Reply to: Loan Scheme - How dodgy?

[tim123]

A BIK is anything that you receive by virue of your employment. It doesn't matter how many links there are in the chain, as long as it looks like you are getting the benefit because of a job it's taxable.

It's only the 'interest' that taxable, but on a large loan this still mounts up.

tim

[Pondlife]

Firstly you say you pay 10% 'tax' of which 7% is fees. It can't be both!

Secondly, Tim, if it's not his Ltd then surely the loan can be at any rate for any amount without being a BIK (IANAA)? But as previously mentioned if the 'lender' hits financial difficulty they could call in the loan and you probably don't have much of a leg to stand on.

I wouldn't touch it with the proverbial(sp?) pole.

[tim123]

I know I'm stating the obvious, but the money "received" in loans doesn't belong to you, therefore there's no tax on it, so no avoidance has taken place. .

Actually there is potentially a tax on the loans (if more than 5k) as it's a BIK. But the rest of what you said is right.

tim

[ratewhore]

Are you referring to MTM? Sorry, I've lost track as there are so many people referring to so many schemes in this thread.

I'm talking about Steed Solutions...

[malvolio]

It's also fair to say that MTM and the like are doing nothing illegal or underhand. It is their clients' problem to declare their taxable income correctly, not theirs.

[IR35 Avoider]

Since MTM has been mentioned in this thread, for the record I thought I just post a link to another thread, where it is claimed some people have been caught, but MTM have replied and said they are still operating their scheme.

[IR35 Avoider]

I am going to get a tax lawyer to look at it.

Look at what? If all you are able to tell the tax lawyer is that you get loans, he isn't going to be able to tell you anything. That's not a scheme. How the loans get paid off might be.

I know I'm stating the obvious, but the money "received" in loans doesn't belong to you, therefore there's no tax on it, so no avoidance has taken place. If the scheme goes wrong, for example because HMRC make waves, and the lender gets put into administration, you will have to repay all the loans. If something happens to pay off the loans, other than you simply paying them back, then that's a scheme, and depending on the legalities, tax may or may not be due.

Anyway, these people are accountants, but they do know a lot about various schemes.

[tim123]

OK there may be a couple of ways in which it works, but no more than that.

But you haven't given us enough information. Is it offshore, if so which country.

Does it (appear to) work because it's a loan scheme.

Or

does it (appear to) work becasue it's offshore.

Or does it need both?

tim

[chav-u-like]

Just to clarify: all you know about the scheme you're in is that it gives you loans?



Maybe I misread your post, but it sounds like you want feedback on a scheme you can't even describe. (Not meaning to sound critical, just that I'm confused.)

Yes thats exactly it. However its not as stupid (although close) as it sounds as there are a lot of people out there on loan schemes and I bet they are all following the same setup. So although all I know is I am paying 10% tax, someone out there probably knows exactly how this works. OK there may be a couple of ways in which it works, but no more than that.

I am going to get a tax lawyer to look at it. Can anyone recommend one?

[expat]

Loan Scheme - How dodgy?

Dodgty as an Agent (tm)

[IR35 Avoider]

I know a few people running through these guys. IOM Trust based. A couple have been through it with UK based tax lawyers who are happy with the whole thing and apparently HMRC have tried a couple of times now to take them to court and lost.

As I say - apparently...

Are you referring to MTM? Sorry, I've lost track as there are so many people referring to so many schemes in this thread.

[IR35 Avoider]

The fact is I don't have any details about the scheme

Just to clarify: all you know about the scheme you're in is that it gives you loans?

I don't think anyone on here knows exactly how these schemes work

Maybe I misread your post, but it sounds like you want feedback on a scheme you can't even describe. (Not meaning to sound critical, just that I'm confused.)

[ratewhore]

ratewhore, you say UK based tax lawyers have been through it with others. Do you know how I could go about getting such a lawyer to look at my scheme?

Yep. You find a tax lawyer, then go through your contract (well, not yours but the one between your agent and the company running the scheme) and associated documentation with them. I believe the company in question are very open and happy to discuss things directly with any legal representation you may have...

[Dundeegeorge]

Evidence please

It really depends on how you look at this. Obviously the attraction of a 10% fee/tax against a 35% tax is going to coerce some people into using these facilities.

Another factor is the risk you are personally willing to take on. I.e. is this tax/fee differential worthwhile taking on the chance of back-tax requests from HMRC and fines etc?

A small salary is in itself a giveaway to HMRC. I know loan schemes that are set up to pay close to market rate salaries, with the rest in loans etc. In all cases that I know of, the loan has to be re-paid in some form, to close the transaction between yourself and the loan provider. Forward purchasing of delvaluing currencies has often been used in the past but I believe this has now been closed by the government.

I don't believe that all schemes are illegal as such, though indeed the scaremongering by the government is having the intended effect of discouraging people to use them. Having said that though, the burden of risk is always upon the individual, and rarely upon the loan provider themselves.

Hogwash, you work for HMRC and I claim my £5.

[chav-u-like]

Thanks for everyones comments. The fact is I don't have any details about the scheme, also I don't want to give any names of the people involved as the tax man may be a regular visitor to this forum, but I can say it wasn't any of the companies mentioned.

There were some pretty constructive posts, but I don't think anyone on here knows exactly how these schemes work and what are the liabilities (if any). The pessimist in me thinks I will end up paying loads of back tax, irrelevant of the 7% fee, whilst the optimist believes that it is a loop hole which is worth riding whilst its there.

ratewhore, you say UK based tax lawyers have been through it with others. Do you know how I could go about getting such a lawyer to look at my scheme?