Offshore Option

[NotAllThere]

If I could get a clear answer to the loan question, that would go some way to alleviate suspicions.

I get calls from "wealth management" companies. They target expats, because we're not covered in the same way as locals, by the local law. They also trot out this spiel about having to meet up to discuss details, because the solution "has to be tailored". Very flattering. But untrue. The reason for personal contact, rather than revealing relevant information up front, is that it is easier to allay suspicions, easier to apply pressure, easier to sell (When you've got the personal contact, the chances of there being a sale at the end are greatly enhanced). It also means it doesn't come under scrutiny - and scrutiny must be avoided at all costs.

Seems to me the same applies to these IoM solutions.

[DonkeyRhubarb]

If I could get a clear answer to the loan question, that would go some way to alleviate suspicions.

I may have got this wrong but this is my understanding.

The loan is made from a Trust. In law, the trustees have to act in the best interests of the beneficiary.

When the term of the loan is nearing an end, the trustees can extend it for another term. This could carry on ad infinitum.

It doesn't matter if the scheme promoter stops trading or goes bust because the Trust is an entirely separate legal entity. The company has no control/influence over the Trust or what happens to the loans.

[malvolio]

I may have got this wrong but this is my understanding.

The loan is made from a Trust. In law, the trustees have to act in the best interests of the beneficiary.

When the term of the loan is nearing an end, the trustees can extend it for another term. This could carry on ad infinitum.

It doesn't matter if the scheme promoter stops trading or goes bust because the Trust is an entirely separate legal entity. The company has no control/influence over the Trust or what happens to the loans.

Correct but only for employees for whom the trust is created. On the face of it, it wouldn't work for Self Employed (although I'm no doubt missing a detail there). Plus the tax isn't cancelled, it is still due, but that debt dies when you do.

It is a very simple change to make the benefit taxable during your life by, for example, only paying it out when you have retired from full time "employment". The potential for such changes is where the risk lies. Also, since the tax on the benefit value of the loan is still due, asking for you to pay it is not a retrospective action.

[DonkeyRhubarb]

Correct but only for employees for whom the trust is created. On the face of it, it wouldn't work for Self Employed (although I'm no doubt missing a detail there). Plus the tax isn't cancelled, it is still due, but that debt dies when you do.

It is a very simple change to make the benefit taxable during your life by, for example, only paying it out when you have retired from full time "employment". The potential for such changes is where the risk lies. Also, since the tax on the benefit value of the loan is still due, asking for you to pay it is not a retrospective action.

I don't think it's an employee benefit trust. I believe it's a different type of Trust altogether, where any person can be named as a beneficiary. It's probably something like a Family Trust.

[geoff from contracta IOM]

introduce life assurance ?

[Sockpuppet]

Correct but only for employees for whom the trust is created. On the face of it, it wouldn't work for Self Employed (although I'm no doubt missing a detail there). Plus the tax isn't cancelled, it is still due, but that debt dies when you do.

It is a very simple change to make the benefit taxable during your life by, for example, only paying it out when you have retired from full time "employment". The potential for such changes is where the risk lies. Also, since the tax on the benefit value of the loan is still due, asking for you to pay it is not a retrospective action.

The point I think people are missing is that HMRC will give this maybe a year before they cotton on to this and they'll just change the law again. They'll probably just make it easy and say that on death they'll take it out of your estate.

[TykeMerc]

Out of interest irrespective of the origin of the loans, how are they viewed by the credit rating agencies?
Surely if they're really loans and not declared on actual credit applications that would be fraud. For that matter how do you declare income when applying for a mortgage or something as basic as a credit card.

[Alan Jones]

Offshore Activity

Have Darwin Pay / Sanzar / AML (used to be known as Aston) merged.

They were all offering EBT’s prior to the introduction of “disguised remuneration” on 9 December 2011 and NOW they all seem to be using a scheme (or about to introduce it) where the contractor is a Sole Trader supplying services to an Offshore Partnership (remember BN66) who in turn sub-contracts to "friendly" UK Umbrella company who sub-contracts to UK Agency who sub-contracts to UK End Client.

PLUS it appears one of the above is holding its clients hostage to fortune to ensure they join the new scheme i.e. a client wished to leave the old scheme BUT the promoter stated that any outstanding loans due would be subject to PAYE (income tax/NI). BUT if they stayed and joined the new scheme then the “old employment” related loan would be “rolled/churned” into the new scheme and would be OK and NOT subject to tax.

[Tommy Rot]

A copy of a letter I received this morning:

Dear Mr Rot,
Congratulations on securing your new contracting role with us here in the Isle of Man. As we previously discussed, we are sure, and have paid handsomely for an opinion that agrees with ours, that by working for us you have successfully avoided the [DRAFT] disguised income legislation.

As our mutual correspondent Malvolio kindly pointed out, we will have to assume that the Ramsey principle doesn't apply & that our relationship and activities are not contrived so as to gain a tax advantage.
We must further assume there will be no last minute, material changes as there were with the 2007 MSC legislation, and that it won't be backdated to Dec 2010).

We believe we are on good ground and our advisors say you have successfully navigated IR35, MSC and any settlement concerns. You know from your trusted friend who introduced you to us that we can be trusted and really do live up to our service promises.

You can now be paid your contract income in full, less of course, our charges, and declare all you need to - which we believe means you can retain up to 85% of your contract value. We are extremely pleased to have you on board, and look forward to making a good earn from your hard work.

Yours sincerely,
Offshore Contracting Company Ltd

<hr>

But something is nagging at me. I am self employed. I have no employment 'wrapper' to protect me. I feel like I am on my own if challenged. I, as contractor must decide, according to the facts, whether the 'loan' is income. The responsibility for correct reporting is mine. It cannot be devolved to the scheme provider. They merely have a contractual position with me. If the loan goes to someone else - say my daughter -is it possible they might be taxed on a receipts basis?

Another friend - I call him Doubting Thomas - showed this to me:
INTM600020 - Transfer of assets abroad
It can also apply where intangible assets are transferred; for example a UK individual may transfer his services to an offshore company. A transfer may be made by way of sale or purchase of assets, or by way of gift.

And then HMRCs indicator checklist:
INTM600060 - Transfer of assets abroad
An individual's services are provided to or by a UK company via a foreign service company or other foreign intermediary.

It's apparently derived from the oldest anti avoidance legislation on the book. Is Thomas right? Or the kind contractor firm? It looks like I am taking all the risk?

Maybe I completely stupid and I should go and hide back in my broom cupboard?

Please help me!
Yours,
Tommy

(A finance professional in the Isle of Man finance industry)

[Alan Jones]

EBT's and Disguised Remuneration

Food for thought.

1. Are you in an EBT scheme .
2. Is it proposing to move you to a new scheme on or around 1 April 2011 and you will then receive “no-longer-an-employee” loans.
3. What about your outstanding invoice for work done as an employee in March 2011 (and maybe February if the Agency is a slow payer)
4. The loans relating to work you did as an employee should be subject to tax/NI under the Disguised Remuneration Rules.
5. IF your scheme promoter is saying the loans are OK because when you actually receive the loans you will be an “no-longer-an-employee” THEN they are telling you “porkies”.
6. BECAUSE if HMRC undertake an audit that (through reconciliation of the figures) allows them to match the loan to work undertaken when you were an employee then you will be in trouble.
7. HMRC will be on the lookout for such practices and will use such “non-compliance” to attack both the new “no-longer-an-employee” scheme and all your EBT loans prior to 9 December 2010.
8. SO if 1-5 sounds familiar then think twice before committing yourself.