All you people with EBT/Loan/Dodgy Umbrella schemes - what you gonna do?

[malvolio]

The changes are less about EBTs and more about loans. While they have been targeted at people using EBTs, EBTs themselves remain perfectly legal, it’s just that they will no longer be tax effective.

And you can be guaranteed that people will leave - I work for a monstrosity of a bank where most contractors are from overseas. Those on EBTs will leave in droves if they can't transfer onto other tax avoidance schemes, like commercial loans (which I am on).

Speaking of which, does anyone know if commercial loans is the next structure to be targeted?

Don't be so sure. The rules are about any convertible income, be it monies received (hence I suspect "loans" are very much in scope) or the equivalent goods (to stop bonuses being paid in Krugerrands, for example), and they are not limiting it to anything specific. You need to be very sure that your scheme is not affected before getting too comfortablet. Mistakes can be costly - and it's already too late to do anything about it if you're wrong.

[ASB]

Not here in detail, but I can tell you the loan repayments are not BIK

Yes, but with the GAAR rule do you feel confident defending that it is a genuine business transaction for the furtherance of your business purposes ?

[EBTContractor]

Don't be so sure. The rules are about any convertible income, be it monies received (hence I suspect "loans" are very much in scope) or the equivalent goods (to stop bonuses being paid in Krugerrands, for example), and they are not limiting it to anything specific. You need to be very sure that your scheme is not affected before getting too comfortablet. Mistakes can be costly - and it's already too late to do anything about it if you're wrong.

I have worked via a few structures over the years and the one I am on is the most transparent and the one I feel the most confident about.

Yes, but with the GAAR rule do you feel confident defending that it is a genuine business transaction for the furtherance of your business purposes ?

I certainly do.

[BlasterBates]

If your "business loan" is being used for your business that is no problem I think, but I can imagine that if the loan is just going into your private bank account that might have a good chance of being classified as "artificial".

[malvolio]

WHS

They are specifically looking to address

arrangements involving trusts or other vehicles used to reward employees which seek to avoid or defer the payment of income tax or
National Insurance Contributions (NICs).

These they define as being

where a third party makes provision for what is in substance a reward or recognition, or a loan, in connection with the employee’s current, former, or future employment, an income tax charge arises. Income tax is charged on the sum of money made available and on the higher of the cost or market value where an asset is used to deliver the reward or recognition

Exclusions are made for pensions schemes, share ownership schemes and commercial (i.e. B2B) loans.

Still feeling confident?

[TykeMerc]

I'm thoroughly glad I didn't go with one of these schemes when I looked into them a while back. This new set of rules makes these schemes look desperately risky.

[EBTContractor]

WHS

They are specifically looking to address These they define as being

Exclusions are made for pensions schemes, share ownership schemes and commercial (i.e. B2B) loans.

Still feeling confident?

Appreciate you asking and I do feel confident - HMRC doesn't come knocking on your door if you take out a loan down at NatWest or Abbey, do they, let alone asking you what you intend to spend it on?

Unlike most structures that are heavily advertised to suck in people being promised 85-90% returns, this structure offers a slightly lower return without the BIK and other associated red flag alerts. As it isn't advertised anywhere as being a tax avoidance structure it doesn't attract negative press. All the EBTs that have been closed have been warned many many times over the past six years, yet they have continued to advertise and accept more and more people.

As Emigre puts it...

Very simple. Do as I have always done. Comply with the tax laws as they are at the time of making my decision.

... and that's exactly what this structure does, and what I do.

[malvolio]

Fair comment but the targetted EBT's are also entirely legal and always have been. It's just the tax treatment that's changed. However, I still think you need to get qualified, informed advice (as opposed to my unqualified, informed wittering... ). The point is not that they are treating "income" as a BIK, but as earnings; in effect you will be taxed on the accrued value to you of having the money available for your use.

[IR35 Avoider]

Appreciate you asking and I do feel confident - HMRC doesn't come knocking on your door if you take out a loan down at NatWest or Abbey, do they, let alone asking you what you intend to spend it on?

I have only casually glanced at this thread, may have misunderstood what the debate is about, and not looked at what the new legislation says, but I'll plunge in anyway...

If you think that your loan is no different than a loan from a bank, then why didn't you get your loan from the bank?

In other words, I assume the legislation targets loans connected with employment, if you couldn't have got the same loan from a bank, or I (as a non-member of your scheme) could not have got a loan from the same place and on the same terms you did, then presumably it's not an ordinary commercial loan on arms-length terms, and is the sort of thing the legislation (I presume) targets.

[malvolio]

I have only casually glanced at this thread, may have misunderstood what the debate is about, and not looked at what the new legislation says, but I'll plunge in anyway...

If you think that your loan is no different than a loan from a bank, then why didn't you get your loan from the bank?

In other words, I assume the legislation targets loans connected with employment, if you couldn't have got the same loan from a bank, or I (as a non-member of your scheme) could not have got a loan from the same place and on the same terms you did, then presumably it's not an ordinary commercial loan on arms-length terms, and is the sort of thing the legislation (I presume) targets.

Pretty much how I read it.

Anyway, there's no great imperative to change scheme providers, all that's really happened is that the affected companies just turned into regular umbrellas. Still legal, still valid, it's just a lot of people will suddenly be paying the full PAYE/EENICs and ERNICs again. Until someone comes up with Plan C of course...