Pay back EBT loan via a Big Con

[Wibble1]

You need to distinguish between sums due to the employer and sums due to the employee.

The employer is entitled to the full value of the invoice he raises on the end client. When the end client pays the invoice, the cash belongs to the employer. That employer can do whatever he wants with that cash. He can use it to pay his overheads including salaries to employees, buy assets, make contributions to pension funds, pay dividends, walk into the street and give it away. His choice, because legally the money is his.

If the employer chooses to use some or all of the cash to pay you a salary, that's his choice. However there is no direct link between the cash from client and the salary to the employee. Money is fungible and who is to say that there is a direct line of legal and beneficial ownership from end client to employee? Certainly, none of the documents make that position clear.

(It may be that this analysis produces a different tax result however and we have not completely dismissed it).

If a salary is paid but you and the employer agree that some of it will go through the PAYE system and some will go to a third party from where it may be re-routed to you via a loan or trust distribution, HMRC's argument (proven so far in Murray) is that IF the total sum has arisen to you BEFORE being divided into salary/contribution then it's taxable income, more precisely remuneration as an employee.

What happens after that is irrelevant.

I think there are a number of flaws in this argument and clearly HMRC also think so. Their argument in Court was essentially "a simple diversion of sums due to permit payment via a trust/loan, must be tax avoidance and if you (Judges) don't agree, the PAYE system will fail completely". the Judges agreed with HMRC.

I'm not convinced that the arguments are sound and I'm not convinced that a higher Court (Supreme Court next) will overturn the result because of the sums at stake. Not a good reason to uphold a bad decision, but one we've seen before.

I also think that the analysis in Murray is not strictly applicable to ALL schemes using an EBT, nor that it produces a personal liability. We will see.

Does that make it any clearer?

Yep, makes it clearer. I'd be interested to know which schemes using an EBT you do not think are strictly applicable from your analysis of the Murray outcome to date, specifically the Edge EBT.

[webberg]

Yep, makes it clearer. I'd be interested to know which schemes using an EBT you do not think are strictly applicable from your analysis of the Murray outcome to date, specifically the Edge EBT.

As I'm sure you'll appreciate I have my opinion on which schemes are better or worse off if Murray was to eventually have a final decision pretty much as it is now.

That opinion has been largely funded by our "Big Group" and as such is their property which I am not able to share outside that group.

I'm sure that other advisers will have a view and some may be prepared to share that without a fee.