Reply to: Payscheme Plus HMRC Enquiry

[DonkeyRhubarb]

Is it not the case that it was UK tax, but at IOM rates thanks to the Double Taxation Treaty? With EBT's, it's UK tax, at UK rates.

Users were self-employed, with part of the income subject to regular UK tax/nic. The remainder was derived from an offshore trust, where notional tax had already been paid in IoM, hence the DTA relief.

[Gaskie]

Maybe the increase is due to them building a warchest, as you just know HMRC have something else up their sleeves (retrospection!)

HMRC are not to be trusted!!

If HMRC do come after people using this scheme, it won't be payscheme who are liable, but the contractors. This is a simple money making exercise.

[DonkeyRhubarb]

Tax paid in EBT schemes is not too much either...

I think that's kind of the point of all these schemes.

In fact, if you look at the financials, they are pretty much all the same, which is why they are often referred to as 85% schemes.

Unfortunately for HM Treasury, the other 15% doesn't go in tax/nic.

[Vallah]

This is not strictly true. Tax/nic was paid every year by people in the scheme, albeit just not very much.

Is it not the case that it was UK tax, but at IOM rates thanks to the Double Taxation Treaty? With EBT's, it's UK tax, at UK rates.

[sal626]

This is not strictly true. Tax/nic was paid every year by people in the scheme, albeit just not very much.

Tax paid in EBT schemes is not too much either...

[sal626]

So although morally dubious, assuming I end this scheme before April next year, there is a good chance I'll escape unscathed?

Iraq War is morally dubious, not tax avoidance - thats legal.

I would say there is a good chance you'll be ok - 2 contractors in my office have joined an EBT scheme since the budget came out, another 3 are thinking about it....

Edit: unless they pull the retrospection wand out...

but also note that there are two SC rulings against HMRc on EBTs (Dextra and Sempra)...

[portseven]

Maybe the increase is due to them building a warchest, as you just know HMRC have something else up their sleeves (retrospection!)

HMRC are not to be trusted!!

[DonkeyRhubarb]

but the whole point of BN66 was that UK tax wasn't being paid on some of the income

This is not strictly true. Tax/nic was paid every year by people in the scheme, albeit just not very much.

[Gaskie]

So although morally dubious, assuming I end this scheme before April next year, there is a good chance I'll escape unscathed?

Not sure I particularly want to carry on mind you. I see the raise from 5% to 7.5% as a direct response to the fact these schemes are ending next year and an attempt to gather as much revenue as possible before then.

[Vallah]

EBT schemes are extremely hard for the taxman to attack. UK tax is being paid on the basic salary element, and also the benefit-in-kind from the loan. OK, it's not nearly as much tax as they'd like, but the whole point of BN66 was that UK tax wasn't being paid on some of the income, that simply isn't the case with EBTs.

[sal626]

Did you guys not see the note in the Budget? They are going to introduce Legislation to stop the EBT schemes in april 2011.

http://www.hmrc.gov.uk/budget2010/businesses.htm#14

AFAIK, none of the “enquiries” into any EBT schemes have led anywhere….

[Gaskie]

I would very much like to know if there has been any progress on this as well. Payscheme have just upped their fees to 7.5% of gross, and now that the tax man is sniffing this is looking less and less appealing by the day.

[prada]

contractor100 and chipmunk, what was the outcome of your HMRC query? please let me know asap! thanks :-) I owe u one :-)

[chipmunk]

You need to contact TRM and they will advise you what to do. I am in the same situation.

[contractor100]

Can you provide any more info, as I'm a bit confused by your post.

Is the scheme you are on EBT/loan based? Or does it use some other mechanism to pay?

As previously stated, EBT = Employee Benefit Trust.

Hi,
I was using Loan base facility and looks like HMRC is interested to query on this element.

C