Reply to: EBTs

P.S. Why are you worried about the new registration requirement if you're stating that the IR have no say over offshore companies...?

If the tax avoidance scheme is not UK based then each and every UK user is personally responsible for registering the deatils with the IR.

Obviously GB is hoping that this will effectively kill them off. I'm not sure about that - if everbody who uses one of these schemes sends them a 500page paper submission on how it works then maybe it would be the IR who get killed off

We will just have to wait for the small print in the Finance Act to see exactly what is involved and what can be done about it.

In answer to how does the money get offshore. In the case of the scheme I was promoting (and hopefully will be again once the details are sorted) ...

End User pays Agent.
Agent pays IOM company.
Contractor works PAYE for IOM company and gets small salary (preserves UK pension and unemployment rights)
EBT is operated by (but seperate from) the IOM employer. EBT pays contractor direct in a form that is not liable to UK tax.

It doesn't suit many UK Ltds to move abroad and they have to use what open to them onshore. If its just a one man band you're talking about then they might be flexible enough to be employed by an offshore company (if the end client/recruitment agency doesn't mind making payments offshore) and potentially use an EBT. Ireland, for one, still allows them under certain circumstances... Isle of Man as well.

If, however, it's a question of a larger company that cannot relocate/reregister offshore or a contractor who doesn't want to, then they obviously can't utilise an offshore based EBT. If that's the case, the funding of such trusts has to be done in a totally different way.

Regards

P.S. Why are you worried about the new registration requirement if you're stating that the IR have no say over offshore companies...?

Re: Offshore EBTs

Yes fiddle,

But how does the money get into the off-shore company in the first place?

Do the agency pay it direct?
Do you pay it into a UK Ltd first
something else?

tim

In short, a company can only claim corporation tax relief on the money they’ve put in an EBT after an individual takes it out of the trust as a fully taxable PAYE payment.

That is certainly the case for UK companies but fortunately the IR has no way to tax offshore companies. That is why all the worthwhile EBTs operate from outside the UK. There was some earlier attempt to curtail their activities in 2000 which is when many UK based EBTs move offshore.

The new registration requirement is causing a little concern at the moment so we have withdrawn applications for new business from www.************.co.uk temporarily until the legal eagles have worked their magic - then it will be business as usual

...and how do these similar trusts work?

Hi,

EBTs still exist and are legal in the UK. They've been around for about 15 years and still are, despite the new legislation in November 2002. However, that legislation took out a lot of the intrinsic Tax benefit that close companies enjoyed through the use of EBTs. In short, a company can only claim corporation tax relief on the money they’ve put in an EBT after an individual takes it out of the trust as a fully taxable PAYE payment.

Many UK companies still use EBTs as they were first intended; as a remuneration strategy for key individuals. EBTs weren't, contrary to popular belief, a "scheme" at all, they were a totally legal and accepted form of strategic planning that the IR were fully aware of. It was only when they started to be used too aggressively for the wrong reasons and set up incorrectly that the IR decided to do something about them; hence Nov 2002 rules.

So, you can use them, but roughly half of the tax benefit just isn't there anymore. However, there are other ways of funding similar trusts in a tax efficient manner, if that's what you are after.

Regards

Re: re

I see the light and it's green.

Thanks everyone.

Re: re

Its not over until the fat jock sings

Re: re

:lol

:hat

Re: re

Sounds like you know what's required then Darren - even got time to spare on here while your yops kids do all the work - nice

I won't give you further advertising opportunities by asking about electronic filing to save your clients some money as I'm sure you've got that in hand too just like our accountant.

I'm just wondering why, if everything is going so swimmingly, you felt obliged to spread unwarrented FUD about offshore? I suppose it pays to though as they do offer the best net % of all the options available with no IR35 fears at all and if GB had rolled out what we were all expecting you'd have been deep in the brownstuff.

Re: re

That's for a brand new company in the name of the client's choice (providing it's available at Companies House) with the client as first director, shareholder & choice of company secretary.

The company is formed within 12 working hours through our e-link into Companies House which means we don't need to carry a stock of new companies as this way is quicker & paper free....other than the new money laundering procedures of course. All documents are then emailed and posted to the client.

Re: re

Is that for whatever name I like or would it just be some name that happened to have been set up already?

Re: re

Free as part of the package.

Re: re

What do you charge to set up a Ltd. for your clients then?

Re: re

It's a crying shame seeing you posting such pathetic bollux Darren. Maybe if you tried to match the fees and service offered by my accountant ...

The fees are the same & haven't lost a client in over 14 years.

I'm not saying that your scheme won't work having not seen how it works, however GB did say he will be targeting these schemes specifically & that they must make themselves known to the IR.