Loans from EBTs and other Trusts

[Hoodlum]

As far as I have been made aware, since at this time, the PBT scheme is fully legal and tax compliant, it is not possible for HMRC to apply tax retrospectively if the loophole is closed in the future.

The difference between this and those who were caught out under BN66, was that legislation deeming these particular schemes illegal was actually brought in initially in 1987 (Finance Act (No. 2)), yet many companies mistakenly carried on offering solutions based around this. Then in 2008, the loophole was completely closed, and tax was applied retrospectively back to 1987.

Apparently, the worst that can happen with the PBT scheme is that the loophole could be closed, and you would have to go back to trading through a limited company, or switch to another scheme.

That said, I can't quite summon up the courage to go ahead with signing up for it!

[cojak]

As far as I have been made aware, since at this time, the PBT scheme is fully legal and tax compliant, it is not possible for HMRC to apply tax retrospectively if the loophole is closed in the future.

The difference between this and those who were caught out under BN66, was that legislation deeming these particular schemes illegal was actually brought in initially in 1987 (Finance Act (No. 2)), yet many companies mistakenly carried on offering solutions based around this. Then in 2008, the loophole was completely closed, and tax was applied retrospectively back to 1987.

Apparently, the worst that can happen with the PBT scheme is that the loophole could be closed, and you would have to go back to trading through a limited company, or switch to another scheme.

That said, I can't quite summon up the courage to go ahead with signing up for it!

I suspect there will be 1 or 2 regulars from the BN66 who'll be around shortly to correct you on a few of your points.

[Hoodlum]

I suspect there will be 1 or 2 regulars from the BN66 who'll be around shortly to correct you on a few of your points.

As I said, "as I have been made aware" - I don't claim to be anything remotely resembling knowledgeable about the issue!

[OnYourBikeGB]

As far as I have been made aware, since at this time, the PBT scheme is fully legal and tax compliant, it is not possible for HMRC to apply tax retrospectively if the loophole is closed in the future.

The difference between this and those who were caught out under BN66, was that legislation deeming these particular schemes illegal was actually brought in initially in 1987 (Finance Act (No. 2)), yet many companies mistakenly carried on offering solutions based around this. Then in 2008, the loophole was completely closed, and tax was applied retrospectively back to 1987.

Apparently, the worst that can happen with the PBT scheme is that the loophole could be closed, and you would have to go back to trading through a limited company, or switch to another scheme.

That said, I can't quite summon up the courage to go ahead with signing up for it!

You might want to check that. The Padmore legislation did not cover BN66 and there was no mistake on the part of the scheme providers, it was legal. BN66 was retrospective pure and simple. It was dressed up as clarification to get it through Parliament, but that pretence has been dropped by everyone now, including HMRC. On the other hand, it's difficult to know how easily they could pull another retrospective stunt, I suppose to some degree that depends on whether or HMRC win with BN66. I'm not saying you should or shouldn't, but go into it with your eyes open. I'm caught by BN66 and I wish I had been a bit better informed.

Ha! Cojak - you powers of prediction are uncanny!

[geoff from contracta IOM]

Potential retrospective legislation for SEBT's

Its true to say that there is no certainty about the loans not being taxed retrospectively but a good indicator is what happened when they closed EBT's. This was not done retrospectively despite the fact there would be some very rich pickings for them if they had done so. The reason I suspect is that the waters were sufficently muddied regarding BN66 for HMRC to slip it through parliment the opposite was true for EBT's they had lost cases previously when they challenged them.
In order for a clarification to the disguised remuneration legislation to catch self employed people using an SEBT HMRC would have to argue that employees actually mean self employed too and thats a hell of a stretch with decades of tax case law against them.


NOTE - With the proposed GAAR coming into effect next year HMRC don't really have to commit too much brain power to legislation for loopholes, they will all effectively be closed.

[Emigre]

As far as I have been made aware, since at this time, the PBT scheme is fully legal and tax compliant, it is not possible for HMRC to apply tax retrospectively if the loophole is closed in the future.

The difference between this and those who were caught out under BN66, was that legislation deeming these particular schemes illegal was actually brought in initially in 1987 (Finance Act (No. 2)), yet many companies mistakenly carried on offering solutions based around this. Then in 2008, the loophole was completely closed, and tax was applied retrospectively back to 1987.

Apparently, the worst that can happen with the PBT scheme is that the loophole could be closed, and you would have to go back to trading through a limited company, or switch to another scheme.

That said, I can't quite summon up the courage to go ahead with signing up for it!

I haven't got a clue where you are coming from or going to with this but...on what basis is it "not possible for HMRC to apply tax retrospectively if the loophole is closed in the future"? They did exactly that with BN66 and S58 FA2008.

Your second paragraph is completely wrong. The DTA scheme was in fact LEGAL following Padmore and the subsequent legislation. Documents from HMRC presented in Court actually accept that. The suggestion that promoters mistakenly continued to market an illegal scheme is therefore completely false.

Nothing you have said explains why it is that you think HMRC cannot close a PBT scheme retrospectively. Personally I think there are many reasons why they would not and cannot but none I see here.

Why would you want to sign up for something that is already under enquiry by HMRC unless you are about to not tell us about the referral fees you would receive?

[Hoodlum]

I haven't got a clue where you are coming from or going to with this but...on what basis is it "not possible for HMRC to apply tax retrospectively if the loophole is closed in the future"? They did exactly that with BN66 and S58 FA2008.

Your second paragraph is completely wrong. The DTA scheme was in fact LEGAL following Padmore and the subsequent legislation. Documents from HMRC presented in Court actually accept that. The suggestion that promoters mistakenly continued to market an illegal scheme is therefore completely false.

Nothing you have said explains why it is that you think HMRC cannot close a PBT scheme retrospectively. Personally I think there are many reasons why they would not and cannot but none I see here.

Why would you want to sign up for something that is already under enquiry by HMRC unless you are about to not tell us about the referral fees you would receive?

Hah, no referral fees for me matey. I'm merely repeating what I got told by a representative of a company offering me this scheme in answer to some of my questions. I'm just trying to go to decide whether to go ahead with it, but it's all a bit of a grey area.

Also, I was under the impression that it is EBTs that are under investigation, not PBTs - these rely on you being a self-employed partner, not an employee.

[geoff from contracta IOM]

Hah, no referral fees for me matey. I'm merely repeating what I got told by a representative of a company offering me this scheme in answer to some of my questions. I'm just trying to go to decide whether to go ahead with it, but it's all a bit of a grey area.

Also, I was under the impression that it is EBTs that are under investigation, not PBTs - these rely on you being a self-employed partner, not an employee.

As for EBT's being under investigation it relates mostly to how the companies treated the payment to the trust for the purposes of Corporation trust rather than individuals. Some individuals were using schemes that were not properly constructed and this may lead to some challenges. Rangers FC is an example of this but it is the club facing the difficulty not the players.

[BlasterBates]

Hah, no referral fees for me matey. I'm merely repeating what I got told by a representative of a company offering me this scheme in answer to some of my questions. I'm just trying to go to decide whether to go ahead with it, but it's all a bit of a grey area.

Also, I was under the impression that it is EBTs that are under investigation, not PBTs - these rely on you being a self-employed partner, not an employee.

When you are given a loan it remains outstanding basically for ever. That means it could be taxed at anytime without the need for retrospective legislation. They could just go round taxing outstanding loans. Who knows?

That´s the problem. When you go into scheme it is very risky indeed. Contractors who get on the wrong side of HMRC by saving a bit of money lose everything

Ask yourself, whether it´s worth it.

[slogger]

When you are given a loan it remains outstanding basically for ever. That means it could be taxed at anytime without the need for retrospective legislation. They could just go round taxing outstanding loans. Who knows?

That´s the problem. When you go into scheme it is very risky indeed. Contractors who get on the wrong side of HMRC by saving a bit of money lose everything

Ask yourself, whether it´s worth it.

my main concern is i believe in terms of law the loans are meant to be discretionary - they arent really! we all know this to be a sham and so it shouldnt take hmrc long to see this as well.
EBT does have a legitimate place - however the way current providers arrange things (say one thing but write another) I think you'd be mad to use them going forward - particularly as the govt is intent on getting as much cash from these schemes as possible :-(