://www.hmrc.gov.uk/budget-update...plan-notes.pdf at page 443 tp 489.

The first document you linked to mentions that the legislation will take effect from April 2011. I only had a quick scan, so may have missed something, but it does seem pretty clear to me.

[malvolio]

The first document you linked to mentions that the legislation will take effect from April 2011. I only had a quick scan, so may have missed something, but it does seem pretty clear to me.

You missed something. Look at the bit about anti-forestalling measures; any income or assets received as of 9th Dec 2010 will be liable to normal taxation at the end of the current tax year. In other words, if you haven't already got it in your personal account, it's now going to get taxed at full rate.

[pastalista]

You missed something. Look at the bit about anti-forestalling measures; any income or assets received as of 9th Dec 2010 will be liable to normal taxation at the end of the current tax year. In other words, if you haven't already got it in your personal account, it's now going to get taxed at full rate.

Assuming, Mal, that the user continues to extract their funds from the EBT. If they have the funds transferred from their EBT provider to an alternative vehicle (ltd company) or ask the EBT provider to return the funds to the originating agent and re-invoice via something like a ltd or an umbrella then they should be fine.

I'm guessing though from these comments that many users of these schemes will ignore or not be aware of the anti-forestalling measures and will think they have until April 2011 to sort it out, which wil be expensive for them.

Pastalista

[prozak]

If they have the funds transferred from their EBT provider to an alternative vehicle (ltd company) or ask the EBT provider to return the funds to the originating agent and re-invoice via something like a ltd or an umbrella then they should be fine.
Pastalista

I asked my provider about this.

Specifically I asked... "Is there any way of reversing the allocation? I could then raise an invoice from my company for you to pay?"

The reply was that they were not sure my suggestion was practical and any invoice raised would have to be at fair value.

Whether that means it cannot be done, I am not sure... it might mean that they would not be able to take their fee for that amount.....? (provider reads this forum not sure who he posts as) and in that way it is not practical?

[pastalista]

Getting your EBT money

I asked my provider about this.

Specifically I asked... "Is there any way of reversing the allocation? I could then raise an invoice from my company for you to pay?"

The reply was that they were not sure my suggestion was practical and any invoice raised would have to be at fair value.

Whether that means it cannot be done, I am not sure... it might mean that they would not be able to take their fee for that amount.....? (provider reads this forum not sure who he posts as) and in that way it is not practical?

I spoke with my scheme provider and they think the best way to handle it is to return the money to the agency and then for the contractor to raise a new invoice from another vehicle. Whether or not some schemes will be happy to return the money to the agency because "they are working on getting a new solution in place" is another matter.

Pastalista

[malvolio]

I spoke with my scheme provider and they think the best way to handle it is to return the money to the agency and then for the contractor to raise a new invoice from another vehicle. Whether or not some schemes will be happy to return the money to the agency because "they are working on getting a new solution in place" is another matter.

Pastalista

Indeed. If you read your Ts&Cs carefully you may find it's no longer your money anyway, whic puts a slightly different slant on things...