Anyone thinking of using an avoidance scheme, DONT!

[borderreiver]

Backed by leading QC legal opinion and underpinned by established statue law

How I hope the advert is really worded like this ...

if human beings didn't love the thought of risk and reward the National Lottery would have folded years ago.

True, except you only stand to lose your stake in the National Lottery ...

I'm amazed people get away with advertising this kind of thing, but obviously they do. I presume Mr "Director of 62 Companies" is shutting them down almost as soon as he's registering them? Doesn't this raise red flags with HMRC and Companies House?

[LisaContractorUmbrella]

I hope the message from this thread gets out there but, in my experience, all the recent HMRC pronouncements have made little difference - we are seeing 2 or 3 new avoidance schemes being advertised every week. They have the same old promises re take home pay but their marketing is primarily based around the schemes being '100% onshore' and 'Not required to be DOTAS registered'. These are genuine ads:

"All your money is kept in the UK at all times.
We do not rely on options that involve you being employed in businesses based in tax havens.
We don't promote Offshore Employment Intermediaries, or indeed offshore at all.
We don't promote Managed Service Companies.
We don't promote arrangements that could be considered to be an 'abusive arrangement' under the recent General Anti-Abuse Rules (GAAR)."

Above scheme promises 90% take home.

"Same day payments up to 87%
All insurances included (£17m worth of cover)
Total compliance with AWR, IR35 & MSC
Minimal admin
No expenses to worry about
No need for a tax return
Fully HMRC compliant
Backed by leading QC legal opinion and underpinned by established statue law
All funds stay in the UK
Fully insured and indemnified
Quick payments
No joining or exit fees
Proven and long-running solutions, in operation for over 14 years"

What this scheme provider doesn't tell you is that their company was only incorporated in June 2014 and their sole director is currently the Director of 62 other companies, the longest standing being just over 2 years.

The point, with all these schemes, is that they tell people what they want to hear - if human beings didn't love the thought of risk and reward the National Lottery would have folded years ago. You also have to consider that any half decent scheme provider can probably refer to 2 or 3 legal cases that HMRC have lost where a 'similar' tax plan was used thereby giving reassurance to their potential customer e.g. the Rangers case. They will also be able to cite Judges' comments and QCs' comments that back up their assertions that their scheme is completely above board.

Now, unless you have visited this lovely forum or understand a bit about the UK taxation system how deeply are you likely to question what you're being told?? Especially when the person giving you the information is telling you exactly what you want to hear

[tractor]

...

A bit off topic, but it doesn't "have" to be there. The reason for it is because they spend the amount that they spend. At present it's sustainable because it isn't clear how much is paid in taxation (even more obscure if you add in things like price inflation generated by central bank coordinated credit expansion), partially due to the misconception that the employer "pays" it (even though the ultimate effect is to make employment more expensive), but any schemes of merging these taxes will make it much clearer, as will their plans to introduce "transparency" in how tax income is spent. I guess those are all very good reasons (to politicians) not to do it, and if they're anything like the Lib dems, they'll have no issue on reneging on their "promises", but equally, I don't see why the current tax system should carry on.

I also don't think it's worth coming up with doomsday scenarios about contractors operating outside IR35 being given the same treatment as the EBT schemes and the like, though, irrespective of what the Tories do with this should they win. It may happen, but it's a different kettle of fish.

'They' have to keep the majority relatively poor and beholden to the Lord of the Manor Banks. If they did not, there would be no one to clean the bogs and drive the trains. This is why every now and then, they open the floodgates to top up the 'workers' e.g. the last 10 years now that the population is aging so much. Labout also did it to garner more votes from an ever grateful sector but that's a different story.

This is why they do the things that they do. Most people think it's a sign of stupidity and incompetence but they know exactly what they are doing.

[Zero Liability]

A bit off topic, but it doesn't "have" to be there. The reason for it is because they spend the amount that they spend. At present it's sustainable because it isn't clear how much is paid in taxation (even more obscure if you add in things like price inflation generated by central bank coordinated credit expansion), partially due to the misconception that the employer "pays" it (even though the ultimate effect is to make employment more expensive), but any schemes of merging these taxes will make it much clearer, as will their plans to introduce "transparency" in how tax income is spent. I guess those are all very good reasons (to politicians) not to do it, and if they're anything like the Lib dems, they'll have no issue on reneging on their "promises", but equally, I don't see why the current tax system should carry on.

I also don't think it's worth coming up with doomsday scenarios about contractors operating outside IR35 being given the same treatment as the EBT schemes and the like, though, irrespective of what the Tories do with this should they win. It may happen, but it's a different kettle of fish.

[tractor]

...

All this conjecture around merging tax and NI ignores the employer's element. There would have to also be an employment tax of around 12% too. How they are going to spin that I have no idea.

[malvolio]

Are you sure of this? My understanding was that they went further and were contemplating a merger of the two forms of tax. If all they're contemplating is merging their admin, that sucks and isn't nearly good enough. I was thinking more 20 - 25%, but you're right, they're a greedy lot and wouldn't settle for less than 28 - 30%.

Existing marginal tax is around 40% in total (typically 20% + 6% +13.8%) once you're past the TFA. They aren't going to reduce that.

[Zero Liability]

A true merger - absolutely dead-zero chance of that happening - even though that's exactly what should occur.

A clean sheet approach would be to merge tax + NI and make it payable on dividends as well. The headline basic rate could be lower as there would be less avoidance opportunities - probably around 28-30% which will be less than the current 20%+12% rate.

Those who would get hit hardest would be pensioners and those with dividend income - and for this reason, it will never happen.

The closest they have promised is to merge the administration of Income Tax and NI, which will make no difference to IR35 as it still wouldn't apply to dividend income.

Are you sure of this? My understanding was that they went further and were contemplating a merger of the two forms of tax. If all they're contemplating is merging their admin, that sucks and isn't nearly good enough. I was thinking more 20 - 25%, but you're right, they're a greedy lot and wouldn't settle for less than 28 - 30%.

[tractor]

A true merger - absolutely dead-zero chance of that happening - even though that's exactly what should occur.

A clean sheet approach would be to merge tax + NI and make it payable on dividends as well. The headline basic rate could be lower as there would be less avoidance opportunities - probably around 28-30% which will be less than the current 20%+12% rate.

Those who would get hit hardest would be pensioners and those with dividend income politicians and their friends who give them seats on the board after their political career is over - and for this reason, it will never happen.

The closest they have promised is to merge the administration of Income Tax and NI, which will make no difference to IR35 as it still wouldn't apply to dividend income.

FTFY

[centurian]

I think if the Tories do win and go forward with a merger of PAYE and NI, it may be rendered superfluous, anyway.

A true merger - absolutely dead-zero chance of that happening - even though that's exactly what should occur.

A clean sheet approach would be to merge tax + NI and make it payable on dividends as well. The headline basic rate could be lower as there would be less avoidance opportunities - probably around 28-30% which will be less than the current 20%+12% rate.

Those who would get hit hardest would be pensioners and those with dividend income - and for this reason, it will never happen.

The closest they have promised is to merge the administration of Income Tax and NI, which will make no difference to IR35 as it still wouldn't apply to dividend income.

[Zero Liability]

IR35. I've just been reading a thread or two where people have said 'Im outside IR35 because my contract reviewer says so' or 'I make sure my working practices mean Im outside IR35' etc, etc.

Point is, any contractor saying this and operating 'outside' IR35 are just sitting on a ticking timebomb despite what they may like to believe.

Possibly, but HMRC hasn't got a very good track record at winning these cases against anyone with a half-decent defence, and the recent HOL review revealed that they cannot even justify their figures for its efficacy and slammed them for it, with various articles on this website and CW pointing out the deficiencies in them. I think if the Tories do win and go forward with a merger of PAYE and NI, it may be rendered superfluous, anyway. IR35 is pretty murky territory. A lot of this is perception based, and as the HoL review demonstrated, contracting outside IR35 was not viewed solely as a means to reduce one's tax liability, although that is a benefit of it; I think it is better understood that it offers a significant advantage to the UK economy by enhancing its flexibility with respect to access to a medium-to-high skill/specialist workforce. Of course, they could just try and change the law in their favour, anyway, but I suspect they will face a lot more resistance in doing so. So it's not a foregone conclusion.

[DonkeyRhubarb]

I'm not recommending this but...

There is only one scenario left where it is still safe to use a scheme.

Namely, if you are intending to leave the country in a few years and never return. Obviously you have to pick your new country carefully since HMRC's tentacles do reach to quite a few places in the world.

If you use a scheme, and stay in the UK, be prepared for years of uncertainty and probably an enormous tax+interest+penalties bill at the end of it.

[BolshieBastard]

For anyone thinking of doing it, my, and Im sure others who have been through 6 years of hell would advise you DONT! It isnt worth the risk, HMRC and the govt may not right now have it defeated, but retro rules are now the norm and not in "wholly exceptional cases" as the law makers would have you believe.

Lets be honest the govt have won, they have essentially made people in old schemes potentially bankrupt, while at the same time making it so terrifying for all others not to entertain the idea with APN'S and follower notices.

IR35. I've just been reading a thread or two where people have said 'Im outside IR35 because my contract reviewer says so' or 'I make sure my working practices mean Im outside IR35' etc, etc.

Point is, any contractor saying this and operating 'outside' IR35 are just sitting on a ticking timebomb despite what they may like to believe.

[Waldorf]

There will always be some suckers who will fall for the crap that these promoters come out with.

If someone cannot see the direction of travel on tax avoidance then they are blind to the obvious, either that or they are greedy or stupid, or probably both.

[smalldog]

For anyone thinking of doing it, my, and Im sure others who have been through 6 years of hell would advise you DONT! It isnt worth the risk, HMRC and the govt may not right now have it defeated, but retro rules are now the norm and not in "wholly exceptional cases" as the law makers would have you believe.

Lets be honest the govt have won, they have essentially made people in old schemes potentially bankrupt, while at the same time making it so terrifying for all others not to entertain the idea with APN'S and follower notices.