Reply to: "Dodgy" offshore schemes

[LisaContractorUmbrella]

Look I think these schemes are dodgy as hell. but still HMRC have not proven them to be illegal. At the moment all they are doing is fishing for weakness, to gather information, or offering a discount on what they perceive as tax owed. If they were that certain the schemes are illegal they would not be offering a discount, they would be using the full weight of the law to get 100% of taxed owed plus penalties.

Personally I don't think they would or will succeed in proving these schemes illegal, but I couldn't take the stress of those letters and legal wrangling over several years, I'll pay a bit more tax and sleep soundly thank you very muchly.

The problem for HMRC is actually getting one of the scheme providers to Court. Fighting HMRC is a very expensive undertaking and, even if you win, it's unlikely that you'll get your costs back so the usual scenario is that a settlement is reached or the company phoenixes; the immediate problem is resolved by no legal precedent is set.

[JoJoGabor]

Look I think these schemes are dodgy as hell. but still HMRC have not proven them to be illegal. At the moment all they are doing is fishing for weakness, to gather information, or offering a discount on what they perceive as tax owed. If they were that certain the schemes are illegal they would not be offering a discount, they would be using the full weight of the law to get 100% of taxed owed plus penalties.

Personally I don't think they would or will succeed in proving these schemes illegal, but I couldn't take the stress of those letters and legal wrangling over several years, I'll pay a bit more tax and sleep soundly thank you very muchly.

[BlasterBates]

A loan that isn't repayable isn't a loan. I'm not entirely sure how the providers square this.

Unless they claim a precedent has been set when a parent "lends" their 17 year old money.

In the Rangers case the loan is repayable. As far as the trustees are concerned it isn't much of a victory as they'll be taxed on any further benefits down the line.

Just deferred tax really.

They pay the loans back in 12 years.

[DonkeyRhubarb]

I understand that, but surely if they're attempting to avoid tax then they talk it up as a sham loan, but on paper it has to be treated as a genuine loan. Therefore, repayable.

Typically the lender is a Trust and the borrower is a beneficiary of the Trust.

The trustees are legally bound to act in the interests of the beneficiary, hence why in practice the loans would never be called in. In some cases the loans do have a set repayment date but then they just get rolled over into new loans ad infinitum.

[Alan @ BroomeAffinity]

A loan that isn't repayable isn't a loan. I'm not entirely sure how the providers square this.

Unless they claim a precedent has been set when a parent "lends" their 17 year old money.

[JRCT]

If it was a genuine loan absolutely nothing but the fact is that these are sham arrangements which have no purpose other than to avoid tax - hence the attention from HMRC

I understand that, but surely if they're attempting to avoid tax then they talk it up as a sham loan, but on paper it has to be treated as a genuine loan. Therefore, repayable.

[TykeMerc]

There should be a way of going after providers as I think that this is borderline criminal fraud.

No kidding.
At a superficial level they look not a lot different from the investment scam type schemes that are criminal fraud.

The end result of the provider scampering off into the distance with pockets full of cash and the suckers facing the consequences doesn't help the fraudulent image either.

As others have pointed out it's shocking just how many active and potential suckers there are.

[LisaContractorUmbrella]

I started contracting a few months before the whole Jimmy Carr thing kicked off. I'd never heard about how dodgy these offshore schemes were before that. But, as I was setting up my Ltd and sorting out how I was going to do business, I got an email offering me 96% take home. Of course, on the face of it, sounds great. So I read what they had to say and my first instinct was "this is dodgy".

There is a massive difference between trying to be tax efficient and making the odd cock up (ie. claiming for something that you probably shouldn't such as travel or mobile) and putting your money into some offshore company to be paid by a loan. Anyone who genuinely thinks that's ok deserves everything they get.


One thing I want to ask about this though, everyone talks, quite rightly, about these schemes being dodgy from the tx and HMRC perspective. But, one thing that struck me about this, that I've not seen anyone else ever mention is the loan bit.

Even if it was legit, why would I give c£100k a year of my hard earned money to some offshore company who will then give me a loan that, in reality (as far as they say), I don't ever have to pay back?

What's to stop them getting in touch with me after 5 years of doing this and saying "You know those 5 loans you signed up for? Well, we want it back. You owe us £500k".

If it was a genuine loan absolutely nothing but the fact is that these are sham arrangements which have no purpose other than to avoid tax - hence the attention from HMRC

[cojak]

If it's a real loan then it will HAVE to be paid back at some time.

Which is why HMRC are allegedly going after widows of deceased contractors...

[JRCT]

I started contracting a few months before the whole Jimmy Carr thing kicked off. I'd never heard about how dodgy these offshore schemes were before that. But, as I was setting up my Ltd and sorting out how I was going to do business, I got an email offering me 96% take home. Of course, on the face of it, sounds great. So I read what they had to say and my first instinct was "this is dodgy".

There is a massive difference between trying to be tax efficient and making the odd cock up (ie. claiming for something that you probably shouldn't such as travel or mobile) and putting your money into some offshore company to be paid by a loan. Anyone who genuinely thinks that's ok deserves everything they get.


One thing I want to ask about this though, everyone talks, quite rightly, about these schemes being dodgy from the tx and HMRC perspective. But, one thing that struck me about this, that I've not seen anyone else ever mention is the loan bit.

Even if it was legit, why would I give c£100k a year of my hard earned money to some offshore company who will then give me a loan that, in reality (as far as they say), I don't ever have to pay back?

What's to stop them getting in touch with me after 5 years of doing this and saying "You know those 5 loans you signed up for? Well, we want it back. You owe us £500k".

[Alan @ BroomeAffinity]

I am not saying that there are those that used dodgy schemes in the full knowledge that they were dodgy but I do genuinely think that people have been caught out because there is a lack of information available. Look how many questions we are asked on here about contracting - if concise, easily understandable information were more readily available at the point when someone starts in contracting it wouldn't happen so often

I suppose we just need to keep banging the drum. I periodically email my clients / post on blogs / social media etc about the dangers of these in the hope that the gullible or uninformed will see it and seek more information.

[DigitalUser]

I am not saying that there are those that used dodgy schemes in the full knowledge that they were dodgy but I do genuinely think that people have been caught out because there is a lack of information available. Look how many questions we are asked on here about contracting - if concise, easily understandable information were more readily available at the point when someone starts in contracting it wouldn't happen so often

Again, I think that's more to do with ignorance rather than information being readily available. I don't see the parallel between setting yourself up as a contractor and tax planning/avoidance.

[LisaContractorUmbrella]

I strongly disagree - we're all adults, and if people choose to plead ignorance and/or stick their heads in the sand (and then cry when the resulting consequences emerge) they have only themselves to blame. It amazes me the number of contractors I know whose financial affairs are in disarray, but people setting themselves up as businesses should make efforts to be fully aware of what they're getting themselves into.

Ultimately, if something looks too good to be true, then it usually is, and I feel a lot of people getting into tax planning schemes have failed to heed this anecdotal piece of advice.

I am not saying that there are those that used dodgy schemes in the full knowledge that they were dodgy but I do genuinely think that people have been caught out because there is a lack of information available. Look how many questions we are asked on here about contracting - if concise, easily understandable information were more readily available at the point when someone starts in contracting it wouldn't happen so often

[Maslins]

There should be a way of going after providers as I think that this is borderline criminal fraud.

I'm inclined to agree. I'm guessing it's currently a case of "the punter knew what they were getting into and signed agreeing to the risks". However, I'm sure there are a fair few people setting up scheme after scheme, making loads of dosh for a few years then when HMRC start sniffing round all the clients they close up and start a new one.

Sad thing is I can imagine there'll always be a large stream of new suckers.

[DigitalUser]

I've stopped being surprised by how widespread membership of these schemes seems to be.

I used to think this was rather a niche undertaking, but three of the last three client sites I have been at have contained at least one contractor who openly discussed being in such a scheme, including one who claimed to be in the same "payment solution" as Jimmy Carr.

I know of someone in same said payment solution scheme - he's being bombarded with letters from HMRC as we speak. The promoters claim to have a substantial fighting fund to defend Vs HMRC - it'll be interesting to see the outcome of this in the courts (if it gets that far).