Loans from EBTs and other Trusts

[Vallah]

I think you've both got a point. IR35 was a huge selling tool for the old schemes, as being employed by the EBT company completely did away with IR35 problems. Now though, that isn't the case, so it's more that people have got used to a high take home percentage.

[DonkeyRhubarb]

I think you've both got a point. IR35 was a huge selling tool for the old schemes, as being employed by the EBT company completely did away with IR35 problems. Now though, that isn't the case, so it's more that people have got used to a high take home percentage.

Here's a little irony.

Quite a lot of people I talk to, who are affected by BN66, have continued in other schemes.

Sounds completely bonkers doesn't it? Once bitten twice shy etc.

The main reason they've given is that it's the only way they can quickly amass £££££ to cover the potential BN66 liability and avoid losing their homes etc.

Of course, there are some doing it just to stick 2 fingers up to Hector.

[Morlock]

If you were to take dividends at a level that kept you below the 40% tax threshold and put the rest of your Ltd Co profits into a director's company pension fund you would pay neither personal income tax nor corporation tax. So potentially the Ltd Co offers a zero tax option.

[malvolio]

If you were to take dividends at a level that kept you below the 40% tax threshold and put the rest of your Ltd Co profits into a director's company pension fund you would pay neither personal income tax nor corporation tax. So potentially the Ltd Co offers a zero tax option.

Errm, not quite...

Dividends come out of taxed net profits, pensions put of gross untaxed profits. Put everything in a pension fund means no dividends are available. Put less than everything in one and CT is due on the balance.

You can however get the same 85% retention as the offshore guys claim by careful use of dividends, salary, pensions and cash draw down from pension funds (if you're old enough) with zero risk and without breaking any rules (real or perceived). But let's not spoil the party just yet.

[Vallah]

Here's a little irony.

Quite a lot of people I talk to, who are affected by BN66, have continued in other schemes.

Sounds completely bonkers doesn't it? Once bitten twice shy etc.

The main reason they've given is that it's the only way they can quickly amass £££££ to cover the potential BN66 liability and avoid losing their homes etc.

Of course, there are some doing it just to stick 2 fingers up to Hector.

Sounds eminently sensible to me. BN66 hasn't even been lost finally yet.

[DonkeyRhubarb]

I have created a Poll to see how many people would carry on with schemes if IR35 no longer existed.

http://forums.contractoruk.com/accou...e-schemes.html

[Fred Bloggs]

Errm, not quite...

Dividends come out of taxed net profits, pensions put of gross untaxed profits. Put everything in a pension fund means no dividends are available. Put less than everything in one and CT is due on the balance.

You can however get the same 85% retention as the offshore guys claim by careful use of dividends, salary, pensions and cash draw down from pension funds (if you're old enough) with zero risk and without breaking any rules (real or perceived). But let's not spoil the party just yet.

Yes, I know. I'm not quite at 85% but close.

[Freelancer1]

Geoff, who is "our group".

have yet to decide which scenario to use......in the meantime I'm still waiting, as no doubt others are, for Geoff to reply the who is "our group" ? What is the "group" substance? and who is motivating the business - what's the founder's track record?

[meanttobeworking]

Yes, I know. I'm not quite at 85% but close.

Probably a stupid question, but when you talk about retention rates, are you giving a % of the gross invoice amounts, or of your ex VAT day rate. I'm assuming it's the former, either that or I'm doing my accounts wrong! The reason I ask is that through the EBT scheme I was on briefly (and no doubt the rest) VAT obviously didn't come in to it, so on an example day rate of £100, I'd get £85 in my pocket. But via a Ltd on the Flat Rate Scheme, the same day rate of £100 is billed at £120 inc VAT, comes in at £103.80 after paying VAT (for the first year at least), and even if there are NO expenses, still ends up as £83.04 in my pocket as a dividend after CT.

So although the take home percentage from a LTD is often quoted as lower than loan schemes, in reality it isn't. Happy to be corrected if I've got this wrong. Also appreciate figures will change once you reach the higher rate tax threshold.

[Fred Bloggs]

Probably a stupid question, but when you talk about retention rates, are you giving a % of the gross invoice amounts, or of your ex VAT day rate. I'm assuming it's the former, either that or I'm doing my accounts wrong! The reason I ask is that through the EBT scheme I was on briefly (and no doubt the rest) VAT obviously didn't come in to it, so on an example day rate of £100, I'd get £85 in my pocket. But via a Ltd on the Flat Rate Scheme, the same day rate of £100 is billed at £120 inc VAT, comes in at £103.80 after paying VAT (for the first year at least), and even if there are NO expenses, still ends up as £83.04 in my pocket as a dividend after CT.

So although the take home percentage from a LTD is often quoted as lower than loan schemes, in reality it isn't. Happy to be corrected if I've got this wrong. Also appreciate figures will change once you reach the higher rate tax threshold.

I work out my % based on what I invoice. I can't give an exact figure in terms of % retention as it depends how much I pay into my SIPP, how much dividend I declare, whether or not I put a SIPP into drawdown that year, how many miles I claim for etc... But it is definately not worth my time even considering a tax avoidance scheme. The difference would be pretty marginal for taking a (IMO) huge risk. I find the discussions very interesting, however.