Overdrawn Capital Account Scheme (Aston Mae / Glen Mae / Procorre)

[DeelerStan]

Procorre

Maybe because they are the same as Glen May and they will eventually go the same way.

I am in the same situation as Smurfburger. Very stressful, getting no information from GM. They give you the speech about it's compliant with HMRC and you won't have any issues.

Bull s***.

I moved to Procorre without my knowledge, it was the only way that we could get out final payment from GM. But I never paid into Procorre and got out a.s.a.p.

Now I run as a normal company, I am not convinced that I would have made less than if I had always run this way. But I can tell you it's a lot better to know your accountant doesn't let you mess around with things.

According to my current accountants (who have just completed my final GM year end), my previous accountants (you can probably guess who if you were with GM) were not following GAAP processes removing the LLP payments from the turnover when they should have been accounted for separately in your year end statements.

I have 2 outstanding appeals from HMRC, don't you just hate those brown envelopes on a Friday (always come on a Friday to ruin your weekend)

[Smurfburger]

Glen May LLP Profit Share Letters

I have just had an email from Glen May stating that latest letters relate to the period up to April 2016.

[Fred Bloggs]

Why are procorre being so quiet about all of this?

Good question. I challenge you to find out anything of substance about them. I have been curious for some time now about how they managed to have a website, come on here (for a time at least) and yet there is nothing of substance at all in the public domain about them that I have ever been able to find. Hence, my asking if anyone here ever really got to understand how they worked and how they kept things so invisible. They seemed so plausible for a time, obviously, that is why folks signed up with them.

[Smurfburger]

Good question. I challenge you to find out anything of substance about them. I have been curious for some time now about how they managed to have a website, come on here (for a time at least) and yet there is nothing of substance at all in the public domain about them that I have ever been able to find. Hence, my asking if anyone here ever really got to understand how they worked and how they kept things so invisible. They seemed so plausible for a time, obviously, that is why folks signed up with them.

Call them and speak to Leonora Miller. She will talk you through it in fine detail.

[Fred Bloggs]

Call them and speak to Leonora Miller. She will talk you through it in fine detail.

Yes, of course she will. They had plenty of opportunity to do that right here and never did.

[Iliketax]

OK. I'm going to waste some of my time writing some stuff on this. I would suggest that if you think it might be relevant to you then you should talk to a competent independent tax adviser about whether it is actually useful to you. The main reason for me writing this is so that you can have an informed discussion with your competent tax adviser based on your own facts and circumstances. I also like the sound of my own voice.

I should start by saying I know little about the details of the overdrawn capital account schemes. I have never seen any docs for any of those mentioned here (and I don't want to see any). I don't advise contractors. But I do know about disguised remuneration and I do know about partnership tax.

The self-employed DR rules are different to the employee ones. But their objective is the same. They look at "outstanding" loans that were made between 6 April 1999 and 5 April 2017. If five conditions are satisfied then the amount of the outstanding loan is taxed as trading income. Some of you may have spotted that I said 5 April 2017, not 2019. That's because the self-employed DR rules already catch payments (including loans) made since 6 April 2017 that satisfy those five conditions. If an amount is within these rules then you pay income tax and self-employed NIC.

So there are five conditions (that I have simplified). If you want to follow along, have a look here: Finance (No. 2) Act 2017

A. You are carry on a trade alone or in partnership.

B. There is an arrangement connected to your trade and it is reasonable to suppose that it is concerned with "relevant benefits" (e.g. a payment of cash by way of an overdrawn capital account).

C. You get a payment (i.e. some cash).

D. There is a qualifying third party payment. This will be the case if your end user pays the LLP for the services you have provided.

E. There's a tax advantage (e.g. the cash from the overdrawn capital account is not taxed but if you'd got a profit share first then you would have paid tax).

So sounds like a slam dunk. You are in this legislation. If you want to read the April 2019 loan charge bit, have a look here Finance (No. 2) Act 2017 and here for the reporting obligation: https://www.legislation.gov.uk/ukpga...dule/2/enacted

So this is where is gets a bit more interesting. Why do you think you are carrying on a trade in partnership? Well if you are carrying on a trade if you are a partner in a general partnership because that is really a partnership. But that's not relevant to these schemes.

You are also carrying on a trade if you are a member of a UK LLP that is carrying on a trade [and the salaried member rules do not apply]. This is because UK tax legislation specifically says that you are (see s863 ITTOIA 2005). Without that deeming rules, a UK LLP would be treated like a company.

If you are an employee of a trading company then the company is carrying on a trade but you are not. You are just an employee.

But what if you are a partner of a non-UK LLP? Are you a partner? Are you an employee? Forget that you might be called a "partner", employees at John Lewis are called partners. It's what your real status under UK tax law that matters.

Before going into that, some entities are treated as "opaque" for tax purposes. This means that the entity is treated as being separate from its owners for tax purposes. So a company is taxed on its profits, not the shareholders. If a shareholder works for a company, they will be an employee/director. This is different from a "transparent" entity. The profits of such an entity are taxed on its owners. For example, a UK LLP is transparent and its owners, the partners, pay tax on its profits. Those partners are not (absent special rules) taxed as employees/directors.

You might want to show your tax adviser page 4 of the attached which confirms what I have said: https://assets.publishing.service.go...mber_rules.pdf

So what about a non-UK LLP. That depends. Some like a Luxembourg SCSp will be treated as transparent for tax purposes. Others, like a Kazakhakstan LLP will be treated as opaque. HMRC publish a very incomplete list here: https://www.gov.uk/hmrc-internal-man...ual/intm180030

I don't know enough about the LLPs mentioned here (and the Singaporean company register is down for maintenance) but let's pretend that one of them is a Singaporean LLP. Is that opaque or transparent? If it is transparent then the self-employed DR rules will bite. If it is opaque then you would have been an employee and so the self-employed DR rules won't apply. But the employee DR rules would apply. Is that so bad though? The employee DR rules don't actually apply to loans from your employer. And it gets a lot more interesting about who has to pay any tax if the overdrawn capital is treated as income. I'm not going to go into that here though. That's something that you can talk to your own tax adviser if it may be relevant.

If you then look at the Singaporean LLP Act https://sso.agc.gov.sg/Act/LLPA2005 then you will see that a Singaporean LLP is a body corporate that is liable for the debts that it has. So skimming through that Act, to me, it suggests that such an LLP is opaque. But I might be wrong. If I am right (and your tax adviser will want to do some thinking on that and probably want to get HMRC to confirm that) then you will be an employee and not a partner. So no trade, means no self-employed DR rules.

Obviously these LLPs may not be a Singaporean LLP and then you'd have to do some thinking with your tax adviser.

Whatever you do, take independent tax advice from someone who is competent before doing anything.

[Loan Ranger]

Of all the schemes I've come across, this has got to be the most mind boggling.

I've read a few people's posts but gave up trying to comprehend the actual mechanics of it.

[nucastle]

OK. I'm going to waste some of my time writing some stuff on this. I would suggest that if you think it might be relevant to you then you should talk to a competent independent tax adviser about whether it is actually useful to you. The main reason for me writing this is so that you can have an informed discussion with your competent tax adviser based on your own facts and circumstances. I also like the sound of my own voice.

I should start by saying I know little about the details of the overdrawn capital account schemes. I have never seen any docs for any of those mentioned here (and I don't want to see any). I don't advise contractors. But I do know about disguised remuneration and I do know about partnership tax.

The self-employed DR rules are different to the employee ones. But their objective is the same. They look at "outstanding" loans that were made between 6 April 1999 and 5 April 2017. If five conditions are satisfied then the amount of the outstanding loan is taxed as trading income. Some of you may have spotted that I said 5 April 2017, not 2019. That's because the self-employed DR rules already catch payments (including loans) made since 6 April 2017 that satisfy those five conditions. If an amount is within these rules then you pay income tax and self-employed NIC.

So there are five conditions (that I have simplified). If you want to follow along, have a look here: Finance (No. 2) Act 2017

A. You are carry on a trade alone or in partnership.

B. There is an arrangement connected to your trade and it is reasonable to suppose that it is concerned with "relevant benefits" (e.g. a payment of cash by way of an overdrawn capital account).

C. You get a payment (i.e. some cash).

D. There is a qualifying third party payment. This will be the case if your end user pays the LLP for the services you have provided.

E. There's a tax advantage (e.g. the cash from the overdrawn capital account is not taxed but if you'd got a profit share first then you would have paid tax).

So sounds like a slam dunk. You are in this legislation. If you want to read the April 2019 loan charge bit, have a look here Finance (No. 2) Act 2017 and here for the reporting obligation: https://www.legislation.gov.uk/ukpga...dule/2/enacted

So this is where is gets a bit more interesting. Why do you think you are carrying on a trade in partnership? Well if you are carrying on a trade if you are a partner in a general partnership because that is really a partnership. But that's not relevant to these schemes.

You are also carrying on a trade if you are a member of a UK LLP that is carrying on a trade [and the salaried member rules do not apply]. This is because UK tax legislation specifically says that you are (see s863 ITTOIA 2005). Without that deeming rules, a UK LLP would be treated like a company.

If you are an employee of a trading company then the company is carrying on a trade but you are not. You are just an employee.

But what if you are a partner of a non-UK LLP? Are you a partner? Are you an employee? Forget that you might be called a "partner", employees at John Lewis are called partners. It's what your real status under UK tax law that matters.

Before going into that, some entities are treated as "opaque" for tax purposes. This means that the entity is treated as being separate from its owners for tax purposes. So a company is taxed on its profits, not the shareholders. If a shareholder works for a company, they will be an employee/director. This is different from a "transparent" entity. The profits of such an entity are taxed on its owners. For example, a UK LLP is transparent and its owners, the partners, pay tax on its profits. Those partners are not (absent special rules) taxed as employees/directors.

You might want to show your tax adviser page 4 of the attached which confirms what I have said: https://assets.publishing.service.go...mber_rules.pdf

So what about a non-UK LLP. That depends. Some like a Luxembourg SCSp will be treated as transparent for tax purposes. Others, like a Kazakhakstan LLP will be treated as opaque. HMRC publish a very incomplete list here: https://www.gov.uk/hmrc-internal-man...ual/intm180030

I don't know enough about the LLPs mentioned here (and the Singaporean company register is down for maintenance) but let's pretend that one of them is a Singaporean LLP. Is that opaque or transparent? If it is transparent then the self-employed DR rules will bite. If it is opaque then you would have been an employee and so the self-employed DR rules won't apply. But the employee DR rules would apply. Is that so bad though? The employee DR rules don't actually apply to loans from your employer. And it gets a lot more interesting about who has to pay any tax if the overdrawn capital is treated as income. I'm not going to go into that here though. That's something that you can talk to your own tax adviser if it may be relevant.

If you then look at the Singaporean LLP Act https://sso.agc.gov.sg/Act/LLPA2005 then you will see that a Singaporean LLP is a body corporate that is liable for the debts that it has. So skimming through that Act, to me, it suggests that such an LLP is opaque. But I might be wrong. If I am right (and your tax adviser will want to do some thinking on that and probably want to get HMRC to confirm that) then you will be an employee and not a partner. So no trade, means no self-employed DR rules.

Obviously these LLPs may not be a Singaporean LLP and then you'd have to do some thinking with your tax adviser.

Whatever you do, take independent tax advice from someone who is competent before doing anything.

Thank you for this post. As much as it muddies the waters even more, it's fascinating none the less.

[Fred Bloggs]

Of all the schemes I've come across, this has got to be the most mind boggling.

I've read a few people's posts but gave up trying to comprehend the actual mechanics of it.

My curiosity if Procorre has never gone away. Even today they have a pretty glossy website full of words but lacking in any substantive information whatsoever. If you have actually managed to work out how this outfit works, I'd love to hear about it. I can well understand why the more naive amongst us have been taken in by them. For a while a rep posted at CUK. True to form, many words and no actual information was posted by them.

[dog]

Call them and speak to Leonora Miller. She will talk you through it in fine detail.

Perhaps Leonara Miller or someone else from Procorre could post on this forum to set the record straight...?