breeze

[speling bee]

I hope it's because Phil is busy, as the questions posed are extremely important. The claims sound almost too good to be true, but I'm not going to condemn before hearing the details.

Absolutely! This is an exciting prospect.

[PhilBreeze]

Sorry for the delay everyone, it's been a busy day..

Please explain how you can promise a 'minimum of 84.5% take home pay for contractors earning over £50k per annum and what evidence can you provide that HMR&C have confirmed that your product is not a tax avoidance scheme. You have stated in several places on your website that this scheme is 'zero risk' as it is indemnified so can you confirm that Lloyds will reimburse any contractors using the scheme for any underpaid tax, penalties, interest and legal costs?

Hi Lisa, our product utilises a discretionary trust as a part of the individual's financial strategy - a complex instrument which if used properly can create significant tax advantages. The way the trust deed has been drafted in this case allows for tax efficient payments to be made to beneficiaries in the form of commercial loans which can be rolled over upon maturity. Arrangements which have been tested twice in the courts, both times the trust payments have been scrutinised and found not to be liable for taxation. Since HMRC have accepted that arrangements "that promoters know to be known to HMRC" are not caught by its anti-avoidance hallmarks, and in light of the Dextra & Sempra litigation amongst other factors, it follows that our product is not a tax avoidance scheme, a fact that has been confirmed in writing from HMRC. Our Lloyd's insurance covers a full reimbursement of fees in the highly unlikely event that the advice we have received be wrong - in complete contradiction of the existing case law - leaving our clients with 100% of their money and the tax bill they would have had, had they not used the arrangements. HMRC would not be able to charge penalties as there is full disclosure of the trust contributions as they are made.

[MrJGrinder]

Hi Phil,

I have another question (hopefully it will be answered on here this time, not messaged telling me to remove it).

Why does a certain director of Breeze, Mark Willis, not mention his time at Sunday Solutions on his profile on Linked In?

http://forums.contractoruk.com/accou...roblem-25.html

I look forward to your response.

[ASB]

and in light of the Dextra & Sempra litigation amongst other factors, it follows that our product is not a tax avoidance scheme.

But, how do you get the payments into the trust in the first place in an efficient way since I believe (please correct me if I am wrong) that the current state of play with Sempra is that the payments into the relevant trusts were disallowed as an expense for CT purposes.

It seems therefore that this can only be effective if the payments into the trust can be got in a tax free way into a jurisdiction with no CT (e.g. IOM, CI etc) and that transfer also be a qualifying expense in the first place.

I not your insurance (which does imply some confidence) only covers your fees not the whole gamut of taxes, penalties etc that could be liable in the event of failure.

I do accept there are products which work, the rely on things I am unsure about and I am naturally cautious in this area.

[speling bee]

Phil, what happens if there is retrospective legislation?

[PhilBreeze]

These schemes rely on the fact that there are a lot of lazy people who do not look into what they get involved with and sign up when they see the £ signs flashing.

Frankly I'd rather our prospective clients fully understand our offering before making the decision to join.

This seems to be another clever scheme, probably with some offshore connection that will probably result in the users getting into problems later on.

Perhaps you've seen the news articles about a £3.9bn 20-year contract HMRC signed with an offshore property management firm in 2001? Mapeley STEPS Contractor Ltd legally avoid buckets of UK corporation tax by holding their assets in Bermuda - and now a subsidiary of that company based offshore owns 60% of HMRC's buildings, which makes any capital gains on the subsequent resale or transfer back to HMRC of those buildings CGT-exempt. The chief exec of HMRC Lesley Strathie told the public accounts committee that she wasn't embarrassed by this because "80% of companies in the property management business hold their properties offshore and a more strategic view should be taken" !

http://www.hmrc.gov.uk/freedom/mapeley-steps.pdf

Legally, bidders can only be excluded if they have not paid tax they owe, or if they have been involved in illegal tax evasion. Therefore purchasers are prevented from excluding bidders using an offshore tax structure in any shape or form.

The point being that offshore is not synonymous with evasion and there you have it directly from Janine Hannan, Senior Commercial Manager at HMRC. In fact the only major case I know of where an offshore "scheme" has landed contractors in trouble is BN66 which was borderline unconsistitutional and is still being challenged by the taxpayer I believe?

http://forums.contractoruk.com/accou...ct-2008-a.html

Regardless the BN66 schemes had not been previously tested in court (somewhat cynically some would argue) and this allowed HMRC to backdate the legislation without contradicting any existing judgements. In our case we have existing judgments giving a clear interpretation of the legal status of our strategy. Don't forget the insurances and inclusive legal support

They quote an 85% return based on £300/day and 10% expenses, I just put this in my accountants calculator and I got to 81%, so is the extra 4% worth the hassle and sleepless nights?

https://www.nixonwilliams.com/net_pay_calculator.asp

A few comments on your accountants' calculations if I may:

1. It's based on 46 weeks, if you set the number of weeks to 48 you lose 1%.
2. It assumes your contract is IR35 compliant, in my experience most contractors are in the "grey area" in respect of IR35 and will always assume some risk if they don't operate deemed payment. Our strategy complies with IR35.
3. If you have other sources of income you will pay more dividend tax and receive less than 80%. With Breeze's strategy the % is not affected by your overall income level.
4. It doesn't seem to take into account other costs such as PI insurances, Companies House fees and other associated costs with running a Ltd co.

Regardless, 4% difference on £300/day x 46 weeks is still £2,760 per annum. Of course someone on a higher rate will benefit even more.

[PhilBreeze]

Phil, what happens if there is retrospective legislation?

Good question, the Government would have you believe that the BN66 legislation wasn't retrospective, merely a "retrospective clarification" (??) of an existing law from 1987. Retrospective legislation being unconstitutional of course, it's like implementing a congestion charge in Birmingham, backdating it to 1990 and then charging anyone who has ever driven through central Birmingham in that period..

When elected, the Coalition Government committed to restore the UK tax system’s reputation for predictability through the new Tax Consultation Framework. The Protocol on Unscheduled Announcements of Changes in Tax Law has also been amended so that retrospective measures will be “wholly exceptional”, and the Chartered Institute of Taxation have called retrospective taxation "inherently unfair".

That said the Government do like to try it on, however in our case they would find it difficult to retrospectively legislate as there are existing court cases which have looked at the arrangements and confirmed the interpretation of the law so any retrospection would be contrary to the already established case law. There is also a provision in the trust deed we use which allows for the terms of the trust to be retrospectively amended.

[PhilBreeze]

But, how do you get the payments into the trust in the first place in an efficient way since I believe (please correct me if I am wrong) that the current state of play with Sempra is that the payments into the relevant trusts were disallowed as an expense for CT purposes.

It seems therefore that this can only be effective if the payments into the trust can be got in a tax free way into a jurisdiction with no CT (e.g. IOM, CI etc) and that transfer also be a qualifying expense in the first place.

I not your insurance (which does imply some confidence) only covers your fees not the whole gamut of taxes, penalties etc that could be liable in the event of failure.

I do accept there are products which work, the rely on things I am unsure about and I am naturally cautious in this area.

Our strategy allows for UK resident businesses to contribute to the trust and deduct such contributions from their taxable profits under the "wholly & exclusively" principle. The Sempra decision applies only to trusts set up to provide benefits to employees of the contributing companies, or their families. Contributions are reported on the Company Return as a deductable expense and have done for many years without further enquiry from HMRC.

Our insurance cannot cover tax liabilities, this would be non-compliant with MSC legislation, however as stated previously the fee reimursement leaves our clients with 100% of their money and the tax bill they would have had anyway, so the "risk free" claim is justified IMO?

[PhilBreeze]

And can you confirm which syndicate is the providing that insurance? So that I can perform due diligence before deciding how to proceed.

I have sent you a message regarding this in a PM.

[MrJGrinder]

Hi Phil,

I have another question (hopefully it will be answered on here this time, not messaged telling me to remove it).

Why does a certain director of Breeze, Mark Willis, not mention his time at Sunday Solutions on his profile on Linked In?

http://forums.contractoruk.com/accou...roblem-25.html

I look forward to your response.