prosperity4 - What do you think?

[rootsnall]

Re: Oh Jesus, another one...

I was resisting coming out with the Malvolio response !

I think you are relying on the IR being lax and never getting round to looking at your case. Your odds are pretty good I would think on past evidence of you getting away with it, I haven't got the bottle to do it personally.

[dreameR78]

Re: Oh Jesus, another one...

So if you set up your own LTD company, what percentage return are you more likely to get?! 60%-70%?!

I am sorry for all the questions but I am seriously thinking of taking up contracting within the next couple of months and I need all the advice I can get from good people like you guys!

[rebekkaloos]

Re: Oh Jesus, another one...

malvolio and rootsnall - did you actually take the time to read about the scheme and read what serious accountants and tax lawyers have to say about it instead of running scared as soon as the magic 80% bar is passed?
Do you think these guys would still be in existence after all these years, with a website accessible to all (hey, including IR people!), if it was blatantly illegal?
Now I'm not saying it's all clear and fine, but just discarding it out of hand because you think the IR might not like it, is quite typical of the attitude of 95% people on this island who just "follow the flow", and that includes contractors who just pay up silly taxes just for peace of mind.

FYI, some respected accountant described it as "very aggressive tax planning" but did not describe it as clearly illegal / tax evasion. Avoidance yes, evasion no. There is a difference.

[rootsnall]

Re: Oh Jesus, another one...

I've looked at some of these schemes over the years and like I say I've never had the bottle despite being tempted a time or two. I haven't studied this one, were do you stand if you are IR35 investigated ? Aslong as you are safe from getting locked up if it all goes wrong its probably worth the risk. If it was risk free we'd all be doing it. I had a mate who's job was setting up these schemes in Oz and his attitude was they are generally designed for people making serious money ie. its worth the risk and they had the money to fight it if they got caught.

[malvolio]

Yes I looked...

I'm not that dumb, unlike some. So let me explain in words of one syllable, then I can get on with the real world.

They are peddling the same expenses scam as P4. They do not actually say they will return 90%, they say that under certain circumstances, up to 90% can be realised. Those circumstances would never arise, or if you claimed they did you would be guilty of tax evasion (not avoidance). So they're not illegal but they are selling a solution that would be illegal if you implemented it and it would be you in court, not them.

The Revenue will notice anyone whose income pattern is significantly above expectation or otherwise out of the ordinary and will investigate. Do not think for a minute that they are inefficient at their primary role, they are actually very good.

The reality is that any umbrella will (a) put you inside IR35 since you are proven to be an employee and (b) cost you money over and above what you make as a Ltd Co. In fact it's worse, since they charge you on 100% or your earnings while a Ltd Co inside IR35 pays on 95%.

An honest one is a good way for a newbie to get into the game, but it is no more than that. Anything that promises to return much over 80% of gross is lying or illegal.

In other words, they are looking for suckers. If you're stupid enough to fall for it and risk losing a lot more than you gain, then fine. Just don't expect us wimps to take that risk.

[rebekkaloos]

Re: Yes I looked...

well Malvolio, we'll just have to agree to disagree.

1) their scheme has nothing to do with expenses. In fact I have even stopped claiming expenses (even though I could claim my travel costs, for example), simply because it does not offer me any financial benefits compared to the payment structure I have set.

2) circumstances under which you can get over 90% are actually not as rare as you think, I would suggest that over 50% contractors on this site would achieve it. If you have a rate of say £400 a day it is a piece of cake.

3) I think you overestimate the IR's capabilities. I have worked there in the past and I have seen some of their IT systems. Suffice to say if I was GB I'd be disgusted.

4) They are not an "umbrella". You do not have a "company". I don't think you have read their offerings thoroughly if you are still thinking of them in this way.

5) Not sure I understand the 100% - 95% of earnings thing you refer to?

Overall I think that it is contractors' loss if they are scared by a high return of their money. As I said, people more qualified than yourself have looked at it and have said that, although
"aggressive" it is not "illegal" if well set up.

[malvolio]

Jesus, now there's two of them...

As an interim manager, city professional, IT contractor or agency operative, you are invited to participate in a revolutionised employment structure. This legitimate company vehicle minimises the impact of IR35. This structure is tailored for contractors earning between £7-£50 per hour. The standard employment package encompasses a range of UK benefits. For those contracts in excess of this range, and where the contract is of a greater size of value, employees are rewarded with a discretionary bonus based on performance, paid as a form of dividend.

Hmmm... Looks pretty umbrella-ish to me. "You work for me and give me all your money and I'll give you some back. If you're really good I'll give you some extra"

The individual has no shareholding and therefore no control in the employing company.

Well that fills me with confidence...

In most cases the agency will negotiate an enhanced rate for those operatives who use our Limited Company Vehicle. In addition there is the ability to claim business expenses, to benefit from discounts on a range of products and the opportunity to participate in the company's EBT at a later stage should disposable income increase.

EBT. That's the illegal bit. You really ought to keep up.

Now stop defending the indefensible. It's your money. I don't care what you do with it, but don't tell me to risk mine, I'm not interested. More to the point, newcomers to contracting should be kept well away until they understand the whole risk.

[WageSlave1]

Re: Jesus, now there's two of them...

I think you overestimate the IR's capabilities. I have worked there in the past and I have seen some of their IT systems. Suffice to say if I was GB I'd be disgusted.

Have to agree with Rebekka on that one. I've also worked with the IR and their systems are a complete mess; the IT equivalent of a cowboy electrician - a mess of unsupported legacy systems patched together with manual spreadsheets!

[AussieInLondon]

my 2p worth..

Hi all - pretty heated debate there! I thought i'd share what i've found out in the past couple of weeks on this topic:

1. P4 wanted to charge me nearly £11K/year and my effective tax rate was still around 41%, despite what look like good expense arrangements with the IR. For such a high % of contract value, I'd expect a better net result ... but that's just me;-)

2. I found PayScheme+ over the weekend and have had the opportunity to talk to them ... here's the skinny on how i think it works:
- they are based offshore (so comply with different rules),
- they pay you based on two separate components ... say you've got a contract value over the year of £150K - you can set a nominal salary of (say) £50K, which is taxed & treated completely normally; AND the remaining £100K is paid to you as a tax free loan (well, all loans are tax free!) that you never repay. They then write off the loan at the end of the year ... this has nothing to do with FS regulations here in the UK, but is goverened by the offshore regulations, which allow it.

So - the quoted "83% to 91%" is possible - depending on how much of the total contract value you take as your nominal salary.

Two points of advice here:
1. use separate accounts to receive your nominal salary and your loan or "tax free dividend" payment into, and
2. you will have a problem if you have been contracting in the UK for at least a year and significantly decrease your nominal payment, because this is seen as avoidance.

Make sense? Hope this helps.

[Rebecca Loos]

Well summarised, AussieInLondon! I have been with them for just under a year and it works exactly as you have said.

I have put it past a senior chartered accountant whose comment was "this is extremely aggressive tax planning and falls into the realm of tax avoidance - which is not illegal by the way". Evasion is illegal, not avoidance.

As others have said, it helps to know you can leg it if need be (i.e. the IR somehow closes the scheme). I still don't think it's normal that they can retrospectively claim tax back (why should something that's legal one minute become illegal the next and deemed to have been illegal all along). But it looks like they can, so even though this scheme is not illegal, better have an escape plan.