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[webberg]

Would you kindly explain what was the primary motive then, since according to you the tax reduction was usually NOT the motive.

Thank you.

In many instances I think staying out of IR35 was the motivation. That particular piece of nonsense is as much, perhaps more, of an issue for the deemed employer as the alleged employee. I have seen concrete evidence of material from clients saying that unless a scheme is used "which prevents IR35 applying" then no job.

In some instances I think people genuinely struggled with the administration, VAT etc of running their own business.

In some instances, I think competition played a part. If the day rate is a given and tax is one of many overheads and others are reducing them, then why not have a level playing field?

In some instances, I think the reduction in tax was important. In a very few cases it may have been the main motivator.

For most contractors, securing the contract is the MAIN motivator. Everything else is secondary. It's very difficult to save tax if you have no income.

I am also saying that whatever the motivation (main or otherwise), judging it from a distance of 10 years or more is unlikely to be accurate. However HMRC and HMRC's PR machine continue to peddle this nonsense and by the look of it are finding a lot of willing customers who will believe it without critical analysis.

[AtW]

In many instances I think staying out of IR35 was the motivation.

Sure, I believe you!

IR35 was about tax more than anything else - hands up who'd complain IF they were deemed employee and had to pay LESS tax?

Joining crazy schemes like ones with loans could have possibly had one overriding motivation - pay a lot less tax, that's it. It's the truth and you know it.

In some instances I think people genuinely struggled with the administration, VAT etc of running their own business.

Really? Accountants were doing all work for £50+ per month, very cheap Ltd admin, I can't see anybody sane thinking this is big deal compared to getting paid in form of LOANS.

[DotasScandal]

the primary motivation was and could have only been to pay a lot less tax, ie: avoid paying tax big time.

Have you assessed the average difference in take-home pay between a Ltd Co. (say, with pension contributions) and a vanilla "contractor scheme"?
Big Group have actually modelled this. The answer is: not "a lot less".
Therefore, the primary motivation could have been something else than "avoid paying tax big time" after all.

[webberg]

[QUOTE=AtW;2284025]
It's really amusing to see very clever, super knowledgeable webberg to shy away from saying the obvious truth - the primary motivation was and could have only been to pay a lot less tax, ie: avoid paying tax big time.
QUOTE]

I think I'm flattered.

An "obvious truth"? I'm not so expert in judging the mind set of people working in a sector that I've never worked in and instead tend to rely upon conversations I've had with such people.

If they tell me, as they do, that their motivations are as I've sketched them, I have a choice of believing them or of assigning a different motive on the basis of no evidence at all.

I accept that some may be telling me what they want to believe today or what they think I want to hear. However the conversations I have are very similar and unless there is a vast conspiracy of which I am unaware, I choose to go with the weight of evidence.

[AtW]

Have you assessed the average difference in take-home pay between a Ltd Co. (say, with pension contributions) and a vanilla "contractor scheme"?

You seriously want to compare cash in hand without tax with frozen pension contributions which you may never live to see? It's not like for like.

[webberg]

It's the truth and you know it..

I only wish I had a monopoly on the truth as you apparently do.

I accept the truth as relayed to me by people who were there.

[AtW]

An "obvious truth"? I'm not so expert in judging the mind set of people working in a sector that I've never worked in and instead tend to rely upon conversations I've had with such people.

Actions speak louder than words.

Who'd join a (registered) tax avoidance scheme and what would be their primary motivation?

I only wish I had a monopoly on the truth as you apparently do.

I accept the truth as relayed to me by people who were there.

No, you accept their VERSION OF EVENTS, which happens to suit you commercially.

You have no objective to find the truth - you are defending their position (however faulty it is) because it's your business.

[webberg]

You seriously want to compare cash in hand without tax with frozen pension contributions which you may never live to see? It's not like for like.

I think if you do the numbers (hard evidence I know which is always so inconvenient) and compare "take home" from operating via a limited company paying CT, some VAT loss perhaps, PAYE on salary and perhaps some higher rate on dividends plus some loans from the company at whatever rate was applicable plus admin costs plus secretarial etc with operating via a "tax avoidance" scheme, allegedly verified as legal, compliant and effective, but with significant fees to promoters etc then the difference is not so great.

So why take the chance of switching to a tax avoidance scheme for the marginal difference?

Surely in that instance there has to be motivation beyond the tax saving?

[AtW]

So why take the chance of switching to a tax avoidance scheme for the marginal difference?

Right now there isn't because HMRC is very aggressive and pretty successful at dealing with those schemes.

I don't agree with you that the difference was marginal - if it truly was then nobody would have taken those crazy loans instead of real money, clearly the "marginal" difference was high enough to tempt a fair few people.

What I don't understand why you can't honestly say that (obviously) tax avoidance scheme members were there for tax avoidance. Tax avoidance is legal, isn't it? You've already said that tax stuff got nothing to do with morals, so why not be honest about it???

[Fred Bloggs]

Just to recap, as I seem to remember it in the early-ish 2000's - I think there was a zero % band for the first £10k of Ltd Co profit. I think Corp Tax was around 22% (?) ERNIC was around 12% (?) and EENIC around 11% (?). Basic rate tax was still 20% (IIRC?). Higher rate tax was 40% + 1% extra NIC.

So, there was a fair incentive to be outside of IR35 and avoid NIC's for Ltd v IR35.

My (fairly sketchy) understanding is that a typical scheme paid PAYE tax on ~£20k salary and paid the remaining ~£80k (typical) tax free But subjected the whole lot to an admin fee of ~10% of the total.

Sorry I can' t be exact. But I think the incentive to go either Ltd Co or scheme user was considerable? The fly in the ointment is the scheme providers fees which it turns out was money down the pan.