Loans from EBTs and other Trusts

[LisaContractorUmbrella]

You work through an agency presumably ? is their margin your income as well ? And the individual does receive an income just not the full contract value.

If you are saying what I think you are saying then the contractor would be paid minimum wage (or similar) and the balance of the contract value would be, for tax purposes, income earned by your company Geoff? Your company would then operate some sort of discretionary loan arrangement?

[geoff from contracta IOM]

I would be more than happy to consider the scheme that you are offering Geoff and any other like it but you and your fellow providers refuse to provide details so we are unable to make an informed judgement. I realise my remark was flippant and I apologise but your statement did seem a little ridiculous under the circumstances

To the best of my knowledge I have never declined to offer the details but i'm not prepared to discuss them on an open forum anymore than you would be happy to discuss your profit per contractor here or publish the employment contract you use for other umbrella's to rip off. Anyone who wishes is welcome to contact me for a detailed explanation, I have seen most of my competitors detail and several umbrella company breakdowns of deductions but I didn't get them on the net !

[geoff from contracta IOM]

If you are saying what I think you are saying then the contractor would be paid minimum wage (or similar) and the balance of the contract value would be, for tax purposes, income earned by your company Geoff? Your company would then operate some sort of discretionary loan arrangement?

The individual is self employed, we invoice their agency for us suppling the service, we pay the individual a certain amount per month as self employed income and the balance goes to a trust and may be lent back to the individual at the discretion of the trustees.

[craig1]

You work through an agency presumably ? is their margin your income as well ? And the individual does receive an income just not the full contract value.

My "income" doesn't go through the agency in a way to avoid UK taxation through the use of a disguised EBT and/or double taxation laws. The margin deduction the agency takes is a transparent B2B deduction in the way of a genuine business transaction and I have no legal or disguised way of recovering a penny of that margin.

[JamJarST]

The individual is self employed, we invoice their agency for us suppling the service, we pay the individual a certain amount per month as self employed income and the balance goes to a trust and may be lent back to the individual at the discretion of the trustees.

Ignoring the fact that all these schemes are obviously sailing very close to the "legality" wind, the highlighted statement immediately rings alarm bells with me.

[Vallah]

These threads all end up in exactly the same way. Lisa (and others) arguing from her umbrella standpoint that the schemes don't work, with others including Geoff and I that they do. Nobody is forcing anybody to go down the offshore route, but there are plenty who do, and given how things are in the UK at the moment, in increasing numbers.

[JamJarST]

These threads all end up in exactly the same way. Lisa (and others) arguing from her umbrella standpoint that the schemes don't work, with others including Geoff and I that they do. Nobody is forcing anybody to go down the offshore route, but there are plenty who do, and given how things are in the UK at the moment, in increasing numbers.

How exactly are things in the UK? I am quite comfortable running my own ltd co and working within the constraints of IR35.

[LisaContractorUmbrella]

The individual is self employed, we invoice their agency for us suppling the service, we pay the individual a certain amount per month as self employed income and the balance goes to a trust and may be lent back to the individual at the discretion of the trustees.

So presumably then you avoid the legislation introduced in April 2011 by calling the individuals who use your scheme 'self-employed' despite the fact that you determine their level of earnings

[LisaContractorUmbrella]

These threads all end up in exactly the same way. Lisa (and others) arguing from her umbrella standpoint that the schemes don't work, with others including Geoff and I that they do. Nobody is forcing anybody to go down the offshore route, but there are plenty who do, and given how things are in the UK at the moment, in increasing numbers.

Everyone has a choice as you rightly say Val; what concerns me, and has always concerned me, is whether the people who sign up to this type of scheme actually fully understand the risks.

[craig1]

These threads all end up in exactly the same way. Lisa (and others) arguing from her umbrella standpoint that the schemes don't work, with others including Geoff and I that they do. Nobody is forcing anybody to go down the offshore route, but there are plenty who do, and given how things are in the UK at the moment, in increasing numbers.

Here's how I see things going at the moment towards in the UK:

- HMRC catching and punitively punishing those who use aggressive avoidance schemes that skate right up to and beyond the line of legality, never mind ethicality.
- HMRC pushing hard on MSC legislation to the point that agencies are getting quite touchy about who they contract with
- The government making loud and persistent noises that they're going to be targeting aggressive tax avoidance

If an offshore scheme gets outlawed by HMRC and the government, the offshore company can shrug shoulders and walk away while those who use the services are left with threats of bankruptcy and punitive retrospective taxation.

Disclaimer: I operate through my own LLP (in partnership with my contractor wife) and last year I legally and ethically took home 74% of my billed revenue.