Reply to: concern about payschemeplus

[tim123]

Also remember that Clown floated the idea (but it got laughed out) that international sports people should get their prize money taxed at the higher rate since they won it in the UK.

Not sure what you are referring to here, but International sports stars get their UK earned income (which includes prize money) taxed in the UK, just like any other person. And in order to stop them evading it, some of the money is with-held at source. This has been the case since long before the clown made the rules.

So what did he propose that is different?

tim

[partimer]

an important point

To add to the discussion.
I think you have to remember that any advice from any tax expert is representive of that time and context of the situation. I refer you all to s660a. There was no change of law. Any accountant and tax expert a few years ago would tell you to split dividends between you and your Mrs.

Look at what happened. The Artic case shows that Clown and co. can simply change the goal posts and back date it (even though the IR did eventually drop the backdated stuff in the Artic case). I can see how Brownstuff could reclassify tax avoidance into tax evasion and spin it to the general public as closing tax loopholes.

Also remember that Clown floated the idea (but it got laughed out) that international sports people should get their prize money taxed at the higher rate since they won it in the UK. We all know how much of a penny pincher he is.

I'm not saying we should all roll over. Far from it !!!
If you're happy with your EBT then stick with it. The only thing is that you don't want to be first in the queue when the IR come knocking after any "re-interpretation" of the rules, like the Artic case.

[Bradley]

Bradley, with the greatest of respect, the way I have conveyed my understanding may not be technically correct to the last detail. But I do know that when it comes to tax my brother is very well qualified and would not advisely incorrectly. He spent over 3 hours meeting the providers I use with me and was satisified with it.

You obviously have a degree of knowledge, but its unqualified.

And I bet your brother doesn't deal with this type of scheme - it's not PCWs field of expertise. What side's he on - corporate or personal?

If he's so qualified, could he answer the points I've raised and explain why he thinks it works?

[Tramline]

Bradley, with the greatest of respect, the way I have conveyed my understanding may not be technically correct to the last detail. But I do know that when it comes to tax my brother is very well qualified and would not advisely incorrectly. He spent over 3 hours meeting the providers I use with me and was satisified with it.

You obviously have a degree of knowledge, but its unqualified.

[Bradley]

Reextra

Your right, EBT's were outlawed in the UK, that is why the employer company is based off shore. GB has a real bee in his bonnet about companies in the UK paying Corp tax so UK based employers cannot offer EBT's.

Sorry, but that's nonsense. UK companies can offer EBTs and get CT relief on contributions to them as long as the payments to the employee/beneficiaries are taxed within 9 months of the company's year-end.

By virtue of what has happened with Dextra the IR are unable to call benefits from EBT's back in to call for tax and NI, you can't change precident. I have no doubt that they will try and rewrite legislation to try and stop this from happening at some future date, but they will need to be very clever about it.

Sorry, more nonsense. A foreign employer employing people to work in the UK has to account for PAYE/NIC to the Revenue on their earnings. Their CT residence status is immaterial. The Revenue doesn't need to be clever.

However, even if the legislation is changed providing you stop using the scheme on or before the date the legislation takes effect there is no way that the IR can come after you.

Looks like you're on a roll ... Pre-Budget report 2004 - the PMG stated that employment related schemes considered to be unnacceptable avoidance would be subject to retrospective legislation.

With regards to accounting for it the employer completes a P11D each year - there is a whole section dedicated to Low interest and interest free loans.

And your point is? Doesn't this prove that the EBT is PAYE registered here?

For what its worth my brother is a tax expert working for PWC and I took him along to the meeting with me when I looked at using my current provider. He has no concerns with it, hence why I took it up.

I think your brother should give up the day job.

[Bradley]

Reextra

None of the employees who received benefits (loans or otherwise) from the EBT has these benefits called back in to charge for tax or NI. The IR conceeded this point, therefore paving the way for these sorts of schemes.

Looking at the offerings available to us, you will find that the employer company is based off shore, usually in a principality where there is no corp tax. We are still UK tax payers so it doesn't really effect us, but given that loans from trusts are an acknoweldged method of remuneration we should have any problem.

The Revenue say at http://www.hmrc.gov.uk/practitioners...d-v-dextra.htm

What are emoluments?

HMRC accept that the term "emoluments" for the purposes of section 43 is wider than just taxable emoluments. It includes money and other benefits convertible into money, even if there is no tax charge at that time the payments are made by the trustees, for example as a result of a statutory exemption.

A loan to a beneficiary is not an emolument. It is simply an investment made by the EBT. At some point the loan will have to be repaid and the money will then be available to the trustee to disburse in line with the terms of the trust (which is likely to be in the form of emoluments).

Note the last sentence. The Revenue expects that a loan will be converted into emoluments at some stage in the future. If it's not then was the loan a loan at all?

What this EBT does is to give the "employee" a "loan" (nudge, nudge, wink, wink) that in reality will never be recovered. The Revenue aren't stupid and will see that the EBT has never, surprise, surprise, demanded that the loans are repaid. In fact, it's even lost touch with some of the beneficiaries of the EBT scheme! At that stage the Revenue say that the loans aren't in actual fact loans because it was never intended that they would be repaid, the EBT owes PAYE/NIC in this country (the company's residence is immaterial) and there is extra tax to pay.

[Xenophon]

The joy of management by exception and having a very comeptent team doing the real work is that I don't have to handhold everything. And winding up you lot has its own rewards, of course!

competent

competent
adjective
able to do something well:
a competent secretary/horse-rider/cook
I wouldn't say he was brilliant but he is competent at his job.
NOTE: The opposite is incompetent.

[malvolio]

If its not boring why spend all your time on here

The joy of management by exception and having a very comeptent team doing the real work is that I don't have to handhold everything. And winding up you lot has its own rewards, of course!

[Tramline]

OK, I'm convinced. I'm a neo-luddite of the first order. And anyway, my work isn't boring and I earn shedloads anyway. na-na-ni-nana

But...


Yes they can, sadly. As of the last budget, Dim Prawn made it possible for future tax legislation to be made retrospective to December 2004. So if they outlaw offshore EBTs at some point, they will be allowed to chase the back tax to that point. Another triumph of New Labour's disregard for common practice...

From what I understand given that there has been a recent case behind this and a precedent set it won't apply to this particular type of scheme. It would contravene human rights if something that was acknowledged as bona fide was later changed and the law applied retrospectively.

The only chance the IR would stand of applying something retrospectively is if it was a scheme with nothing behind it in the way of case law etc.

[Underscore2]

If its not boring why spend all your time on here......ps I also earn shedloads - I just dont like giving have of it away!

[malvolio]

OK, I'm convinced. I'm a neo-luddite of the first order. And anyway, my work isn't boring and I earn shedloads anyway. na-na-ni-nana

But...

However, even if the legislation is changed providing you stop using the scheme on or before the date the legislation takes effect there is no way that the IR can come after you.

Yes they can, sadly. As of the last budget, Dim Prawn made it possible for future tax legislation to be made retrospective to December 2004. So if they outlaw offshore EBTs at some point, they will be allowed to chase the back tax to that point. Another triumph of New Labour's disregard for common practice...

[Tramline]

I admire your optimism. EBT's were effectively outlawed in the UK at the last budget. I don't think it's happened yet, but you can make a good bet that sometime soon EBT-derived income paid in the UK will be treated as earned income and taxed as normal.

Incidentally, how do you account for it on your annual SA form? Or, since it's effectively tax paid, do you just not mention it?

Your right, EBT's were outlawed in the UK, that is why the employer company is based off shore. GB has a real bee in his bonnet about companies in the UK paying Corp tax so UK based employers cannot offer EBT's.

By virtue of what has happened with Dextra the IR are unable to call benefits from EBT's back in to call for tax and NI, you can't change precident. I have no doubt that they will try and rewrite legislation to try and stop this from happening at some future date, but they will need to be very clever about it.

However, even if the legislation is changed providing you stop using the scheme on or before the date the legislation takes effect there is no way that the IR can come after you.

With regards to accounting for it the employer completes a P11D each year - there is a whole section dedicated to Low interest and interest free loans.

For what its worth my brother is a tax expert working for PWC and I took him along to the meeting with me when I looked at using my current provider. He has no concerns with it, hence why I took it up.

[Underscore2]

Malv.....

Just give up.....if you are happy with the LTd route stick with it. But you are not going to change some of us who reckon there are opportunities to make a bit more cash from this rather dull work we do....I'm sure Herr Brown will catch us all soon with his band of dedicated tax slueths....

[malvolio]

I admire your optimism. EBT's were effectively outlawed in the UK at the last budget. I don't think it's happened yet, but you can make a good bet that sometime soon EBT-derived income paid in the UK will be treated as earned income and taxed as normal.

Incidentally, how do you account for it on your annual SA form? Or, since it's effectively tax paid, do you just not mention it?

[Tramline]

Rebeccaloos saidOne of the points considered in the Dextra case was the relationship between the loans etc and the employees and the loans etc were attributed to the employees as earnings i.e. what RB quotes above simply won't work any more unless the case is appealed and over-turned.

This isn't the case. If you read the whole Dextra case you will find that the IR's issue was the corporation tax deduction enjoyed by the company. That is to say under normal circumstances if a company makes a profit they pay corp tax. In this case the company didn't pay any corp tax at all and were claiming that all of the funds they placed in the EBT were technically void of corp tax. This is the point they lost on.

None of the employees who received benefits (loans or otherwise) from the EBT has these benefits called back in to charge for tax or NI. The IR conceeded this point, therefore paving the way for these sorts of schemes.

Looking at the offerings available to us, you will find that the employer company is based off shore, usually in a principality where there is no corp tax. We are still UK tax payers so it doesn't really effect us, but given that loans from trusts are an acknoweldged method of remuneration we should have any problem.