Loans from EBTs and other Trusts

[Vallah]

I think the point is, where is the money between receipt and being transferred into the Trust where it is fairly safe?

That's a seperate point to the one Alan was making though, which concerned EBT companies being able to recall loans.

The point you make is a good one, and is presumably what happened to clients of Norla, where I assume, the money didn't make it into the hands of the trustees. No different to an end client, agency or umbrella going bust in similar circumstances though really.

[malvolio]

That's a seperate point to the one Alan was making though, which concerned EBT companies being able to recall loans.

The point you make is a good one, and is presumably what happened to clients of Norla, where I assume, the money didn't make it into the hands of the trustees. No different to an end client, agency or umbrella going bust in similar circumstances though really.

Quite a lot different, IMHO, since my money is only managed by people directly accountable under English law... Not to say that UK companies don't screw you round either. I recall one agency who spent the VAT money, closed down, costing their clients a few tens of thousands each, and mysteriously reappeared under a fishy new name.

It's about risk mitigation though, isn't it. I try to keep mine as effective as possible.

[Vallah]

It's about risk mitigation though, isn't it. I try to keep mine as effective as possible.

Absolutely. Be careful who you deal with is as good advice as any really.

[TykeMerc]

That's a seperate point to the one Alan was making though, which concerned EBT companies being able to recall loans.

The point you make is a good one, and is presumably what happened to clients of Norla, where I assume, the money didn't make it into the hands of the trustees. No different to an end client, agency or umbrella going bust in similar circumstances though really.

Surely the situation is rather different as there's a clear money ownership trail of work - pay with agents and umbrella companies, the kind of trail that can be followed up as a creditor and via the courts, isn't that somewhat obfuscated with the EBT/ new trust type arrangements?

[Vallah]

Surely the situation is rather different as there's a clear money ownership trail of work - pay with agents and umbrella companies, the kind of trail that can be followed up as a creditor and via the courts, isn't that somewhat obfuscated with the EBT/ new trust type arrangements?

Don't see why it should be, any more than dealing with an umbrella. A third party will be doing your invoicing and cash collection, and as long as you deal with a long established and reputable firm, then there shouldn't be any problems.

[DonkeyRhubarb]

The schemes I'm familiar with require users to relinquish any contractual right to the money. (I assume this is to avoid falling foul of the Ramsay Principle.)

The arrangement is therefore based on trust.

If an unscrupulous promoter refused to pay up I don't think there could be any legal comeback.

[TykeMerc]

The schemes I'm familiar with require users to relinquish any contractual right to the money. (I assume this is to avoid falling foul of the Ramsay Principle.)

The arrangement is therefore based on trust.

If an unscrupulous promoter refused to pay up I don't think there could be any legal comeback.

That is (or certainly was) how I understood the arrangement went, if the contractor had a right to the money then it wasn't really a loan, just income wearing an unconvincing wig and big nose glasses disguise.

Things might have changed with the post Dec 2010 announcement and alternative schemes, but I don't immediately see how things could be fundamentally different. If the money never makes it to the Trust then how is it possible for a contractor to get paid his earnings? It seems to me to require vastly too much trust as an additional layer of risk on top of the potential for HMRC investigation.

[DonkeyRhubarb]

In reality the risk of not getting paid is fairly low, and a promoter wouldn't be able to get away with this for very long.

Being investigated by HMRC on the other hand is highly likely, and even more so in light of this:

http://cdn.hm-treasury.gov.uk/2011bu...xavoidance.pdf

Page 14, Box 3.B - Detection

"working with scheme promoters on a smooth introduction of the new requirement to provide lists of clients who have taken up avoidance schemes, with the first lists being due by 30 April 2011;"

[DonkeyRhubarb]

One other item in the above document which could be problematic is this proposal on Page 9.

2.4 There is a market for tax avoidance schemes, even where HMRC believes they do not deliver the advertised tax advantages – comprising both promoters willing to sell them and taxpayers willing to buy. Some taxpayers are prepared to enter into high risk schemes to exploit a cash flow advantage of retaining tax whilst continuing to dispute a liability, in some cases even where the courts have ruled against similar transactions. This advantage results from tax and interest only becoming payable under some tax regimes once HMRC has proven each use of a scheme to fail.

2.5 The Government intends to address this behaviour by the minority by removing the cash flow advantage of using such avoidance schemes. It will bring forward proposals to list specific schemes in regulations, with a range of options to ensure that users of the listed schemes do not benefit from retaining the tax in dispute. Users of schemes will be encouraged to pay the disputed tax earlier than is currently required or will face an additional charge for late payment of the tax when it is found to be due.

[Fred Bloggs]

I wouldn't touch a scheme with a barge pole, but I find this thread extremely interesting and very enlightening. HMRC's list will have to change every week, or even day I should think to stay up to date. And the list of scheme user names means you might as well walk around with a neon sign flashing over your head.