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Loans from EBTs and other Trusts

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    Originally posted by malvolio View Post
    Incidentally I'm getting around 82% from MyCo's earnings, without fiddling expenses and without breaking any laws or principles. Perhaps I'm just a bit smarter than you think I am.
    I'm guessing you're one of the lucky few IT contractors who *really* sets their own hours, is allowed (really) to substitute and truly falls outside all the other IR35 rules. That's really fortunate for you mate, but most of the people in this thread are probably not so lucky. The point of this discussion centres around people who have all the drawbacks of being a contractor, and yet retain 60% or less of their earnings via PAYE umbrella to be 'sure' that they are doing the right thing. Don't take pot shots at people who are just trying to do their best to avoid paying *more* tax than permies do, in an environment where rates are being squeezed and it's no longer true to say that the additional taxes are factored for in to the rates on offer.

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      Originally posted by contractor42 View Post
      I'm guessing you're one of the lucky few IT contractors who *really* sets their own hours, is allowed (really) to substitute and truly falls outside all the other IR35 rules. That's really fortunate for you mate, but most of the people in this thread are probably not so lucky. The point of this discussion centres around people who have all the drawbacks of being a contractor, and yet retain 60% or less of their earnings via PAYE umbrella to be 'sure' that they are doing the right thing. Don't take pot shots at people who are just trying to do their best to avoid paying *more* tax than permies do, in an environment where rates are being squeezed and it's no longer true to say that the additional taxes are factored for in to the rates on offer.
      Sigh...

      I'm not taking potshots at anyone, other then the clever guys who think EBTs are a good idea.

      You can avoid paying more tax than necessary by using your own company and fully understanding IR35. Hiding behind an umbrella is safe and simple but it's not tax efficient and will be an even worse idea when the AWD comes in later this year.

      As for my retention rates, let's just say it helps to be a little older than most. However 70-75% is totally achievable without stepping outside the intent of any UK tax laws.
      Blog? What blog...?

      Comment


        Originally posted by malvolio View Post
        Sigh...

        I'm not taking potshots at anyone, other then the clever guys who think EBTs are a good idea.

        You can avoid paying more tax than necessary by using your own company and fully understanding IR35. Hiding behind an umbrella is safe and simple but it's not tax efficient and will be an even worse idea when the AWD comes in later this year.

        As for my retention rates, let's just say it helps to be a little older than most. However 70-75% is totally achievable without stepping outside the intent of any UK tax laws.
        'Scuse I Mal but why do you say that umbrella's will be a worse option in October?
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        Comment


          Originally posted by LisaContractorUmbrella View Post
          'Scuse I Mal but why do you say that umbrella's will be a worse option in October?
          Something to do with holiday pay and related benefits (although not sick pay, for some reason) after temps have been on site for a number of weeks? And umbrella users, under the current AWD definitions, will be treated as agency temps. The extra rights will cost money, which I'm guessing won't come from the client or the umbrella, or the less smart clients will simply terminate before any rights accrue.

          I've yet to see any answers about how the brollies will be handling this situation...
          Blog? What blog...?

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            Originally posted by malvolio View Post
            Something to do with holiday pay and related benefits (although not sick pay, for some reason) after temps have been on site for a number of weeks? And umbrella users, under the current AWD definitions, will be treated as agency temps. The extra rights will cost money, which I'm guessing won't come from the client or the umbrella, or the less smart clients will simply terminate before any rights accrue.

            I've yet to see any answers about how the brollies will be handling this situation...
            The reason for that is that there has been no guidance published yet and apparently Cameron has been trying to get some of the legislation reversed (in papers today - he's got the right hump because Vince Cable didn't do what he was told).

            The initial legislation gave employment rights to agency workers after 12 weeks - what has not been clarified is whose responsibility providing those rights is; it seems that agencies are working on the assumption that it will be umbrella companies but really that is up to Cameron and Co to decide. As soon as we have had more info (April the something) will be happy to post and let people know how or if it will affect them. Up until then you are getting a bit ahead of yourself old chap
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              Originally posted by malvolio View Post
              You can avoid paying more tax than necessary by using your own company and fully understanding IR35.
              Ok, I'll admit to being less informed than some, but as far as I know, you can't be 'a bit' outside of IR35 - it's a binary proposition. If you wouldn't be comfortable with HMRC talking to your boss and having him/her explainin that yes, you do have to ask permission before having a day off or WFH - and no, you wouldn't be allowed to substitute anyone else to do your job - then you're inside IR35 and you pay the same as PAYE umbrella. If that's wrong, I'm genuinely eager to understand how it works.

              A friend told me that virtually all of the contractors in his office use LCs, but he's quite sure that none of them are in reality outside IR35 - they're 9-to-5-ers who use the company's computers and stationary, and do whatever ad-hoc tasks they are assigned and are treated the same as the permies. They just fiddle with their contracts, buy their insurance and take the risk. When you get down to it, surely that's what the vast bulk of IT contractors are doing.

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                Originally posted by contractor42 View Post
                Ok, I'll admit to being less informed than some, but as far as I know, you can't be 'a bit' outside of IR35 - it's a binary proposition. If you wouldn't be comfortable with HMRC talking to your boss and having him/her explainin that yes, you do have to ask permission before having a day off or WFH - and no, you wouldn't be allowed to substitute anyone else to do your job - then you're inside IR35 and you pay the same as PAYE umbrella. If that's wrong, I'm genuinely eager to understand how it works.

                A friend told me that virtually all of the contractors in his office use LCs, but he's quite sure that none of them are in reality outside IR35 - they're 9-to-5-ers who use the company's computers and stationary, and do whatever ad-hoc tasks they are assigned and are treated the same as the permies. They just fiddle with their contracts, buy their insurance and take the risk. When you get down to it, surely that's what the vast bulk of IT contractors are doing.
                Read The Potted Guide to IR35 | Contractor Accountants then you tell me. For one thing none of the factors you mention are even vaguely relevant, just the usual can't-be-bothered-to-find-out excuses. But I will mention that 98% of IR35 cases have either been dropped or found in favour of the contractor.

                The real triumph of IR35 is the number of people it's scared into paying more tax than they ought to, either by using umbrellas (not the only reason people use them, of course, but you get the point) or by declaring themselves inside. But hey, we've only been telling people that for around 11 years now...
                Blog? What blog...?

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                  Originally posted by DonkeyRhubarb View Post
                  The problem these days, since the disclosure regime (DOTAS) came in, is it's very hard to determine if HMRC are serious or not because it's virtually automatic that every return gets put under enquiry (Code of Practice 8 - COP8). HMRC are sitting on literally tens of thousands of SA returns where they've opened an enquiry under COP8. Many of these enquiries will go nowhere but don't expect HMRC to be proactive in closing them. I know of people whose returns were put under enquiry 5 years ago and they've heard nothing since !!!

                  HMRC will prioritise investigations. I don't know what the criteria are but I would hazard a guess that the following will be important factors:

                  1) The total tax revenue lost through the scheme. Where several promoters have offered the same scheme, as was the case with BN66, they will be looking at the aggregate tax loss. (With BN66 it was of the order of £200M)

                  2) Is the scheme still operating ie. is it an ongoing problem that needs to be addressed more urgently. Coupled with this they'll be looking at whether its use is escalating ie. increasing numbers of users. (With BN66 there were 2500 users and it was still growing.)

                  If a scheme ranks high on both these counts then there is greater reason for concern.


                  You didn't say whether your returns had been put under enquiry (COP8). If not, I'm assuming it was a loan type thingy where the promoter advised you it didn't need to be declared as income ie. no need to include a DOTAS number on your returns. Normally, HMRC only has 12 months from the 31st Jan filing deadline to open a COP8 but my guess is they'll argue they're entitled to use "discovery" to override this in cases where nothing was included on the return.

                  It's a difficult call to make. My previous post was more concerned with people who had returns under enquiry. If you are not on HMRC's radar at all then this might not apply.

                  DR, thanks for the detailed message, this of course makes sense and I have been keeping up with the BN66 developments as the impact will be profound. To clarify, I am not under investigation, and neither is the scheme provider (directly anyway). A number of members and ex-members ARE under investigation for their participation in the scheme.

                  My problem was detailed by a post in Legal Surgery some time ago, under http://forums.contractoruk.com/legal...der-dotas.html . This went unanswered by the so-called legal experts, but that's not a surprise. It is more a surprise that my ex-Loan provider has not answered the same message that I emailed to them!

                  The gist of that post was that the Loan provider did not provide a Scheme Number, even when I asked them for one, and they gave the reason that their scheme did not meet the criteria to be disclosed (oh dear... and hence why I left them soon after). So my Tax Returns had no scheme number on it, which is what I am concerned about because the provider was based offshore, i.e. the onus to disclose hence being on the participator rather than the provider.

                  The loan itself was declared, and BIK paid on it.

                  The provider couldn't have had more than 200 contractors on their books, probably not even that many. It wasn't large scale by any means.

                  It's complicated so I don't expect an exact answer as such. I'm just wondering what might happen if the members currently being investigated are implicated. The provider doesn't appear to be so proactive in chasing down HMRC.

                  Comment


                    Originally posted by ChimpMaster View Post
                    DR, thanks for the detailed message, this of course makes sense and I have been keeping up with the BN66 developments as the impact will be profound. To clarify, I am not under investigation, and neither is the scheme provider (directly anyway). A number of members and ex-members ARE under investigation for their participation in the scheme.

                    My problem was detailed by a post in Legal Surgery some time ago, under http://forums.contractoruk.com/legal...der-dotas.html . This went unanswered by the so-called legal experts, but that's not a surprise. It is more a surprise that my ex-Loan provider has not answered the same message that I emailed to them!

                    The gist of that post was that the Loan provider did not provide a Scheme Number, even when I asked them for one, and they gave the reason that their scheme did not meet the criteria to be disclosed (oh dear... and hence why I left them soon after). So my Tax Returns had no scheme number on it, which is what I am concerned about because the provider was based offshore, i.e. the onus to disclose hence being on the participator rather than the provider.

                    The loan itself was declared, and BIK paid on it.

                    The provider couldn't have had more than 200 contractors on their books, probably not even that many. It wasn't large scale by any means.

                    It's complicated so I don't expect an exact answer as such. I'm just wondering what might happen if the members currently being investigated are implicated. The provider doesn't appear to be so proactive in chasing down HMRC.
                    Out of interest, do you know how HMRC were able to identify the users under investigation if there was nothing on their tax returns?

                    Did HMRC given any specific reason why they were investigating or was it just a general enquiry? A lot of the enquiries they make seem to be nothing more than fishing expeditions, and many ultimately go nowhere.

                    If there has been no further correspondence from HMRC in 2 years then it doesn't sound like a very active investigation.

                    Although HMRC dragged their heels for 5 years in the investigation of the BN66 schemes, they did write to users about once a year. There were also 4 test cases, that they were supposed to be taking to the Special Commissioners, who received more regular letters.

                    I'm not sure there's much you can do at the moment since only the users under investigation can request closure from HMRC. It doesn't surprise me that the provider isn't keen to expedite matters and I would expect them to discourage any users from forcing the issue.

                    By the way, is the scheme still running or was it closed by the legislation announced back in December?

                    Comment


                      Originally posted by ChimpMaster View Post
                      DR, thanks for the detailed message, this of course makes sense and I have been keeping up with the BN66 developments as the impact will be profound. To clarify, I am not under investigation, and neither is the scheme provider (directly anyway). A number of members and ex-members ARE under investigation for their participation in the scheme.

                      My problem was detailed by a post in Legal Surgery some time ago, under http://forums.contractoruk.com/legal...der-dotas.html . This went unanswered by the so-called legal experts, but that's not a surprise. It is more a surprise that my ex-Loan provider has not answered the same message that I emailed to them!

                      The gist of that post was that the Loan provider did not provide a Scheme Number, even when I asked them for one, and they gave the reason that their scheme did not meet the criteria to be disclosed (oh dear... and hence why I left them soon after). So my Tax Returns had no scheme number on it, which is what I am concerned about because the provider was based offshore, i.e. the onus to disclose hence being on the participator rather than the provider.

                      The loan itself was declared, and BIK paid on it.

                      The provider couldn't have had more than 200 contractors on their books, probably not even that many. It wasn't large scale by any means.

                      It's complicated so I don't expect an exact answer as such. I'm just wondering what might happen if the members currently being investigated are implicated. The provider doesn't appear to be so proactive in chasing down HMRC.
                      Hi

                      You still haven't said whether you are being investigated under COP 8?

                      In my particular case, I got the COP 8 letter on 6th December stating that I was being investigated and the first follow up letter came in February the following year.

                      Given that they have dragged their feet over chasing you up, I (if it were me in your position) would do nothing. I would simply await further contact from them.

                      I am assuming that you no longer use the scheme or anything like it? Are you running ltd co now or umbrella? As long as you are running in a completely clean way now (and from as close to the period they say they are looking at as possible) then there is little to be gained from contacting them. A good lawyer will argue away any attempt to add interest during the period from when they sent the first letter to any actual liability being declared. It is not your job to make their job easy.

                      Of course, much will also depend on the outcome of the test cases that they are running with your former scheme mates - I am sure you are keeping a close eye on things.

                      Good luck

                      Pastalista

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