I always knew we were right....

[Ondine]

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.

Great, I feel a lot better now

[Ondine]

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?

Recruiters are a good start. Forums like Contractor UK also help. Contractor UK's news letters do a good job in educating the market.

I think PCG also do a good job by bringing specialists accountants to seminars who explain how the different trading structures operate.

UK Payroll umbrella companies making it absolutely clear (on their web sites) that they are compliant and do not operate Offshore EBT style schemes or have anything to do with them.

[DonkeyRhubarb]

There should be more onus on HMRC to be proactive in preventing avoidance. At the moment they don't do much until schemes have already been very heavily used, in effect shutting the stable door after the horse has bolted resulting in the huge backlogs of enquiries they are now faced with.

A quick search on Google comes up with a whole bunch of companies they could be probing. If these companies aren't disclosing their schemes through DOTAS then HMRC should be asking why not.

HMRC's current approach is too reactive and, as I've already mentioned, by the time scheme users come to their attention via self-assessment etc it is too late.

[eek]

There should be more onus on HMRC to be proactive in preventing avoidance. At the moment they don't do much until schemes have already been very heavily used, in effect shutting the stable door after the horse has bolted resulting in the huge backlogs of enquiries they are now faced with.

A quick search on Google comes up with a whole bunch of companies they could be probing. If these companies aren't disclosing their schemes through DOTAS then HMRC should be asking why not.

HMRC's current approach is too reactive and, as I've already mentioned, by the time scheme users come to their attention via self-assessment etc it is too late.

I think that is due to a lack of staff and an unwillingness to be proactive when chasing evaders is more important than stopping them before they begin.

The real solution is the Australian approach. All schemes need prior approval from HMRC otherwise its no go and full tax has to be paid. It would also be incredible easy to implement. 1 line hidden in next years budget for a start date April 6th 2016 (after the next election so the blame can be pointed elsewhere if its a grade a disaster).

[LisaContractorUmbrella]

There should be more onus on HMRC to be proactive in preventing avoidance. At the moment they don't do much until schemes have already been very heavily used, in effect shutting the stable door after the horse has bolted resulting in the huge backlogs of enquiries they are now faced with.

A quick search on Google comes up with a whole bunch of companies they could be probing. If these companies aren't disclosing their schemes through DOTAS then HMRC should be asking why not.

HMRC's current approach is too reactive and, as I've already mentioned, by the time scheme users come to their attention via self-assessment etc it is too late.

I think a lot of that is a lack of resources - tax avoidance is, I would imagine, a fairly small part of HMRC's remit. I do think that the measures they are taking are becoming more heavy handed and wide reaching e.g. the National Insurance Contributions Bill brought in under GAAR which means that they don't have to involve themselves in minutiae of complicated variations of employee trust schemes.

[Wanderer]

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?

Not as long as these "dodgy schemes" are paying referral fees to the agencies who recommend them...

[LisaContractorUmbrella]

Not as long as these "dodgy schemes" are paying referral fees to the agencies who recommend them...

Good point

[Freelancer Financials]

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

Hi Brillopad,

Dividends only count towards a mortgage if you operate through a Limited Company structure. Not offshore Loan Trust payments.

Those getting paid by way of a Loan Trust arrangement, receive that payment into a personal account. Not a LTD Company business account. So strictly speaking, they can only use the minimum wage to apply for a mortgage, unless they can prove that they are also paying UK tax on the Loan Trust portion of their earnings.

Whereas, contractors operating through PAYE (UK) Umbrellas and LTD Companies don't have problems getting a mortgage.

[Freelancer Financials]

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?

Just simply tell them that they will struggle to get a mortgage on these schemes.

Virtually all the high street lenders have made it clear that they do not want applications from buyers who operate under these Offshore Umbrella/Loan Trust schemes.

The only reason some get a mortgage is because dodgy mortgage brokers disguise them as working through PAYE brollies.

[Freelancer Financials]

How on earth do people operating through an Offshore Umbrellas prove their earnings for affordability when they're applying for a mortgage or finance?

They're P60 and tax returns only show a small minimum wage salary, so how do they do it. Self cert Mortgages were banned a few years back?

I suppose they can't get a loan unless they're buying a shed.

That's correct. Unless they are a cash buyer!