IR35 vs Tax Schemes

[Subsignal]

Hi everyone - this is my first post although I have followed many threads on this forum for a couple of years now - especially those that involve the arguments for and against using a Ltd Company, Umbrella Company or Tax Scheme.

I read on the web the other day how it is far more preferable to run the risk of IR35 as opposed to being caught by the Revenue using a Tax Scheme. This opinion seemed to make sense because apparently IR35 investigations can only be based on the previous year's tax return and investigations for tax schemes can be based on Tax Returns from up to 3 years ago and the adverse financial implications are far lower for IR35 as well, according to this particular article.

It occured to me that there is a lot of negativity surrounding tax schemes with regard to the risks involved but other than the Montpelier case which appeared to revolve around the "supposed" misinterpretation of a particular piece of legislation (apologies for my huge simplification!) and another company running off with all of thier clients money, have there actually been any other tax schemes challenged successfully by the Revenue or companies disappearing with client's money?

If not, it would appear that Tax Schemes are just as risky/safe as using an accountant/umbrella/Ltd Company - all of which I guess have been investigated successfully by the Revenue many many times over or have been run by in some cases very unscrupulous owners.

[malvolio]

The safe options remain (in order of increasing risk) permanent employement, then umbrella, then wing it and hope ltd company without properly uderstanding the tax landscape, then a properly informed Limited Company, then being an existing member of a magic scheme, then joining any scheme that pretends not to result in you paying taxes ( you do, you just don't know it yet) since around September last year.

Of that list, given you can't join a scheme retrosepctively, the best return/risk raio is a well managed Ltd Co working outside IR35. End of. IMVHO.

But if you've been reading the threads al that time, you already know that.

[northernladuk]

This opinion seemed to make sense because apparently IR35 investigations can only be based on the previous year's tax return and investigations for tax schemes can be based on Tax Returns from up to 3 years ago and the adverse financial implications are far lower for IR35 as well, according to this particular article.

Are you sure about this??

[Sockpuppet]

The safe options remain (in order of increasing risk) permanent employement, then umbrella, then wing it and hope ltd company without properly uderstanding the tax landscape, then a properly informed Limited Company, then being an existing member of a magic scheme, then joining any scheme that pretends not to result in you paying taxes ( you do, you just don't know it yet) since around September last year.

Of that list, given you can't join a scheme retrosepctively, the best return/risk raio is a well managed Ltd Co working outside IR35. End of. IMVHO.

But if you've been reading the threads al that time, you already know that.

Think you've got the informed and uninformed Ltd Cos round the wrong way.

[malvolio]

Think you've got the informed and uninformed Ltd Cos round the wrong way.

Well maybe - same return, different risk levels. The people that ask about these things are usually interested in the returns and ignore the risk. Which is good for the scheme providers, if no-one else...

[Subsignal]

The safe options remain (in order of increasing risk) permanent employement, then umbrella, then wing it and hope ltd company without properly uderstanding the tax landscape, then a properly informed Limited Company, then being an existing member of a magic scheme, then joining any scheme that pretends not to result in you paying taxes ( you do, you just don't know it yet) since around September last year.

Of that list, given you can't join a scheme retrosepctively, the best return/risk raio is a well managed Ltd Co working outside IR35. End of. IMVHO.

But if you've been reading the threads al that time, you already know that.

Thanks for the info and whilst I realise this is the standard reply when replying to "risk" questions, I was more interested in why tax schemes are considered more risky when I have seen little evidence regarding legal challenges and successful HMRC investigations other than the obvious Montpelier case. Which is why I asked for other examples - otherwise it seems to me that a well run tax scheme is no less risky than any other route! (And no, I don't work for a company that provides schemes - I'm just curious!)

[BlasterBates]

Hi everyone - this is my first post although I have followed many threads on this forum for a couple of years now - especially those that involve the arguments for and against using a Ltd Company, Umbrella Company or Tax Scheme.

I read on the web the other day how it is far more preferable to run the risk of IR35 as opposed to being caught by the Revenue using a Tax Scheme. This opinion seemed to make sense because apparently IR35 investigations can only be based on the previous year's tax return and investigations for tax schemes can be based on Tax Returns from up to 3 years ago and the adverse financial implications are far lower for IR35 as well, according to this particular article.

It occured to me that there is a lot of negativity surrounding tax schemes with regard to the risks involved but other than the Montpelier case which appeared to revolve around the "supposed" misinterpretation of a particular piece of legislation (apologies for my huge simplification!) and another company running off with all of thier clients money, have there actually been any other tax schemes challenged successfully by the Revenue or companies disappearing with client's money?

If not, it would appear that Tax Schemes are just as risky/safe as using an accountant/umbrella/Ltd Company - all of which I guess have been investigated successfully by the Revenue many many times over or have been run by in some cases very unscrupulous owners.

I think you'll find that contractors have been stuffed by far more than just two schemes. Virtually all the schemes for contractors in Europe went wrong at some point.

You do know that on a "successful" loan scheme you're simply deferring tax?

It gets paid when you leave the scheme.

It's simply not true that a tax scheme is no more risky than a Ltd. It's very risky and the only ones that haven't been hammered by HMRC will have a question mark over their loans until, either they're written off, in which case you pay tax, or you die.

Do you really want to have your entire savings as a "loan". Wouldn't you prefer to know the money in the account really is yours?

[centurian]

And if you had taken out a loan scheme over the past few years, you could easily be sitting on a loss now, since tax rates have gone up

You would have avoided 40% tax, but if you go over 100K in a year, you get taxed as 50% (and yes, it is 100K not 150K due to the loss of personal allowance at 100K - averages out at 10% between 100-150K).

Although that's why some are buying into the schemes now - in the hope that the 50% tax gets removed - you need a mega rate to make that worthwhile though.

[BolshieBastard]

Hi everyone - this is my first post although I have followed many threads on this forum for a couple of years now - especially those that involve the arguments for and against using a Ltd Company, Umbrella Company or Tax Scheme.

I read on the web the other day how it is far more preferable to run the risk of IR35 as opposed to being caught by the Revenue using a Tax Scheme. This opinion seemed to make sense because apparently IR35 investigations can only be based on the previous year's tax return and investigations for tax schemes can be based on Tax Returns from up to 3 years ago and the adverse financial implications are far lower for IR35 as well, according to this particular article.

It occured to me that there is a lot of negativity surrounding tax schemes with regard to the risks involved but other than the Montpelier case which appeared to revolve around the "supposed" misinterpretation of a particular piece of legislation (apologies for my huge simplification!) and another company running off with all of thier clients money, have there actually been any other tax schemes challenged successfully by the Revenue or companies disappearing with client's money?

If not, it would appear that Tax Schemes are just as risky/safe as using an accountant/umbrella/Ltd Company - all of which I guess have been investigated successfully by the Revenue many many times over or have been run by in some cases very unscrupulous owners.

Are you sure about this??

He probably got the same tulipty ill informed email from contractor weekly that said it was!

Better Living in IR35

[Subsignal]

He probably got the same tulipty ill informed email from contractor weekly that said it was!

Better Living in IR35

Yep, that's the one! Why do you say it's ill informed?