Payschemeplus / Talent Resource Mnagement TRM

[Cowboy Bob]

You are entitled to an opinion but until you have used the various schemes I doubt if you understand how they work. Maybe you are bitter as you can't bring yourself to step out of your LTD comfort zone? Anyway, what you say is wrong. Yes you are a tax resident and your salary earnings (perhaps 10-20k) are taxed but the bulk of the income is treated differently whereby the agreement is that you take it in the form of employee benefit zero % interest loans which are recorded on a P11D. It is a benefit of working as an employee and any employer can provide this facility to your staff. It is not a MSC scheme. You are an employee and pay PAYE/NI. Over 90% nett is easily achievable.

If it's a loan scheme, what happens when the loan is finally written off? Yep, you guessed correctly, a nice fat tax bill...

From here - http://www.shout99.com/contractors/s...id=12986&n=300

Income tax on write-off of the loan
Assuming that the trustees are able to make loans to the employee that are not caught by PAYE, the write-off of the loan must be considered.

When the write-off happens, there would be an income tax charge and also a Class 1 NIC liability (as this would be an emolument under s19 ICTA on general principles). This is in addition to the annual income tax liability and also a Class 1B NIC liability on the annual benefit-in-kind on the interest free loan.

Even if the write-off happens after the individual ceases employment with the composite company an income tax charge may arise under s148 ICTA 1988. This legislative provision imposes a charge to tax where payments and other benefits are made in connection with the termination of employment, even if received at a later date.

Your tax bill is coming, when who knows, but it will come. Better make sure you have the cash...

[test_guy]

If it's a loan scheme, what happens when the loan is finally written off? Yep, you guessed correctly, a nice fat tax bill...

From here - http://www.shout99.com/contractors/s...id=12986&n=300

Income tax on write-off of the loan
Assuming that the trustees are able to make loans to the employee that are not caught by PAYE, the write-off of the loan must be considered.

When the write-off happens, there would be an income tax charge and also a Class 1 NIC liability (as this would be an emolument under s19 ICTA on general principles). This is in addition to the annual income tax liability and also a Class 1B NIC liability on the annual benefit-in-kind on the interest free loan.

Even if the write-off happens after the individual ceases employment with the composite company an income tax charge may arise under s148 ICTA 1988. This legislative provision imposes a charge to tax where payments and other benefits are made in connection with the termination of employment, even if received at a later date.

Your tax bill is coming, when who knows, but it will come. Better make sure you have the cash...

This analysis is impartial and hardly expert advice and it is dated 2002! (Expert analysis: Isle of Man IR35 avoidance strategy flawed by WJB Chiltern plc at 17:16 14/11/02)

The loan is repaid monthly by the next invoice payment from the client so the exposure to tax (if any) is only one maximum one months income.

[malvolio]

Great. Dead easy. Such a shame the Treasury outlawed such schemes for UK residents last year...

[ASB]

Great. Dead easy. Such a shame the Treasury outlawed such schemes for UK residents last year...

They didn't outlaw them. They changed the tax treatment. This may or may not have an adverse impact on consumers of the scheme. In general I recall these are assessable to income tax when the loan is granted and then credit is obtained when repaid. In the event of any issues it is the taxpayers responsibilty to make correct declarations etc.

[Cowboy Bob]

So basically if you do not pay back the loans - which is effectively the same as them being written off - then they are liable to full tax/NI.

[tim123]

You are entitled to an opinion but until you have used the various schemes I doubt if you understand how they work. Maybe you are bitter as you can't bring yourself to step out of your LTD comfort zone? Anyway, what you say is wrong. Yes you are a tax resident and your salary earnings (perhaps 10-20k) are taxed but the bulk of the income is treated differently whereby the agreement is that you take it in the form of employee benefit zero % interest loans which are recorded on a P11D. It is a benefit of working as an employee and any employer can provide this facility to your staff. It is not a MSC scheme. You are an employee and pay PAYE/NI. Over 90% nett is easily achievable.

If they are 0% loans recorded on the 11D then tax is payable on the notional interest that has not been paid.

You pay this, this year, next year, the following year and every year until you repay the loan. Eventually, the tax you have paid on the interest is more than the tax that you would have paid on the principle, and you still owe the money back.

tim

[test_guy]

If they are 0% loans recorded on the 11D then tax is payable on the notional interest that has not been paid.

You pay this, this year, next year, the following year and every year until you repay the loan. Eventually, the tax you have paid on the interest is more than the tax that you would have paid on the principle, and you still owe the money back.

tim

Nope
The offer of loan normally occurs every 6 weeks and when you accept it is is made 0% interest. It is repaid from the proceeds of the next client invoice. Normally you will only be offered a loan is there is enough cash in your "trust" to actually loan you! There is no tax to pay on the interest.

[oraclesmith]

2-Dec-2004 - wow that's a lot of tax to pay back !

[cojak]

I'm sure maxima will be reading this thread with much interest.

Remember folks, the advice you get on this board is worth exactly the amount you paid for it.

Tax legislation may change and house prices and the stock market may go down as well as up...

[tim123]

Nope
The offer of loan normally occurs every 6 weeks and when you accept it is is made 0% interest. It is repaid from the proceeds of the next client invoice. Normally you will only be offered a loan is there is enough cash in your "trust" to actually loan you! There is no tax to pay on the interest.

How can a loan to you, be paid off by money that comes from client income without first creating a taxable payment when the client income is paid to you?

The fact that you don't physically transfer the money, doesn't mean that the step isn't there.

tim