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

[Fred Bloggs]

A little off topic perhaps, but did anyone ever really get to understand how Procorre worked? For a short time, they actually used to post on CUK but I think they got scared off by the questions they were being asked. As a curious bystander I have tried to find out what I could about them in the public domain, of which there appears to be nothing of substance at all. They always seemed a very opaque, mob to me.

[nucastle]

Sounds like a great PR story, however they still operate a 'scheme' where either by your Ltd company or via an Umbrella your contract earnings goes to their offshore LLP, and then funds are 'advanced' back to you via a capital overdrawn account payment.

It's aggressively sold (or was) as a tax avoidance strategy, in the past by what appeared to be some kind of referral scheme or agency who cite the 83% retention rate as being advantageous over the typical 75% or so you would have gotten by operating a Ltd company.

What wasn't however disclosed, was that the 75% retention in the Ltd company scenario was because 25% of tax is legitimately paid, whereas with their scheme, the 17% consists of their margin, and what appears to be something more like low single digits of tax paid as income tax on very low partnership 'drawings' of around the 10-11k a year level.

The problem now is that Procorre are stating that all along this was never about tax avoidance, and that for the magic 17% you handed them you got a host of benefits etc etc, oh and you still DO have to pay all the tax after all (which was never EVER disclosed). The reality was that apart from a few very low cost benefits (certainly not worth say 20 grand a year you handed to them as their 'cut' of your earnings, more like 500 quid) you still did all the leg work as a contractor yourself, but the 'umbrella' you operated through was just one of their intermediaries.

As far as I know, nobody has EVER seen a set of partnership accounts for any year, showing any capital overdrawn balances, let alone had the opportunity to participate in any way possible as a 'partner'. And as stated before, being sent letters with no addresses, with photocopied signatures declaring what appear to be arbitrary numbers on them to do little more than theoretically balance the books of some offshore entity, holds about as much water as a colander. It's been rightfully stated by others that the idea that you can basically declare profits at any random point in the future is pretty laughable. Now the 2019 loan charge and various crackdowns are starting to come along, all these profit allocations are being dumped on the poor contractors who were duped into what they thought was a canny way to save on paperwork and increase their retention by 5-7% or so. The 'LLP' gets off scott free by basically just stating this was simple tax deferral. The contractors however, were misled.

The right way out of this is settlement, and not trying to play along with the game of this lot.

[Smurfburger]

As far as I know Glen May was dissolved around the end of last year, and deregistered at Companies House. It appears to be the pattern that Procorre and its other guises follow. Close one company run by them and open a new one. At the very least it means you can’t find information on them on the internet.

Glen May LLP is registered in Singapore and is still operating.

[Smurfburger]

@ITMark - agree that its not worth the paper its written on regards to Glen May and they are covering their backs, however in 2019 HMRC will have the right to request all LLP's in UK and overseas to declare partner overdrawn capital balances and Glen May has just effectively written this down to zero by declaring a profit share. This now means HMRC will be seeking individuals to declare it. My understanding is that with overseas LLP's HMRC's position has been to tackle it with the individual directly via self assessment challenges so I suspect at some point they will be asking us if we have received a profit share or capital payments that have not been paid back to the LLP.

Would be good to know if anyone else has a different view on this.

Not sure what you mean by "not worth the paper it's written on". Surely, if the new legislation dictates that LLPs cannot defer the declaration of profit share and must declare any missed years, then isn't Glen May doing the correct thing?

My letter states that this is the penultimate financial accounts and so there'll be another one next year. If the tax has been paid on all declared profit share, then isn't that a good thing? Granted, it means we have a lot of tax to find in one go but HMRC cannot argue that no tax has been paid. They might contest the declared profit share values but that is a different argument and Glen May would need to provide the statements accordingly.

[Smurfburger]

Yes few people have received it, in my opinion it's not worth the paper it's printed on (Glen May one doesn't even have their address / tel numbers on and they've already been struck off). It's just a bit of rear end covering from them. They also (alike Procorre one - as they are the same people) don't mention any particular tax year. I'd get some professional advice and not take their word as it's biased and solely protecting themselves.

Procorre and Glen May are not the same at all. Procorre acquired the Glen May talent but, because of all the interest in Glen May, Procorre has been tarred with the same brush and the Glen May (and others) his acquisition has damaged their reputation.

Yes, a couple of Aston Mae people moved over to Procorre after Glen May was acquired (Steve Smith and Amy) but Procorre is not Glen May and never was. That said, because of all the HMRC attention, I chose to go the umbrella route rather than going to Procorre when Glen May was acquired. My reason for doing so was because I feel that HMRC will not leave you alone unless you're effectively going through a PAYE route. Yes, you might also get dividends but that is more mainstream and less convoluted than these LLPs.

In a recent lengthy conversation with a Procorre accountant, I was told that everything you earn through them is declared each year and that they have not had the same HMRC attention that Glen May did. The reason for that attention was principally because of the deferral of tax payment.

Anyway, I'm not with Procorre and am nothing to do with them but I am confident that they were never anything to do with Glen May, or others under HMRC's spotlight - they simply acquired the businesses and it bit them on the backside badly and damaged their reputation.

[Smurfburger]

First, HMRC does not have the "right" to request details of the overdrawn account. It is YOUR LEGAL OBLIGATION to report. Whether Glen Mat et al do that or not, makes no difference.

Second, hiding details from HMRC is not a recommended strategy.

Third, Why do you continue to beleive anything these people tell you?

Partnership taxation is complicated. We and I'm sure many other advisers, have real problems in reconciling what Glen May claim to have done/be doing and in particular recommending that you put entries into a tax return, long after you have th left the partnership (and Glen May has been gone a long while) is contrary to UK law.

Go and get advice.

Glen May is still operating.

[webberg]

I got a letter, dated 28th March 2018, yesterday, with a huge profit share declared (almost £90k) and so I will have to pay the tax on that by the end of January 2019. Also, I am settling previous loans schemes I used and so have a massive amount of tax to pay. It's going to be a struggle and might have to remortgage.

The letter, from Glen May, states that it is the penultimate financial accounts and, since I paid for calendar year 2012 (Glen May runs Jan to Dec) in January 2018, I suspect this letter relates to 2013, 2014 and 2015 but am trying to get confirmation on that.

I left Glen May in March 2017 and so will have another year and quarter's worth of profit share next year if my assumptions are correct.

As a tax adviser, I would struggle to reconcile what you have said above.

Go and get advice from a party that is not connected to Glen May.

[Smurfburger]

1. The charge covers "any form of credit". I think therefore that it would be hard to argue that an ability to overdraw an account would not be a form of credit.

2. The Glen May "profit share" is, in my opinion, a paper exercise that is designed to achieve nothing other than protection for those behind Glen May.

3. Deducting the cost of acquiring a Ltd Co as a trading expense? Not a chance. The Procorre structure you should take to a competent adviser and ask some hard questions of.

When settling my previous use of loan schemes, I was dealing with a very senior person at HMRC. I have an email from him stating that it could be good news for me since they already know the names of schemes that will have the loan charge applied and Glen May was not one of them.

That doesn't mean HMRC will not follow up on existing enquiries into Glen May but, since we have all started to pay tax on the declared profits (I already paid for 2012 in January 2018 and have just received another profit share letter from Glen May that seems to cover multiple years), that must affect the direction any enquiries go in. If we have paid tax on the calculated profit shares, I'm not sure there's a case to answer unless HMRC's query will now be how those figures were arrived at.

[Smurfburger]

Has anyone had their 2012/13 Profit Share Figure from Glen May yet?
Time is running out to get it this tax year - as promised.

Been trying to get a response from them for a few weeks now - NOTHING !!!

Not very reassuring. Not happy, especially since I’m making “payments on account” based on receiving this figure annually.

Come on Glen May, get onto this.

I got a letter, dated 28th March 2018, yesterday, with a huge profit share declared (almost £90k) and so I will have to pay the tax on that by the end of January 2019. Also, I am settling previous loans schemes I used and so have a massive amount of tax to pay. It's going to be a struggle and might have to remortgage.

The letter, from Glen May, states that it is the penultimate financial accounts and, since I paid for calendar year 2012 (Glen May runs Jan to Dec) in January 2018, I suspect this letter relates to 2013, 2014 and 2015 but am trying to get confirmation on that.

I left Glen May in March 2017 and so will have another year and quarter's worth of profit share next year if my assumptions are correct.

[webberg]

First, HMRC does not have the "right" to request details of the overdrawn account. It is YOUR LEGAL OBLIGATION to report. Whether Glen Mat et al do that or not, makes no difference.

Second, hiding details from HMRC is not a recommended strategy.

Third, Why do you continue to beleive anything these people tell you?

Partnership taxation is complicated. We and I'm sure many other advisers, have real problems in reconciling what Glen May claim to have done/be doing and in particular recommending that you put entries into a tax return, long after you have th left the partnership (and Glen May has been gone a long while) is contrary to UK law.

Go and get advice.