Reply to: Global , how do they do it?

[tim522004@yahoo.co.uk]

Avoid EBT's at all cost!

The Revenue have appointed Inspectors in the 64 districts (that was about two years ago). Their job to target offshore stuctures, in particular EBT's.

At the end of the day EBT's are quite complicated and you are trusting offshore trustees to admininster the trust correctly.

The only eventual winners of the EBT's are the solicitors/accountants who administer them.

[tamper]

Oh brilliant. hat will work. Unless like 99% of us you are a UK resident and are liable for tax on income earned anywhere in the world. "Oh sorry hector, I forgot to declare 90% of my earnings for last year..."

Interesting - when I arrived in France in 2002 I called the IR to clarify my position, since I was doing off-site work for UK clients from my place in France, and getting paid directly into my UK bank account. Their position was that if the work was physically being done outside the UK, then they weren't interested.

EDIT: Oh hang on, that's the other way round isn't it? D'oh!

[csharper]

Instead of taking free unqualified advice from individuals on here why don't you invest some money in professional advice and actually have their offering assesd on it merits?

I'm happy with my current setup and don't need any professional advice really. Again I was just trying to see what are they upto, and not willing to actually hire their services.

[Tramline]

I'm not working with them. I saw this thread and thought of giving them a call and find out what exactly they are up to.
I know it's dodgy and will get one in lot of trouble if the income outside the UK is not declared.

Instead of taking free unqualified advice from individuals on here why don't you invest some money in professional advice and actually have their offering assesd on it merits?

[ASB]

Oh brilliant. hat will work. Unless like 99% of us you are a UK resident and are liable for tax on income earned anywhere in the world. "Oh sorry hector, I forgot to declare 90% of my earnings for last year..."

Residency has nothing to do with it whatever. It's domicile that matters.

Mind you it would still (probably) fail if you wern't UK domiciled since it is still UK sourced income [although there are probably ways it could be structured not to be].

So if you are not UK domiciled and the offshore element is constructed in the correct way and it is not remitted back to the UK then it might eascape UK tax.

[csharper]

I'm not working with them. I saw this thread and thought of giving them a call and find out what exactly they are up to.
I know it's dodgy and will get one in lot of trouble if the income outside the UK is not declared.

[malvolio]

Oh brilliant. hat will work. Unless like 99% of us you are a UK resident and are liable for tax on income earned anywhere in the world. "Oh sorry hector, I forgot to declare 90% of my earnings for last year..."

[csharper]

They have a new scheme where you get paid 2-3K pm by UK company and offshore company transfers rest of the money to your offshore account.

[cojak]

As I keep repeating - If it looks too good to be true, it probably is...

[csharper]

I called them. They said they don't do EBTs anymore.

[IR35 Avoider]

I am sure you will appreciate if the agency or client is "deemed employer" of the individual they will be liable to comply with IR35 regulations including the obligation to pay the appropriate employer’s National Insurance contributions.

We're getting there....

... but it remains my understanding that if the client or agency have paid another UK company (the scheme front-end, for example) for the workers services, then no matter what happens to the money after that, the Inland Revenue cannot track further back up the chain than that UK company, when looking for a "deemed" employer. I was really trying to find out if you had any reason to think this was untrue.

They can probably always go after the worker for full income tax and employees NI, so it's just a question of who they can go after for the employers NI. I read something a long time ago in which I think they claimed that where money had reached a worker via going off-shore, they could reclaim it from the last UK company in the chain before it went off-shore. In this case that would be the scheme front-end, not the agency or the client. They would remain safe.

The reason I want to be sure nothing's changed is that it would probably be the end of contracting as we know. If there really were any significant risk that clients or agencies could be made to cough up, they would refuse to contract people on anything other than PAYE terms.

Section 44 you referred to in your post is just the updated name for S134 I was referring to. As far as I can see, following a quick scan, it can only be applied to a company that has a direct contract with the individual. (Presumably there's an exception somewhere to cover what I said about the off-shore scenario earlier.) Given the edifice Hector has attempted to construct on the base of S660A in order to collect money in those circumstances, I suppose it's only a matter of time before they try to claim there is an unwritten contract between the worker and the client or agency.

This article emphasises the importance to the agency of not having the contractor as a party to any contract.

[bangface]

I've read your last post again, but I remain puzzled.

So far as IR35 is concerned:-

1. Off-shore schemes are usually structured so that it is (they claim) irrelevant whether you fail the IR35 status tests or not. That is the whole point of them. If you can pass the IR35 tests there's not much point using an off-shore scheme.
2. If the client or agent only make payments to a UK limited company, and definitely not directly to the contractor as an individual, they cannot be an intermediary for IR35 purposes, so they are off the hook even if he is caught.

Just to clarify - I do agree that the contractor has to worry about IR35 - it's just that (even after re-reading) I still don't see why you think the client or the agency are at risk.

Regarding IR56 - this is just the old law that means an individual claiming to be self-employed can be treated as an employee for tax purposes, if he fails status tests. Because of this (and S134) clients and agencies don't make payments to individuals other than by operating PAYE. The reason why contractors all had companies in in the first place was in order to immunise clients and agencies from IR56 and S134. IR35 was then brought in to achieve for limited company contractors what IR56 and S134 were failing to achieve, however it was deliberately drafted in such a way that it was the contractor company and not the client or agency that was affected by it.

If clients or agencies are only making payments to another UK limited company, then IR35, IR56 and S134 are irrelevant to them, though possibly not to the contractor and other intermediaries further down the chain.

I agree most Off-shore schemes do "claim" to be structured in such a way that it is irrelevant whether a contractor fails the IR35 status tests or not. Not only do they "claim" to be safe, most "claim" to be IR Approved!!!! But that's another story...The structure of these schemes is built upon a high level of Tax advice and on paper theoretically should work, however such companies and their advisors cannot pre-determine the commercial reality of one's circumstances and as everybody’s circumstances are different, it is going to be extremely difficult if not physically impossible to ensure that everyone is operating outside the boundaries of IR35.

This is where I feel there will be a problem regarding "deemed employment" As we know if the revenue perform an IR35 investigation, they will almost certainly be looking to ascertain who the employer is.

As you know they will take certain criteria into consideration, which will include looking at the amount of control the agency or client has over the contractor, how the contracts are worded, the way in which the contractor represents himself and so on. If the contractor is held to be under the direction, supervision or control of a party other than his employer in accordance with Section 44 of the Income Tax (Earnings and Pensions) Act 2003 the agency or the party to whom he or she supplies services, could be deemed to be his/her employer. I am sure you will appreciate if the agency or client is "deemed employer" of the individual they will be liable to comply with IR35 regulations including the obligation to pay the appropriate employer’s National Insurance contributions.

[IR35 Avoider]

I've read your last post again, but I remain puzzled.

So far as IR35 is concerned:-

1. Off-shore schemes are usually structured so that it is (they claim) irrelevant whether you fail the IR35 status tests or not. That is the whole point of them. If you can pass the IR35 tests there's not much point using an off-shore scheme.
2. If the client or agent only make payments to a UK limited company, and definitely not directly to the contractor as an individual, they cannot be an intermediary for IR35 purposes, so they are off the hook even if he is caught.

Just to clarify - I do agree that the contractor has to worry about IR35 - it's just that (even after re-reading) I still don't see why you think the client or the agency are at risk.

Regarding IR56 - this is just the old law that means an individual claiming to be self-employed can be treated as an employee for tax purposes, if he fails status tests. Because of this (and S134) clients and agencies don't make payments to individuals other than by operating PAYE. The reason why contractors all had companies in in the first place was in order to immunise clients and agencies from IR56 and S134. IR35 was then brought in to achieve for limited company contractors what IR56 and S134 were failing to achieve, however it was deliberately drafted in such a way that it was the contractor company and not the client or agency that was affected by it.

If clients or agencies are only making payments to another UK limited company, then IR35, IR56 and S134 are irrelevant to them, though possibly not to the contractor and other intermediaries further down the chain.

[bangface]

Why would agencies and clients be at risk? My understanding is that in general a company that only makes payments to another UK company for a worker is not at risk.

Schemes that have an off-shore element can have a UK company as a front-end to pass the money to them, so the agent will be in the same position as the client, i.e. they have passed money to another UK company.

Try reading my last post again

[IR35 Avoider]

Why would agencies and clients be at risk?

I'm surprised the agencies actually deal with these companies as they and their clients are at just as much risk as the contractor!!

Why would agencies and clients be at risk? My understanding is that in general a company that only makes payments to another UK company for a worker is not at risk.

Schemes that have an off-shore element can have a UK company as a front-end to pass the money to them, so the agent will be in the same position as the client, i.e. they have passed money to another UK company.