I want to leave a Umbrella Loan Scheme to go LTD

[kal]

My advice cash it in and tax it correctly.

I doubt that anyone will get away with any scheme now.

Getting on the wrong side of HMRC is a really bad experience. You don't want to go there.

...and they will come after you even if it is just a year, so don't think in terms of might, it definitely will end up as a COP8 investigation and you will definitely receive a nasty brown letter with a huge bill.

Sort it out now while you're still in the driving seat. You,ve lost the fee but you should be able to sort it out.

Do you really want to end up with a 5 or even 10 year ongoing dispute with HMRC?

Agree, I hope that these schemes are outlawed as too many contractors get sucked in and are then left to bend over and take both barrels from hector, i almost signed up to one of these when I was embarking on contacting not knowing any better, luckily I was advised not to...

[malvolio]

Thanks, by sorting out ..shall I just setup a ltd right away..and let the scheme provider do my sa next year and make sure they deal with the incomes accordingly

How ever it is they see legal ... Then it's up to hmrc to approve or not... And the provider to help battle

Or u saying just pay 40 percent on the loans via a new accountant or put in pension??

It's not about the legality of the scheme; that's the mistake a lot of people are making. It's about the construction of the scheme and to some extent whether or not you are in a position to use that structure. HMRC are there to collect tax owed. The scheme provider is there to earn money for their own people. Neither have any interest in or obligations towards you.


What I'm saying (others may disagree) is treat what you've earned to date as normal income and ignore the scheme nonsense. That income carries a tax liability. Then whatever you earn from your company this tax year, you don't have to take as salary (or anything else, come to that). You also have to think about IR35, of course. At year end, total up the gross income, calculate what tax is owed, deduct what's been paid, send of the cheque.


But before doing any of that, get a proper accountant to advise you: there are several on here or if all fails go look at the PCG's Accredited Accountants, who will know all about contracting.

[BlasterBates]

Thanks, by sorting out ..shall I just setup a ltd right away..and let the scheme provider do my sa next year and make sure they deal with the incomes accordingly

How ever it is they see legal ... Then it's up to hmrc to approve or not... And the provider to help battle

Or u saying just pay 40 percent on the loans via a new accountant or put in pension??

Hmrc will not approve it, they will fight you tooth and nail, you would have to go through a 10 year legal battle which will cost you a fortune and you probably won't win.

Most contractors think this, i.e. nothing to lose wait until HMRC challenges it, but it will take years before they do and then the interest has built up so you now have to pay double or triple the original tax bill.


Go and see a reputable accountant and put your tax affairs in order, i.e. pay tax on the full amount and perhaps put in a pension. There are better ways to mitigate tax.

At least you have the chance to sort things out.

[ASB]

Mal,

You are quite right. If there was illegality in the schemes then those challenged would tend to find themselves on the receiving end of criminal charges.

the question is just about whether the scheme is actually effective in its aims.

[ASB]

There is a small issue with what bb said. Only in as much as it will not be possibke to reclassify the income. This may remove the possibility of some mitigation strategies. E.g. corporate pension contributions.

however if you make the switch now it will stop the scheme impact from worsening. It is at worst 9 months exposure.

you dont actually seem to know what the payments from the scheme are. If they are loan payments you could formally ask for the loan to be forgiven. Assuming they do this then declare these on your tax return and pay. You may even avoid the ni consequences.

If it is a payment for ipr then declare it and pay the tax.

of course it is possible the scheme does meet its aims. But id be doubtful.

[LisaContractorUmbrella]

Thanks, by sorting out ..shall I just setup a ltd right away..and let the scheme provider do my sa next year and make sure they deal with the incomes accordingly

How ever it is they see legal ... Then it's up to hmrc to approve or not... And the provider to help battle

Or u saying just pay 40 percent on the loans via a new accountant or put in pension??

It doesn't really work like that with HMRC - have a look here HMRC Scheme Enquiries - this will give you an idea of the reality of the situation.

Find yourself a really good accountant that specialises in the contractor market and take there advice on how best to move forward.