Loans from EBTs and other Trusts

[DonkeyRhubarb]

Helen, I agree this is a terrible situation for the likes of you, and perhaps there is a case to only start the retrospective period after an "amnesty" during which extreme avoidance mechanisms can be exited. However retrospective taxation simply must happen. There cannot be one rule for most and another for those who can afford to hire magic circle accountancy firms. If you want to pay less tax vote for a party who will lower taxation, but for decades the rule of law when it came to taxation did (de-facto) not apply to to the richest - see Warren Buffett admitting he pays lower tax than his secretary. It is completely unacceptable in a supposed enlightened democracy.

I bet you pay considerably less tax now through your Ltd than when you were previously working through an Umbrella.

Sorry but you asked for that.

I bet there are a lot of employees who'd like to arrange their tax affairs in the way you do.

What is that I can smell?

[BolshieBastard]

But then SantaClaus creates a private forum for us - result!

Im not in favour of a private forum elsewhere. But I dont like the idea of this thread going over what is essentially old ground by trolls like this one and others I have mentioned, dribbling on when they dont know the difference between avoidance and evasion or, do not wish to acknowledge the difference.

[DotasScandal]

Now that statement is worth a separate thread! (There are a few people who would apply this to our laws, especially tax laws, at the time the Exchequer needs all it can grab, but if we haven't got the letter of the law to abide by, then it's a very, very slippery slope....) Sorry for being off topic but the law isn't (or shouldn't be) a pick 'n' mix subject.

Dude would have made Stalin proud.

Anyway, let's not feed that troll...

[nick4notax]

Helen, I agree this is a terrible situation for the likes of you, and perhaps there is a case to only start the retrospective period after an "amnesty" during which extreme avoidance mechanisms can be exited. However retrospective taxation simply must happen. There cannot be one rule for most and another for those who can afford to hire magic circle accountancy firms. If you want to pay less tax vote for a party who will lower taxation, but for decades the rule of law when it came to taxation did (de-facto) not apply to to the richest - see Warren Buffett admitting he pays lower tax than his secretary. It is completely unacceptable in a supposed enlightened democracy.

I'm sorry Stonecircle, this is simply nonsense. The rules are for all. We are not rich mega corporates, just ordinary IT folk who found a company or three that professed to know the law sufficiently, either by their purchased advice or otherwise, to structure a scheme that was both tax efficient and simpler to administer than our old IR35-burdened limited companies. It may be true that most would never have ventured to the scheme if IR35 had not been no draconian/punitive. That is irrelevant though. Fact is, we followed the law. We fully disclosed ALL the details of our earnings and this scheme, year on year. We are fully entitled by legal precedent dating back to the 1920s, to structure our finances to LEGALLY retain the maximum amount of earnings. Law does not recognise idiot phrases like "aggressive avoidance" and quite rightly so. We all want fairness but I know no individual that sits comfortably with the concept of back-dating the application of NEW laws to the detriment of any citizen, regardless of ideological leanings. Whether you like or dislike the fact that some may have gotten onto something good and others didn't really should not influence a proper perspective on proper law. It should be enough to be contented by the fact that the law can be changed and such arrangements are no longer possible from the date that law receives royal assent.

[BrilloPad]

Now that statement is worth a separate thread! (There are a few people who would apply this to our laws, especially tax laws, at the time the Exchequer needs all it can grab, but if we haven't got the letter of the law to abide by, then it's a very, very slippery slope....) Sorry for being off topic but the law isn't (or shouldn't be) a pick 'n' mix subject.

Or we could just re-use any of the previous 10 threads we had on this discussion? Think of the environment - re-use....

[stonecircle]

Now that statement is worth a separate thread! (There are a few people who would apply this to our laws, especially tax laws, at the time the Exchequer needs all it can grab, but if we haven't got the letter of the law to abide by, then it's a very, very slippery slope....) Sorry for being off topic but the law isn't (or shouldn't be) a pick 'n' mix subject.

I agree ret-tax is not ideal. But every word on the taxation statute has a single aim: to enforce taxation to occur. Over the years, certain behaviors have rightfully been encouraged (saving, retirement funding, investment in certain areas), and this has caused tax law to become complex enough to leave unintended loopholes. For tax law specifically, an exception must be made. If you are in breach of the spirit, if not the letter of the law, you are still in breach. Otherwise tax is effectively lawless (to the tune of £13 trillion). It becomes exactly the "pick 'n mix" scenario you describe. Not retrospectively taxing is more a slippery slope to lawlessness than vice-versa.

[bananarepublic]

Would the Montpelier scheme have existed if it wasn't for IR35?

Would MSCs or any of the plethora of EBT/loan/forex contractor schemes have existed if it wasn't for IR35?

Nope. All of this was an unintended consequence of IR35.

If Labour hadn't meddled, none of this would have happened. Everyone would have carried on Ltd and the Government would have got a reasonable amount of tax.

What a mess.

I am sure stonecircle would welcome an IR35 investigation to put beyond any doubt that he was not a disguised employee.

Any contractors paying themselves dividends are clearly not operating within the spirit of IR35. That was to treat contractors working via Ltd companies through intermediaries as employees for TAX PURPOSES only.

Perhaps a "clarification" of the law is in order ....

[smalldog]

I agree ret-tax is not ideal. But every word on the taxation statute has a single aim: to enforce taxation to occur. Over the years, certain behaviors have rightfully been encouraged (saving, retirement funding, investment in certain areas), and this has caused tax law to become complex enough to leave unintended loopholes. For tax law specifically, an exception must be made. If you are in breach of the spirit, if not the letter of the law, you are still in breach. Otherwise tax is effectively lawless (to the tune of £13 trillion). It becomes exactly the "pick 'n mix" scenario you describe. Not retrospectively taxing is more a slippery slope to lawlessness than vice-versa.

So, using the "spirit of the law" argument, it is for everyone to pay their "fair share" in the govts view. I therefore assume under your Ltd you pay full PAYE on your income minus expenses and dont declare dividends, and that you havent gone to the trouble of shirking your social tax responsibilities by having an outside IR35 contract, purposely evading tax, whoops there is that word again.

IF you havent complied with the "spirit of the law" I imagine you realise the error of your ways and intend to pay the retrospective taxes due on the basis of full PAYE on your next SA as a back tax calculation.

[stonecircle]

I'm sorry Stonecircle, this is simply nonsense. The rules are for all. We are not rich mega corporates, just ordinary IT folk who found a company or three that professed to know the law sufficiently, either by their purchased advice or otherwise, to structure a scheme that was both tax efficient and simpler to administer than our old IR35-burdened limited companies.

It may be true that most would never have ventured to the scheme if IR35 had not been no draconian/punitive. That is irrelevant though. Fact is, we followed the law. We fully disclosed ALL the details of our earnings and this scheme, year on year. We are fully entitled by legal precedent dating back to the 1920s, to structure our finances to LEGALLY retain the maximum amount of earnings. Law does not recognise idiot phrases like "aggressive avoidance" and quite rightly so. We all want fairness but I know no individual that sits comfortably with the concept of back-dating the application of NEW laws to the detriment of any citizen, regardless of ideological leanings. Whether you like or dislike the fact that some may have gotten onto something good and others didn't really should not influence a proper perspective on proper law. It should be enough to be contented by the fact that the law can be changed and such arrangements are no longer possible from the date that law receives royal assent.

Yes but the law must treat an IT bod on £80k pa the same as a leader of industry on millions. It cannot do this without ret tax. As mentioned, I think it's unfair if you were not given an opportunity to exit your extreme avoidance schemes before the retrospective period began, but my point is, there simply isn't any other way of effectively collecting tax in a complex world than to ret tax. IR35 is designed to deter de-facto employees from being lightly taxed as companies. The principle behind it is sound. I have no axe to grind that I've been paying ltd company tax while others in complex trust or llp schemes have been paying less. Fact is, I'm a service provider with multiple clients. It's justifiable for me to be a ltd. What isn't is to have multiple layers of trusts\llps\holding companies\etc. The latter only has a single purpose - the avoidance of tax and responsibility to society that made your career possible.

[BrilloPad]

Yes but the law must treat an IT bod on £80k pa the same as a leader of industry on millions. It cannot do this without ret tax. As mentioned, I think it's unfair if you were not given an opportunity to exit your extreme avoidance schemes before the retrospective period began, but my point is, there simply isn't any other way of effectively collecting tax in a complex world than to ret tax. IR35 is designed to deter de-facto employees from being lightly taxed as companies. The principle behind it is sound. I have no axe to grind that I've been paying ltd company tax while others in complex trust or llp schemes have been paying less. Fact is, I'm a service provider with multiple clients. It's justifiable for me to be a ltd. What isn't is to have multiple layers of trusts\llps\holding companies\etc. The latter only has a single purpose - the avoidance of tax and responsibility to society that made your career possible.

The vast majority of the world manages without retrospection. When India tried it with Vodafone recently "Call me Dave" was up in arms.

But you have hit the nail on the head. Everyone should be treated equally. The mistake Montpelier made was to apply a rich person scheme to the poor.

Also I feel retrospection debate is over. Now the issue is should HMRC be allowed to mislead parliament.