Hypothetical question

[DaveB]

Leaving aside the obvious issues of trusting your money to other people etc etc, what does the congregation think of this from a tax/legal perspective. Would it fall foul of any specific taxation legislation? And no, I'm not intending to do this, I'm just curious about the legalities.

You work for an umbrella Co. as a full time employee. All PAYE etc is taken care of based on a low salary.

Under a seperate arrangement you are given access to funds through a loan facility for an amount equal to the difference between your salary and your gross earnings. The loan is provided by a third party unconnected to the umbrella co. you work for. You draw on this arrangement on a 6 weekly basis with the total loan amount being adjusted each time.

The loans run for a fix term of 40 years, accrue interest and are fully repayable. Shortly before the loan becomes re-payable you are given access to a second loan, also fixed for 40 years for the amount of the previous loan + interest due.

[slackbloke]

Leaving aside the obvious issues of trusting your money to other people etc etc, what does the congregation think of this from a tax/legal perspective. Would it fall foul of any specific taxation legislation? And no, I'm not intending to do this, I'm just curious about the legalities.

You work for an umbrella Co. as a full time employee. All PAYE etc is taken care of based on a low salary.

Under a seperate arrangement you are given access to funds through a loan facility for an amount equal to the difference between your salary and your gross earnings. The loan is provided by a third party unconnected to the umbrella co. you work for. You draw on this arrangement on a 6 weekly basis with the total loan amount being adjusted each time.

The loans run for a fix term of 40 years, accrue interest and are fully repayable. Shortly before the loan becomes re-payable you are given access to a second loan, also fixed for 40 years for the amount of the previous loan + interest due.

I don't understand it - My experience suggests if I don't understand then there is no way an accountant can :-)

[TheBigYinJames]

The loan is provided by a third party unconnected to the umbrella co. you work for. You draw on this arrangement on a 6 weekly basis with the total loan amount being adjusted each time.

I suspect this is where it would become unstuck. The '3rd party' would have to be a co-signee on the contract, or it couldnt legitimately receive any money for the work done.

[DaveB]

I suspect this is where it would become unstuck. The '3rd party' would have to be a co-signee on the contract, or it couldnt legitimately receive any money for the work done.

But it could be recieveing money from the brolly via some other means...?

[TheBigYinJames]

But it could be recieveing money from the brolly via some other means...?

You sounds as vague as that advert was. Finding the other (legal) means is the trick. Solve that and you'll be rich.

[ASB]

Leaving aside the obvious issues of trusting your money to other people etc etc, what does the congregation think of this from a tax/legal perspective. Would it fall foul of any specific taxation legislation? And no, I'm not intending to do this, I'm just curious about the legalities.

You work for an umbrella Co. as a full time employee. All PAYE etc is taken care of based on a low salary.

Under a seperate arrangement you are given access to funds through a loan facility for an amount equal to the difference between your salary and your gross earnings. The loan is provided by a third party unconnected to the umbrella co. you work for. You draw on this arrangement on a 6 weekly basis with the total loan amount being adjusted each time.

The loans run for a fix term of 40 years, accrue interest and are fully repayable. Shortly before the loan becomes re-payable you are given access to a second loan, also fixed for 40 years for the amount of the previous loan + interest due.

It doesn't look like a beneficial loan, provided the interest is at an appropriate commercial rate and actually paid.

I don't see how it can possibly be of any benefit though.

[DaveB]

It doesn't look like a beneficial loan, provided the interest is at an appropriate commercial rate and actually paid.

I don't see how it can possibly be of any benefit though.

The loan income isn't taxed....

[ASB]

The loan income isn't taxed....

No but it has to be paid back at some point, or it is taxed.

Ok, so you pay it back from the next loan but the capital amount outstanding is constantly increasing. Also if the interest is rolled up it might be a beneficial loan, and if the interest is actually paid this will pretty soon wipe out the tax saving.

[TheBigYinJames]

I think the moral of this tale is that loan offsets to avoid tax only work if you die before you pay it off.

[Incognito]

Is the debt not deductable from your estate?