I always knew we were right....

[malvolio]

It comes back to my earlier point: the schemes themselves may well be legal and watertight, and have a totally legitimate purpose such as optimising a pension fund's returns for its pensions payroll or permitting speculative investment in areas that don't get direct HMG support such as film production

The question is, are you in a position to be able to use them legitimately? That's the bit the scheme providers tend to ignore...

[Bunk]

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.

Never underestimate how little some people know about their finances. There was a contractor at clientco who left recently, (she'd been here about 6 months), and she messaged me a few days before she left asking how she should pay VAT. It turned out she was VAT registered but hadn't been charging VAT or filling in the returns. Some of things she said were mind-boggling.

Eg.

The agency never told me I had to add VAT on top of the rate.

Won't the agency have paid the VAT for me?

I don't send an invoice, I just get a payslip. (WTF? I tried to clarify that to check she wasn't PAYE but no, she wasn't)

It shouldn't be this hard, they pay me like I'm an employee.


So basically, never be surprised how many people think that as long as money hits their account, everything is fine.

[DonkeyRhubarb]

I am not sure that all of them would necessarily understand tbh

Yes but I think you're very much talking about a minority who don't. If you go on the "HMRC Scheme Enquiries" sub-forum, most people there knew they were using an avoidance scheme.

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.:

Very true. Some go even further and advise their clients that they don't need to declare anything on their SAR because the distributions are not taxable income (eg. loans). This has always felt to me like straying into evasion territory.

However it's done, people need to be "educated" before they start using a scheme. As things currently stand, by the time HMRC gets wind of it it's too late.

[Ondine]

What?? What case?

Vallah didn't support or even refer to your case, he was refering to a different aspect of the thread, not your assertion that most contractors use loan schemes.

I believe that Vallah works for an off-shore provider.

(Did you notice that I put 'I believe'? I didn't say that 'Vallah works for an off-shore provider' even though I'm pretty sure that he does. You need to recognise the difference between a personal belief/opinion and an objective fact, Ondine.)

I didn't say that most contractors use a loan trust scheme. Please don't twist what I said. I know that the majority of contractors use LTD trading structure. And that only a very small minority go through "loan trust" schemes.

Read what I said in context to what BrilloPad was saying, I think you misunderstood.

That's assuming that they're using a Limited Company, but most aren't. In the majority of cases, the payment made in the form of a loan trust is paid directly into their personal bank account.

Don't UK lenders only look at UK taxable earnings?

I was only referring to contractors that use Loan trust arrangements through Offshore providers, irrespective of whether they're using agents like Darwin, etc.

I was responding to Brillopad's response below on how contractors working through these offshore loan trust schemes can secure mortgage.

How do most contractors do it on minimum wage? Believe it or not dividends do count towards a mortgage.

BrilloPad suggested it was through minimum wage and dividends. So I then The pointed out that the payment made in the form of a loan trust is paid directly into their personal bank account.

I hope that's clear.

[Ondine]

Its actually quite simple, they are not umbrellas they are offshore/onshore tax schemes that may or may not masquerade as umbrellas.

They are not however umbrellas because they don't pay everything as PAYE.

I totally agree.

[cojak]

Yes but I think you're very much talking about a minority who don't. If you go on the "HMRC Scheme Enquiries" sub-forum, most people there knew they were using an avoidance scheme.



Very true. Some go even further and advise their clients that they don't need to declare anything on their SAR because the distributions are not taxable income (eg. loans). This has always felt to me like straying into evasion territory.

However it's done, people need to be "educated" before they start using a scheme. As things currently stand, by the time HMRC gets wind of it it's too late.

In my experience of modding and answering contractors questions about EBTs and these kind of schemes, you can educate and point out the risks until you're blue in the face. Greed is greed is greed and punters will continue to ask ANYONE (including scheme sales men) until they hear the answer they like.

There are posters in the HMRC Enquiries threads who originally posted 'does this scheme sound too good to be true?' 3-4 years ago and are now bleating that they are being chased for tax, despite the warnings given on here.

[cojak]

I didn't say that most contractors use a loan trust scheme. Please don't twist what I said. I know that the majority of contractors use LTD trading structure. And that only a very small minority go through "loan trust" schemes.

Read what I said in context to what BrilloPad was saying, I think you misunderstood.



I was only referring to contractors that use Loan trust arrangements through Offshore providers, irrespective of whether they're using agents like Darwin, etc.

I was responding to Brillopad's response below on how contractors working through these offshore loan trust schemes can secure mortgage.



BrilloPad suggested it was through minimum wage and dividends. So I then The pointed out that the payment made in the form of a loan trust is paid directly into their personal bank account.

I hope that's clear.

Right, now I see the point you were making. I don't think that's what BP was suggesting (only Ltds use minimum wage & dividends), but that's for him to argue over.

At least your point is clear.

[Ondine]

'Most' contractors do not operate through dodgy offshore loan schemes as they are not daft Quite a number do operate through umbrella companies but I would think that a higher proportion work through their own Ltd Co's

I agree. The point I was making was that the majority of contractors that do use dodgy offshore schemes received the "Loan Trust" element of their earnings directly into a personal account, NOT a business account linked to a LTD.

[Ondine]

Yes, we are sister company to SJD - literally actually - Simon Dolan is my brother

That's interested, I just recently move my accounts to SJD in St. Albans. They seem like a lovely bunch!

[Ondine]

A glossy brochure, smooth salesmen and fancy offices is enough for many people to ignore reality. People see the extra £100 a week and ignore the obvious flaws because they want that extra £100.

They must give large kick backs / commission to their agents because I regularly received News Letters coming from the likes of Contracting Made Easy promoting Bedouin, Darwin, & Cascade.

They even set a forum on the site, its was crap. I unsubscribed as I was getting bombarded with rubbish material.