Loans from EBTs and other Trusts

[RockTheBoat]

And I disagree with your disagreement... Sorry.

Look. I think we can all agree here that none of us are lawyers, and so all this "yes they are", "no they arent" is meaningless drivel until Hector and the tax planning providers have fought it out. Hector can say what he likes, it will get challenged, they will challenge back, and someone higher up will make a decision, or new legislation will be enacted to provide mist \ clarity.

Firstly, under Ramsay Hector can assess your taxation on the benefit to you of having free access to the loaned amount. It's no different to the usual case of where do you draw the line with a BIK.

are you talking about the loan or the interest saved? Hector cant say its not a loan? thats crazy. So he taxes the whole amount one year, I then pay that, and next year pay the whole loan back. what now, do I go back to hector and say money back please? this clearly wont work

Finally the new rules are very clear. Any income of any kind, even if it's a case of '61 Latour you can sell to someone else, will be treated as earned income and taxed accordingly at year end.

this has nothing to do with the issue

if I take post taxed dividends, buy and sell that same case of '61 Latour, this will be liable to the same tax treatment as if I had used loaned money to buy it. come on

[Emigre]

Sticky

Thanks for sorting that out Cojak

[malvolio]

Look. I think we can all agree here that none of us are lawyers, and so all this "yes they are", "no they arent" is meaningless drivel until Hector and the tax planning providers have fought it out. Hector can say what he likes, it will get challenged, they will challenge back, and someone higher up will make a decision, or new legislation will be enacted to provide mist \ clarity.



are you talking about the loan or the interest saved? Hector cant say its not a loan? thats crazy. So he taxes the whole amount one year, I then pay that, and next year pay the whole loan back. what now, do I go back to hector and say money back please? this clearly wont work



this has nothing to do with the issue

if I take post taxed dividends, buy and sell that same case of '61 Latour, this will be liable to the same tax treatment as if I had used loaned money to buy it. come on

Sigh... You really don't understand "Benefit in Kind" do you?

And your last statement is incorrect. We're not talking about the source of the money, it's to do with you having it to spend. But I'm not going to argue the point any further.

[prozak]

I suppose if you don't need the loan, paying back the loan when HMRC comes sniffing would be a bonnafide way of getting him off your back at least for a while.

In fact I can see here that if you let the EBT accumulate and you receive absolutely nothing, no loan and then after 10 years go overseas and ask for it to be disbursed, could that be legal.
.

That is the backup plan for me. Not sure if it will work. Will only know if it ever comes to it.

My plan was to close the loan when I left the UK.

[RockTheBoat]

Sigh... You really don't understand "Benefit in Kind" do you?

And your last statement is incorrect. We're not talking about the source of the money, it's to do with you having it to spend. But I'm not going to argue the point any further.

Agree about not arguing the point.

from an earlier post in the Norla thread for info

"Just to clarify- you are taxed on the amount of the Benefit in Kind, which is the cumulative loan amount multiplied by the statutory interest rate. You are then taxed on this amount. So the tax you pay will be - Loan amount * Interest rate * tax rate, NOT loan amount * interest rate."

[Emigre]

Agree about not arguing the point.

from an earlier post in the Norla thread for info

"Just to clarify- you are taxed on the amount of the Benefit in Kind, which is the cumulative loan amount multiplied by the statutory interest rate. You are then taxed on this amount. So the tax you pay will be - Loan amount * Interest rate * tax rate, NOT loan amount * interest rate."

RTB. This was one occasion where I disagreed with Malvolio, not on the facts but on the possible application of it. Mal has a rock solid background in this area including direct involvement with PCG and getting some of the improvements to IR35 in motion. His tax knowledge goes well beyond there.

There will always be differences of opinion, that's what these forums are about, but I would not want to lose Mal's counsel on this thread.

Emigre

[RockTheBoat]

There will always be differences of opinion, that's what these forums are about, but I would not want to lose Mal's counsel on this thread.

Emigre

Point taken.

Mal please dont go away.

[Morlock]

For Clarification...

If you get an interest-free loan of £100 from your employer, it's a benefit in kind on which you get taxed at HMRC's statutory interest rate; which at eg 4% means you get taxed as you'd had extra income of £4; and £4 as a 40% taxpayer = £1.60 tax owed).

If you get an interest-free loan from a 3rd party, eg 0% finance on a new car, it's not taxable.

If you're self-employed you, duh, don't have an employer. Any loan you get is therefore from a 3rd party, and so not taxable.

[pastalista]

If you get an interest-free loan of £100 from your employer, it's a benefit in kind on which you get taxed at HMRC's statutory interest rate; which at eg 4% means you get taxed as you'd had extra income of £4; and £4 as a 40% taxpayer = £1.60 tax owed).

If you get an interest-free loan from a 3rd party, eg 0% finance on a new car, it's not taxable.

If you're self-employed you, duh, don't have an employer. Any loan you get is therefore from a 3rd party, and so not taxable.

I think this is the bit that the providers are relying on. Changing the game from one being an employee and having some kind of trust that loans money to being a sole trader and having a trust that loans money works in the context of the above statement but not in the eyes of Hector who can look through such a structure and say that the loan / trust element isn't really a loan but is really income.

I think that until the legislation is published in April it is not possible to say for sure what exactly it will cover. The reality is, though, that even if it doesn't specifically cover the arrangement in question, the "see through" nature of it in Hector's eyes will.

It will be interesting to see the different variants that the providers come up with and the different QC opinion that will be just as certain that the structure works as they were about EBT and the dual taxation schemes.

Pastalista

[dazedandconfoozed]

New Scheme

Hello

I've been using a EBT from an isle of man company and as you all know the EBT is no more. I have been offered to be moved to a new Loyalty Benefit Fund structure.

Has anyone else been offered this structure? The salesman was pretty sure that if the new scheme was challenged it would be shut down as the EBT's were and not go through the BN66 route (court case)

Does anyone have any advice or views on this?

Thanks in advance