Principal Contractors / tax-efficiency / Isle of Man / Trustees

[Zero Liability]

I don't think that is a fair comparison. Surely the argument would be the permie as the stake in the ground and it would be how under taxed LTD contractors are.. which HMRC obviously agree with. Remember, permies use the rules, we use a loophole which HMRC are actively (and badly) trying to close.

I don't disagree (except for the loophole description), given the current institutional setup and rules, their only goal is to maximise tax intake, so from HMRC's perspective a contractor isn't paying the amount of tax they'd like to see. They probably still don't think you pay enough tax as an employee, even.

My point was more in the direction of what people would consider a reasonable amount of tax to pay for what they receive. In the end, the only reason HMRC is so fixated on establishing employment even where there isn't any is because of historical precedents (it is mostly a relic by economic controls imposed during the two great wars and after), income is taxed in most of the West, and taxed on a progressively increasing scale, and usually accompanies 'social security' taxes. Employment does come with certain rights and expectations attached to it but the market is evolving and requires greater flexibility, and the lines are blurring between traditional employment and freelancing. Meanwhile, HMRC is still stuck to some outmoded view of what employment is, and expects everyone to behave that way.

Of course their sole purpose is to maximise their collection of revenue, which even that they arguably do badly, luckily for us. But it is politicians and legislators who ultimately decide tax policy, and whether it is 'fair' or economically desirable from the govt's POV. A process usually hijacked by special interests. IMO, if they're taking more than they need to finance the few necessary functions of the govt, including a basic safety net, they're over-taxing. You can argue that entrepreneurial risk taking etc. should be rewarded, but it already is - by profits. Thus why I say permies are over-taxed. I also concur with ASB's and Malvolio's points.

[ASB]

Arguably we are all under taxed. But only in pedantic terms of the fact that we spend more.

our spend per head is around 11k. With a working population of 38m and an actual population of 63m and an average salary of 27k it is quite clear that personal taxes are going to be fairly high.

Obviously personal taxes are only part of the story. Ultimately though everybody in work needs to produce about 18k in taxes, somewhere along the way.

Of course cutting spending might help. 11k per head does sound like a lot.

Personally I would like to see a flat allowance of 15k. Flat tax of 15% and no ni. Simple to administer. Of course this would reduce the take and we would now have to support all those redundant civil servants.

The balance could be shifted back into the corporate arena.

Ultimately it makes no difference though. The tax, be it corporate or personal, is still produced by the labours of the working population.

My drugs though are 100k. It doesnt take too many expensive cases like me to skew the spending. Then there are all the pensioners. Need to look after them. Unless a cull is planned. Then there are all the kids. Need some sort ofan education.

Maybe the 11k isnt so much after all. Though im sure we could do it considerably better and cheaper.

[BlasterBates]

I would say no scheme works in the end. These schemes are all based on the income simply being renamed as something else, such as "a loan", artificial arrangements where income contractually doesn't belong to you, but basically you have control of the money and who gets it. HMRC just need to argue their case well. There was a recent case, and the key argument of the judge was that regardless of what happened after the money went overseas that income effectively belonged to the contractor before it ended up in the trust or whatever it was. That's pretty much a catch all for all schemes.

[ASB]

I would say no scheme works in the end. These schemes are all based on the income simply being renamed as something else, such as "a loan", artificial arrangements where income contractually doesn't belong to you, but basically you have control of the money and who gets it. HMRC just need to argue their case well. There was a recent case, and the key argument of the judge was that regardless of what happened after the money went overseas that income effectively belonged to the contractor before it ended up in the trust or whatever it was. That's pretty much a catch all for all schemes.

I think some of them did work under their rules at the time. But given the announcement back in 08, and subsequently gaar it seems unlikely that anything going forward will be sucessful.

Ultimately it doesnt really matter how esoteric transactions may be. You can see what is as the results of the fruits of ones labour. And it will be caught accordingly.

[BlasterBates]

I think some of them did work under their rules at the time. But given the announcement back in 08, and subsequently gaar it seems unlikely that anything going forward will be sucessful.

Ultimately it doesnt really matter how esoteric transactions may be. You can see what is as the results of the fruits of ones labour. And it will be caught accordingly.

The judge in the BN66 case said it if it were to be tested in court it would be a difficult one decide on, which is why I think with the right arguments it is winnable from the HMRC side, and if you look at the judges argument on a recent case they didn't use any new legislation to rule against it, i.e. the principle of the income being the contractor's before it ended up in the scheme, and it being the contractor's decision to have the money channeled into the scheme. That seems to me to be a catch all. Unless the original client/agency were to testify it was their decision I wouldn't see much hope of winning that argument.

Agreed though that nothing is certain, but I think persistence by HMRC can see most of these schemes go down in flames.

[LisaContractorUmbrella]

Genuinely not trolling.
I thought it could open up a conversation about "outlier" accounts set-ups.

Since I have returned to being mostly a contractor, I am getting targeted emails as I now am subscribed to contractor-specific environments.

Apologies if the thread has come across as troll-like.

They are based in IOM so this will apply https://www.gov.uk/government/upload...rmediaries.pdf

They appear to be using some sort of loan scheme so this will probably apply http://www.hmrc.gov.uk/budget-update...x/tiin2675.pdf

If it's a recognised tax avoidance scheme then this will probably apply before long https://www.gov.uk/government/news/t...x-owed-upfront

Using this sort of scheme will therefore be pretty much equivalent to painting a large bullseye on your back, handing HMRC a rocket launcher and then begging them to give you a 3 second head start.

[DonkeyRhubarb]

Using this sort of scheme will therefore be pretty much equivalent to painting a large bullseye on your back, handing HMRC a rocket launcher and then begging them to give you a 3 second head start.

Anyone thinking of using a scheme in the current climate needs to seek professional help.

And I mean a psychiatrist, not an accountant.

[DirtyDog]

I've told you this before and will say it again. Unless they are a brand new forumite, encourage them and because they deserve everything they get.

Simple answer, do you understand how the scheme works. Do you receive the money immediately as income or is it a loan, grant, trust payment..... If you don't understand how it works or its any of those things run....

Since the OP is / was an agent, I can understand why we're not encouraging them to go for it anyway...

[ASB]

They are based in IOM so this will apply https://www.gov.uk/government/upload...rmediaries.pdf

They appear to be using some sort of loan scheme so this will probably apply http://www.hmrc.gov.uk/budget-update...x/tiin2675.pdf

If it's a recognised tax avoidance scheme then this will probably apply before long https://www.gov.uk/government/news/t...x-owed-upfront

Using this sort of scheme will therefore be pretty much equivalent to painting a large bullseye on your back, handing HMRC a rocket launcher and then begging them to give you a 3 second head start.

Don't sit on the fence. Tell us what you really think.