Loans from EBTs and other Trusts

[BlasterBates]

the BIG problem with the ebt schemes is that they're contrived - I've looked at a couple and have been told I will take home 85% of what I invoice - not at all discretionary - and have also been told I wont be asked to repay the loan -- now these have been said verbally and providers wont commit to this in writing - however my worry with them was that the paperwork didnt reflect the reality of the situation and could then be challenged by hmrc.. if the revenue attack the real nature of the arrangement and not the paperwork then I was very worried it could all fall apart.

Indeed a verbal agreement is legally binding, so if they can prove that you're stuffed. Just shows that they're illegal, it's down to a fact as to how well they can hide the fact.

[Vallah]

Indeed a verbal agreement is legally binding, so if they can prove that you're stuffed. Just shows that they're illegal, it's down to a fact as to how well they can hide the fact.

Saying that "the loans do not have to be repaid" is just wrong. The loans are repayable if and when the independent trustees deem it appropriate. The trustees always have to act in the beneficiaries' best interests.

[slogger]

Saying that "the loans do not have to be repaid" is just wrong. The loans are repayable if and when the independent trustees deem it appropriate. The trustees always have to act in the beneficiaries' best interests.

Exactly my point, what I was told and what was on paper where two different things, hence arrangement a sham.. the reality was its a completely contrived arrangement and the paperwork didn't reflect underlying intentions of both parties.

Having said that I don't want to be a downer in these discussions and I hope people aren't hit by hmrc .. good luck!

[TheBigD]

Saying that "the loans do not have to be repaid" is just wrong. The loans are repayable if and when the independent trustees deem it appropriate. The trustees always have to act in the beneficiaries' best interests.

I haven't read the entire thread, so apologies if it's been covered, but could you give an example as to when it WOULD be in the beneficiaries' best interests for the to have the loan repaid?

[LisaContractorUmbrella]

I haven't read the entire thread, so apologies if it's been covered, but could you give an example as to when it WOULD be in the beneficiaries' best interests for the to have the loan repaid?

[slogger]

lol - when the loan was a sham and shouldnt have been made in the first place, else if a legit arrangement then I guess fine - just the two large schemes I looked at where shams and I was concerned not valid - hence I guess court could unwind the arrangement - I guess where arrangement is legit then would be ok.

also I guess could be other circumstances - e.g. solicitor friend of mine mentioned a case hes involved in where owner of an ebt died, his wife now trying (key word being trying - not succeeded yet) to call in a % of loans as she says mgmt company has high costs and shouldnt have paid as large a % out as they should have done..

[BlasterBates]

a case hes involved in where owner of an ebt died, his wife now trying (key word being trying - not succeeded yet) to call in a % of loans as she says mgmt company has high costs and shouldnt have paid as large a % out as they should have done..

Yes if it truly is a loan, indeed it might get called in. I would see that as a real danger.

Even if she doesn't succeed, still extremely stressful to get a bill for say 10% of you income over 10 years.

This doesn't surprise me, I've been expecting this to happen when scheme owners get into financial difficulty or sell out.

[ChimpMaster]

What happens when the scheme members get an investigation opened based on their SA, but the scheme provider decides to shut down and run off into the sunset?

[Vallah]

Apologies for not having as much time to read forums as you!

In answer to the original question, it's impossible to say, as it depends entirely on an individual's circumstances.

[Vallah]

Yes if it truly is a loan, indeed it might get called in. I would see that as a real danger.

Even if she doesn't succeed, still extremely stressful to get a bill for say 10% of you income over 10 years.

This doesn't surprise me, I've been expecting this to happen when scheme owners get into financial difficulty or sell out.

I don't quite understand what the original point was, but scheme promoters cannot recall loans if they're properly constituted loans from independent trustees. There are some firms out there making loans direct from the company rather than a trust, but they're best avoided.