I always knew we were right....

[northernladuk]

Do you think it is that simple Eek - just plain old fashioned greed?

And a huge dose of nativity. Makes for a very dangerous mix!

[DonkeyRhubarb]

DonkeyRhubarb is probably a far better person to ask here as he got stuck trying to escape IR35 when that first appeared. I'm not trying to score points here I really would be interested in the reason why people signed up for these schemes.

Everyone I knew who joined back in 2001 did so because of IR35. We had all been previously operating through Ltd companies. Montpelier even called their arrangement an "IR35 scheme". They didn't have to actively sell the scheme because it caught on by word of mouth. There was no website or brochure.

Things are very different now. IR35 is no longer the threat it was perceived to be and all out war has been declared on tax avoidance.

I suspect a lot of the folks joining schemes now are new to contracting. There may be a few moving across from brollies but I can't see many people switching from Ltd to a scheme like we did.

[moggy]

And a huge dose of nativity. Makes for a very dangerous mix!

Merry Xmas...

[northernladuk]

Merry Xmas...

Goddamn autocorrect!!! I am more than capable of writing bollux without autocorrect stepping in!

[LisaContractorUmbrella]

Yes because if they read around the issue they would notice the flaws in the plan. Hence they either :-

1) read up on the issue but greed gets the better of them
2) they just go for what they believe to be the best option and ignore the possible risks.

There is a third option that they believe what the salesman tells them that its risk free and safe but even then its still greed that makes them sign up for the deal compared to the more sensible approach of a limited company + accountant or straightforward umbrella.

DonkeyRhubarb is probably a far better person to ask here as he got stuck trying to escape IR35 when that first appeared. I'm not trying to score points here I really would be interested in the reason why people signed up for these schemes.

Me too - we put masses of stuff on the internet to try and inform people about the risks but there seem to be new dodgy schemes springing up every day

[LisaContractorUmbrella]

Goddamn autocorrect!!! I am more than capable of writing bollux without autocorrect stepping in!

[LisaContractorUmbrella]

Everyone I knew who joined back in 2001 did so because of IR35. We had all been previously operating through Ltd companies. Montpelier even called their arrangement an "IR35 scheme". They didn't have to actively sell the scheme because it caught on by word of mouth. There was no website or brochure.

Things are very different now. IR35 is no longer the threat it was perceived to be and all out war has been declared on tax avoidance.

I suspect a lot of the folks joining schemes now are new to contracting. There may be a few moving across from brollies but I can't see many people switching from Ltd to a scheme like we did.

So how do you think we can get the message across to newbies? Do you reckon it would make a difference if recruiters were better educated about the difference between umbrella companies and dodgy schemes claiming to be brollies?

[DonkeyRhubarb]

So how do you think we can get the message across to newbies? Do you reckon it would make a difference if recruiters were better educated about the difference between umbrella companies and dodgy schemes claiming to be brollies?

Some of the bigger recruiters already have a policy of not dealing with anything dodgy. Contractors either have to operate through their own company or be on PAYE. Some even have lists of approved umbrella companies. Education might help but there are an awful lot of agencies so I don't know how practical that would be. Some probably don't care what arrangements their contractors use.

Although these contractors may be newbies, they must know what they are signing up for is not a normal way to get paid. I find it hard to believe that they don't know they are using a tax avoidance scheme. What they are probably ignorant/complacent about are the risks and future ramifications.

At the moment DOTAS requires scheme promoters to register a scheme before they can market it. One thing that might deter people signing up is if there was a legal requirement for taxpayers to inform HMRC before using a scheme. HMRC could then write back and scare the bejesus out of them. You need to get to people before they actually start using a scheme, not 2 or 3 years later after they submit their first self-assessment.

[eek]

You need to get to people before they actually start using a scheme, not 2 or 3 years later after they submit their first self-assessment.

but there is no money for HMRC in doing that.

[LisaContractorUmbrella]

Some of the bigger recruiters already have a policy of not dealing with anything dodgy. Contractors either have to operate through their own company or be on PAYE. Some even have lists of approved umbrella companies. Education might help but there are an awful lot of agencies so I don't know how practical that would be. Some probably don't care what arrangements their contractors use.

Although these contractors may be newbies, they must know what they are signing up for is not a normal way to get paid. I find it hard to believe that they don't know they are using a tax avoidance scheme. What they are probably ignorant/complacent about are the risks and future ramifications.

At the moment DOTAS requires scheme promoters to register a scheme before they can market it. One thing that might deter people signing up is if there was a legal requirement for taxpayers to inform HMRC before using a scheme. HMRC could then write back and scare the bejesus out of them. You need to get to people before they actually start using a scheme, not 2 or 3 years later after they submit their first self-assessment.

I am not sure that all of them would necessarily understand tbh - we send out guidance explaining how PAYE works because people don't understand it yet that's the way that all permies are paid. We all understand the concept of tax avoidance but I wonder how many of the general public do other than in terms of Starbucks or Google; also would anyone new to this country think that an avoidance scheme was not legitimate if it were sold to them as being so, especially if it was recommended by an agency or co-worker?

The problem with DOTAS is that some scheme providers who should register don't because they don't consider that they are promoting tax avoidance e.g.:

At Gladius Consulting, we address all of the points made above about the factors to consider when deciding which PAYE umbrella company to use. Remember, we have a wealth protection strategy that is equally suitable to individuals wanting to operate under a traditional umbrella PAYE company structure, as well as those individuals that seek to retain or start their own one-man limited company structure.
Let us examine the way in which we address each point:
Gladius Consulting has recently managed to lower the entry barrier to our wealth protection strategy. This has now made this particular structure available to individuals and companies that would previously not have qualified. This wealth protection strategy has been successfully implemented by a large number of big corporations and high net-worth individuals for over 20 years. For the last 10 years the team behind Gladius Consulting has been actively servicing the UK contractor market, establishing an enviable reputation as one of the top contractor service teams in the industry
The Gladius Consulting fee structure is completely transparent. Depending on the option you go for, we will discuss and agree the exact fee structure with you in advance, in writing, before you pay a penny.
Gladius Consulting does not make use of any form of expense dispensation. This is an outdated strategy still used by many umbrella PAYE companies, and is becoming an increasingly popular area of investigation for HMRC
Gladius Consulting will never take your funds abroad. All funds remain in the UK at all times
Gladius Consulting does not make use of an Employee Benefits Trust (EBT) as part of its wealth protection strategy
Gladius Consulting can provide documented proof that our wealth protection strategy has been carefully reviewed and approved by a leading QC with specific reference to all applicable legislation. Our solution is completely based in existing statute and does not require notification under DOTAS. We are continuously working with leading tax counsel and fiduciary experts to maintain the compliance of our strategy. QC opinion confirms our strategy will remain effective and robust with the current GAAR proposals set to come into effect in the near future. Our claims are backed up by specific reference to case law, which ensures that our solution is tried and tested. Finally we have the only insurance policy available in the industry which returns any fees paid to us in the unlikely event that our strategy is successfully challenged by HMRC. This is underwritten by Lloyds of London. In the event of an HMRC enquiry you will have the full resources of our legal and tax specialist team at your disposal at no extra charge.