Loans from EBTs and other Trusts

[TykeMerc]

Point well made there DaveB

[cojak]

Surprised Admin let this one through tbh.

Although Adrian does seem to be operating on his own, so he could just be collecting referrals.

I checked out his site but I couldn't see that he was selling anything so let it through.

But that's what the Report Post icon is for guys, please use it


We will occasionally let the odd one slip through.

(still impressed by you DaveB though )

[isherdholi]

Hi,

I'm a new joiner, sorry to bring up an old thread.

I've been in touch with a couple of umbrella companies who used to offer EBTs.

The latest big thing is PBT (partner benefit trusts).

Basically, the umbrella co. sets you up as self-employed (if you're not already set up) and the whole thing works in a similar way, i.e. you get a min. wage and the rest of it goes into a trust fund, but its not an employee benefit trust. You get made into a partner of the umbrella company and the trust fund is called a partner benefit trust. You get paid the remaining amount of whatever you're owed as a loan from this trust, but because you're not an employee, its not an EBT.

Has anyone else heard of this and/or used it? Does it work? Is it legal?

[Ebbers]

Hi,

I'm a new joiner, sorry to bring up an old thread.

I've been in touch with a couple of umbrella companies who used to offer EBTs.

The latest big thing is PBT (partner benefit trusts).

Basically, the umbrella co. sets you up as self-employed (if you're not already set up) and the whole thing works in a similar way, i.e. you get a min. wage and the rest of it goes into a trust fund, but its not an employee benefit trust. You get made into a partner of the umbrella company and the trust fund is called a partner benefit trust. You get paid the remaining amount of whatever you're owed as a loan from this trust, but because you're not an employee, its not an EBT.

Has anyone else heard of this and/or used it? Does it work? Is it legal?

Hi,

I currently have a Limited Company and have done for the past 5 or 6 years. Recently I was contacted by one of the organisations of the type you've mentioned.

They are Rousseau International and base the huge return you receive on a series of Commercial Loans through a Limited Liability Partnership (based in Switzerland).

You are registered as self-employed in the UK, are paid a minimum salary and therefore minimum Tax and NI and your invoicing in the to your agency is handled through an umbrella company.

All sounds very tempting, until you start reading through these posts.......obviously there is an element of risk involved but Rousseau insist you are covered by their insurance should you ever be taken to court over this........oh yes, and this scheme is "QC" approved......whatever that means?

I think I'll stick with my Limited Company for now.

Anyone else got any comments on these LLP vehicles?

[meanttobeworking]

Depends how brave/greedy you are. What ever the exact details of these schemes (and there have been a number of different ones over the years), even a cursory look at how they operate show them to be a mechanism entirely fabricated to avoid paying tax/NI by taking advantage of some loopwhole in legislation designed for other things. That in itself sets you up to be of particular interest to HMRC, who have provided ample evidence to show they are putting increasing effort into shutting down these schemes. As an ex EBT'er, I consider myself to have had a close shave, and you've only got to look at the BN66 thread to see what they are capable of. But after the Dec 9th announcement on EBTs, which might be considered a warning shot across the bows of these types of scheme, I would be entirely unsurprised if HMRC take a much more agressive stance against the replacements to EBTs, even if they DO have a different acronym.

Ultimately, you're putting yourself in the firing line of a very big and very powerful organisation that could plunge you into financial turmoil if your name comes out of a hat. How much is that extra few percent worth?

[DonkeyRhubarb]

I'm not sure what happened about this but there was a proposal in the budget to enable HMRC to remove the cash flow advantage of certain schemes.

Basically, users would have to pay any tax/nic up front and they would only get it back on a successful outcome of litigation.

I could see HMRC employing this to nobble a lot of these schemes.

[geoff from contracta IOM]

I'm not sure what happened about this but there was a proposal in the budget to enable HMRC to remove the cash flow advantage of certain schemes.

Basically, users would have to pay any tax/nic up front and they would only get it back on a successful outcome of litigation.

I could see HMRC employing this to nobble a lot of these schemes.

Sounds great but will almost certainly clash with Human Rights legislation as only the courts can decide the outcome of a challenge, not a government body acting like the SS. The court may ask a defendant to lodge a bond but I doubt it unless it has been done solely for the purpose of gaining a delay in paying advantage and not because they believe it to be a legal tax reduction method. If it can be argued that paying upfront will intefere with being able to pay one's defense costs it's dead in the water. Presumption of innocence is a biggy.

[Emigre]

Depends how brave/greedy you are. What ever the exact details of these schemes (and there have been a number of different ones over the years), even a cursory look at how they operate show them to be a mechanism entirely fabricated to avoid paying tax/NI by taking advantage of some loopwhole in legislation designed for other things. That in itself sets you up to be of particular interest to HMRC, who have provided ample evidence to show they are putting increasing effort into shutting down these schemes. As an ex EBT'er, I consider myself to have had a close shave, and you've only got to look at the BN66 thread to see what they are capable of. But after the Dec 9th announcement on EBTs, which might be considered a warning shot across the bows of these types of scheme, I would be entirely unsurprised if HMRC take a much more agressive stance against the replacements to EBTs, even if they DO have a different acronym.

Ultimately, you're putting yourself in the firing line of a very big and very powerful organisation that could plunge you into financial turmoil if your name comes out of a hat. How much is that extra few percent worth?

It seems to me very unlikely that even Hector would seek to apply retrospective attacks on these new arrangements while the Huitson/Shiner (BN66) cases are still working their way through the legal system. If however, the CoA were to find in HMRC's favour on Huitson then I think we could expect to see far more unannounced retrospective application of tax rules to cover up for HMRC inadequacies and failings. Of course, such action would send a clear message to the world that the UK is NOT open for business, well not on the basis of certainty anyway.

The BN66 legal challenge may still have several years to run.

[Tonymc]

Hi,

I'm a new joiner, sorry to bring up an old thread.

I've been in touch with a couple of umbrella companies who used to offer EBTs.

The latest big thing is PBT (partner benefit trusts).

Basically, the umbrella co. sets you up as self-employed (if you're not already set up) and the whole thing works in a similar way, i.e. you get a min. wage and the rest of it goes into a trust fund, but its not an employee benefit trust. You get made into a partner of the umbrella company and the trust fund is called a partner benefit trust. You get paid the remaining amount of whatever you're owed as a loan from this trust, but because you're not an employee, its not an EBT.

Has anyone else heard of this and/or used it? Does it work? Is it legal?

This is something I have been researching as at the moment, I do not think I am getting good enough value from my umbrella company.

This thread ( I have tried to read as much as possible ) has warned me off the idea. the company I was talking with just now works on a bonus payment 10 times through the year, rest of the time you are on min wage.

Is going ltd and doing all my own paperwork the only way to really maximize my contract pay?

Thanks

Tony

[geoff from contracta IOM]

This is something I have been researching as at the moment, I do not think I am getting good enough value from my umbrella company.

This thread ( I have tried to read as much as possible ) has warned me off the idea. the company I was talking with just now works on a bonus payment 10 times through the year, rest of the time you are on min wage.

Is going ltd and doing all my own paperwork the only way to really maximize my contract pay?

Thanks

Tony

Hi Tony,

There are other options, any you look at should deliver your money to you immeadiately or I would be wary, there was a recent case where a provider was processing every 6 weeks and alledgely buggered off with lots of contractors money. It depends entirely on your risk profile, the solutions that currently meet with legislation such as my own are based on opinions from tax specialist QC's and whilst the opinons are nearly unnamious in agreeing the self employed benefit trust type solutions are legally compliant they are based on opinions. The nature of our legal system means that the only guaranteed answer ( and even then still not guaranteed ) will rely on case law. If it is a grey area and no case law exists you can only work with a barristers opinion , the safety coming in the fact that if the majority of eminent tax barristers agree something is legal it is probably easier for HMRC to change the law rather than challenge. If you want to get closer to 100% certainty use a Ltd. Co. but then IR35 will become a concern, if you are happy to look at the supporting evidence and make an informed decision then it is possible to retain 85% of the contract value and forget about IR35, be wary of any solution that claims to provide a 100% guarantee, where common law is concered no such thing exists.

HTH