Loans from EBTs and other Trusts

[moggy]

But your highly valued skills are of no use to the UK if you do not contribute towards the bills, ie you have paid no tax but expect the rest of us to help you out when you fall ill.

If you have spent all the money without holding any back for the inevitable day when HMRC come knocking, then it is your own fault.

Perhaps you should have looked into this before you signed up and got greedy.

I don't like the fact that things can be changed retrospectively, and in fact think they will be forced to back down on that eventually - but i also completely agree with Waldorf in what he says.

[DonkeyRhubarb]

I don't like the fact that things can be changed retrospectively, and in fact think they will be forced to back down on that eventually - but i also completely agree with Waldorf in what he says.

I think it's highly unlikely that they would legislate retrospectively against the schemes which were closed by the disguised remuneration legislation in December 2010.

However, I'd be a bit more concerned if I was in a scheme after this date.

[Vallah]

Anybody receiving letters (or even phone calls in some cases) from HMRC should not deal with HMRC themselves, but should get in contact with the scheme promoter asap. We have the expertise to deal with HMRC accordingly, and we are duty bound to defend you, as we said we would.

[cojak]

This is not open for debate in this thread moggy.

[cojak]

OK, I've thought it though.

I've changed my mind. (I'm allowed, I'm a Mod. )

This particular thread started as generic and only in the last couple of months has become a haven for those who have received unwelcome documentation from the HMRC.

I therefore will let the debate continue.

I will create ANOTHER thread for those asking for information on HMRC EBT enquiries - no debate will be permitted in that thread.

Therefore both sides will be able to comment as they wish in this thread.

[DonkeyRhubarb]

Anybody receiving letters (or even phone calls in some cases) from HMRC should not deal with HMRC themselves, but should get in contact with the scheme promoter asap. We have the expertise to deal with HMRC accordingly, and we are duty bound to defend you, as we said we would.

Sadly not all promoters are like yourselves, Montpelier etc.

I know some people who were in a scheme a few years ago and, as soon as HMRC started opening enquiries, the promoter went into voluntary liquidation. Fortunately, in that particular case, HMRC never pursued the enquiries any further.

[JimBobTwoTeeth]

Please do not mistake the following comments for professional advice, they are not. They represent my understanding and may be right or wrong.

Firstly, the question about whether you are due to pay tax on interest is not as simple as the formula above. You need to look at your relationship to the loan provider. Were you employed by a business that made payments into an EBT? If so, then you should be taxed on the benefit of that loan. The benefit would be the outstanding balance times the HMRC interest rate (not sure what it is just now) at your marginal rate (in essence as above). If you pay any rate of interest, or interest is accrued, on the loan then that can be deducted from the BIK calculation.

However, if you were self-employed and a business that you may or may not have contracted with makes a payment to a trust that loans you some money it is not a BIK as described above. It is a loan from an independent party. That means that it is not a benefit in kind and is not taxable.

That addresses the interest issues. My next question is why do you want to unwind the loans or have them written off? Such action would trigger an income event which could all fall to be taxable in a single year. If you are serious about that, I would leave it till next tax year with a lower top rate band.

As things stand, it is my understanding that by leaving the loans they are potentially available for offset against your estate in any probate calculations.

Thanks for replying. The information is very useful. However I wasn't as clear as I should have been. I have EBT loans which do not accrue interest and were granted prior to the law change in Dec 2010. These are not my primary worry. After the law change I then took employee loans from the provider (not EBT's) which do acrue interest. This is obviously very stupid and I am kicking myself for it and having sleepless nights. I am now limited.

So what I have is 2 years worth of employee loans hanging over my head. That is the problem I am trying to solve.

[rennarda]

s

But your highly valued skills are of no use to the UK if you do not contribute towards the bills, ie you have paid no tax but expect the rest of us to help you out when you fall ill.

If you have spent all the money without holding any back for the inevitable day when HMRC come knocking, then it is your own fault.

Perhaps you should have looked into this before you signed up and got greedy.

I was presented with an EBT as a tax efficient and LEGAL scheme to maximise income. After receiving the tax assemsment for that year, I think it was a pretty reasonable assumption to think that the IR were happy with this arrangement, and had assessmed my tax return, and that the money I had received was mine (to do with what I chose).

Had the IR so much as queried the scheme at that time I would most likely have left it immediately. They didn't, so I continued using it for another 3 years.

I never said I spend everything, but I certainly don't have ~30% of my gross income saved up just incase the Revenue decide to change the law retrospectively. Have you ? If you have, then you might wonder what is the point of having money you can never dare spend ?

As for my value to the UK, you're being naive to just think about income tax - what about the VAT on my invoices, or the actual sales & efficiency savings I generate for the client companies I work for (eg. the savings in just one use case this year amounted to more than 2x my gross pay)

[DonkeyRhubarb]

As for my value to the UK, you're being naive to just think about income tax - what about the VAT on my invoices, or the actual sales & efficiency savings I generate for the client companies I work for (eg. the savings in just one use case this year amounted to more than 2x my gross pay)

It is not even as simple as this.

If you spent or invested the tax saved then this went back into the economy - VAT on purchases/services, supporting jobs of people paying tax/nics.

The whole thing is very circular in nature.

Leaving aside the fair share moral argument, what's best for the economy overall?
£100,000 collected in tax in the hands of the government
OR
£100,000 in the hands of a taxpayer

Not obvious is it?

[DonkeyRhubarb]

According to HMRC estimates, £5Bn/year is lost through tax avoidance.

The Government would have the sheeple believe that they wouldn't have to cut as many services if it wasn't for the evil tax dodgers.

However, this is utter BS.

Even if they stamped out all the avoidance and collected that £5Bn/year, they would be taking a big chunk of it out of the economy being spent on goods and services generating tax revenue. (I'm not even including here that it might drive many tax avoiders abroad.)

It's fair enough to make the argument against tax avoidance on moral grounds but the economics are nowhere near as simple as they portray.