Loans from EBTs and other Trusts

[Vallah]

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.

The law was changed with respect to the use of EBTs in December. I didn't notice any "punitive retrospective taxation" aspect of the change in law.

[craig1]

The law was changed with respect to the use of EBTs in December. I didn't notice any "punitive retrospective taxation" aspect of the change in law.

A long thread for you to read

[Emigre]

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

Firstly Lisa, thanks for posting the link to Hector's new plans. As a sufferer of S58 FA2008 I'm tempted to point out some of the blatant economies of truth in the document but this is the wrong place.

In terms of Geoff's arrangements as I understand them the "level of earnings" isn't so much a determination as a contract. Very simply the individual contracts with an offshore entity for a monthly rate of £1500 on a self-employed basis. Their services are then peddled via whatever intermediaries to an end user who pay the market rate. The balance, less fees, makes its way to the Trust.

[LisaContractorUmbrella]

Firstly Lisa, thanks for posting the link to Hector's new plans. As a sufferer of S58 FA2008 I'm tempted to point out some of the blatant economies of truth in the document but this is the wrong place.

In terms of Geoff's arrangements as I understand them the "level of earnings" isn't so much a determination as a contract. Very simply the individual contracts with an offshore entity for a monthly rate of £1500 on a self-employed basis. Their services are then peddled via whatever intermediaries to an end user who pay the market rate. The balance, less fees, makes its way to the Trust.

No probs Emigre - glad to help.

Yep I think you're right but, if that is the case, I fail to see how it will fall outside new legislation. If the individuals are 'peddled out' by the OIM company then they are essentially employees and the trust will fall foul of the recent EBT legislation.

[geoff from contracta IOM]

No probs Emigre - glad to help.

Yep I think you're right but, if that is the case, I fail to see how it will fall outside new legislation. If the individuals are 'peddled out' by the OIM company then they are essentially employees and the trust will fall foul of the recent EBT legislation.

You cannot be a self employed employee, the two definitions are totally incompatible

[Vallah]

No probs Emigre - glad to help.

Yep I think you're right but, if that is the case, I fail to see how it will fall outside new legislation. If the individuals are 'peddled out' by the OIM company then they are essentially employees and the trust will fall foul of the recent EBT legislation.

It can't fall foul of the EBT legislation, as there aren't any EBTs! And why are they "essentially employees". The only thing to be careful of is IR35, which is a different point entirely, but that obviously goes for people using bog standard limited companies as well.

[craig1]

You cannot be a self employed employee, the two definitions are totally incompatible

I work through an LLP as a partner without an employment contract, without PAYE, outside of Corp Tax and paid on profits that are not directly related to my directly earned revenues but there's absolutely no doubt that I'd be caught under these conditions if my LLP was based outside of the UK. It's pedantry to assume a court would treat a member of an LLP or a self-employed person differently to an "employee" in an offshore avoidance scheme.

[LisaContractorUmbrella]

You cannot be a self employed employee, the two definitions are totally incompatible

Agreed Geoff. What I am saying is that just because you label someone as self-employed, it doesn't mean to say that they would be considered so by the powers that be. Can you also confirm whether the individuals are working in the UK and resident in the UK?

[BlasterBates]

Since BN66, the only feasible scheme now is through loans. So it seems unlikely that these new rules aren't targeted at EBT's. The fact is when these new rules come in, there will be no difference between an offshore and an onshore scheme, that's the whole idea. It would be very naive to think that any offshore scheme isn't now going to be targeted. The new rules are clear they reserve the right to ignore your offshore status.

[Vallah]

Agreed Geoff. What I am saying is that just because you label someone as self-employed, it doesn't mean to say that they would be considered so by the powers that be. Can you also confirm whether the individuals are working in the UK and resident in the UK?

Well that's true, but that's why I mentioned IR35. We don't deal with anybody who we consider to be an IR35 risk.