Avoiding IR35 by using Umbrella and LLP

[DaveB]

What is being offered to you is a tax avoidance scheme with the added 'selling point' of putting you outside IR35. If that is the only reason you would consider it, dont bother. There are easier and more realiable ways (see points 1 and 2 below).

How to avoid IR35.

Either -

1. Work through Brolly. You pay tax and NI like any other employee, no issues.

2. Work as a Ltd company then:

a. Get your contracts checked for IR35.
b. Work in a manner appropriate to a contractor supplying services, not an employee.
c. Take out any of the available insurances against investigation and penatlies. (optional)

[Greg@CapitalCity]

Kick to the kerb

Just my opinion, but the days of using companies like this are gone. If you work in the UK, and earn money in the UK, then you pay tax in the UK. What you will probably find is if the company fell over, or their tax status was challenged by the tax office, all liability from the tax avoidance scheme would fall squarely on you. They probably won't tell you that, and it will probably be extremely difficult for you to work this out yourself from their T&C's. But that is probably why these companies go for the hard sell these days - its great for them - all the risk lies with you.

New clients come to us after having used these services because they couldn't get a mortgage when using complex tax structures. Another downside.

But seriously, why not work through a ltd company - go on the VAT flat rate scheme, claim your expenses correctly, and your take home pay will be 80-85% anyway. Plus, its legal.

[LisaContractorUmbrella]

It is nominal in that it never actually leaves my bank account. It is simply a journal from one company to another without an actual transfer of funds.

Then it is a completely artificial structure which our friends at HMR&C would be highly likely to view as avoidance

[Obiron]

I am interested that you consider £50K is a "nominal amount".

It is nominal in that it never actually leaves my bank account. It is simply a journal from one company to another without an actual transfer of funds.

[awaythelads]

I am getting the 'hard sell' from Rousseau International. They are claiming they have a loophole to avoid IR35 but seem unwilling or unable to explain it clearly to me.

Perhaps ask the good folks at Rousseau what their thoughts are on Sunday Solutions/Von Essen. Maybe they can refresh their memory by reading this article in The Times?

[kernow69]

I got a call from these people - wouldn't tell me where the Brolly was based (UK? IOM?) and after checking I can't even find the LLP on Companies House.....

I am getting the 'hard sell' from Rousseau International. They are claiming they have a loophole to avoid IR35 but seem unwilling or unable to explain it clearly to me.

The plan seems to be:
I raise a timesheet to their brolly
The brolly invoices my client
They pay me £300 net from the invoice and cater for the tax and NI.
I 'lend' the LLP a nominal amount (lets say 50K)
The LLP repays this loan at a rate that uses up the remainder of the invoice value. This way the money comes to me as a loan repayment and is therefore neither income or captial growth......

BUT... I have never transferred any money into the LLP so I am concerned that one of a nubmer of things may occur. A) The LLP goes into receivership and I am comitted to finding the actual lent amount to balance their books. B) the LLP goes bust meaning it cannot 'repay' the loan and the balance in the brolly is inaccessible. C) HMRC will lift the veil of incorporation and still come back at me for the unpaid tax AND will regard the scheme as money laundering.

Does anyone have any experience of this type of scheme or of Rousseau International themselves. They are predicting I could keep 82% of the net invice value which seems akin to the pre IR35 tax rules. Is there anyone else who offers this kind of scheme and if so, what is there to prevent me from forming my own LLP and running the same process myself and saving their admin commission.

TIA

Obiron

[Wanderer]

I am getting the 'hard sell' from Rousseau International. They are claiming they have a loophole to avoid IR35 but seem unwilling or unable to explain it clearly to me.

My test is to ask how much the tax man gets paid out of the money you earn. If HMRC gets nothing then you have to wonder how long it will be before they come and attack these schemes. Also remember that they are usually based offshore so when there is a problem they cease trading and disappear which may leave you personally liable for the tax.

[GillsMan]

"They are claiming they have a loophole to avoid IR35 but seem unwilling or unable to explain it clearly to me."

Excuse me? Someone wants you to buy a product but won't tell you how it works! Why are you even considering it?

Don't get me wrong, this is a very complex area and when someone has something that might work it could prove to be very lucrative so I can understand them being reticent on how they release information (check the forums for people revealing various aspects of various "strategies", not all of which is accurate) but they have to at least explain the principles!

I am interested that you consider £50K is a "nominal amount". I personaly would like to undertake some accounting/taxation work on your behalf. There is no need for concern because I only ever charge "nominal" fees.

I have found two products that I have satisfied MYSELF will work, returning 82% to 85%, neither of which involve the contractor in receving loans from trusts. That is not to say that any given individual would agree with my analysis. A big part of this is down to the individuals attitude to risk.

I have to accept that if something like this works then at some point HMRC will get legislation through to block it. Until then, I see a window of opportunity. There is of course also the chance that I am wrong and these two options will not work. I am certainly not suggesing that there will be no risk, that would be unrealistic.

I have done my homework and would expect anyone considering such a move to do the same and ask and ask and ask until you are happy. I think most of us know that HMRC will look at these but if it is set up properly and IMPLEMENTED PROPERLY then they can work.

I have to say, this is an excellent post. This subject can be rather emotive with people on one side saying these loophole schemes are great as you can maximise your take home, and those on the other side saying that they are bound to failure. I'm in the latter half, but I do like the fact that Taxless makes clear that whether or not you agree with such schemes depends on your attitude to risk.

Personally, I'm somewhat risk averse when it comes to tax, HMRC, etc, and so I wouldn't touch it at all, but I do think the above represents a relatively balanced post on the subject. Kudos.

[Fred Bloggs]

You're right to be concerned. Look carefully at how you can work through a Ltd Co as well and compare the returns. Then ask yourself if you want to take the extra risk of the scheme. Myself, I wouldn't but it's up to you. There is plenty of info on here to help you decide.

[Taxless]

"They are claiming they have a loophole to avoid IR35 but seem unwilling or unable to explain it clearly to me."

Excuse me? Someone wants you to buy a product but won't tell you how it works! Why are you even considering it?

Don't get me wrong, this is a very complex area and when someone has something that might work it could prove to be very lucrative so I can understand them being reticent on how they release information (check the forums for people revealing various aspects of various "strategies", not all of which is accurate) but they have to at least explain the principles!

I am interested that you consider £50K is a "nominal amount". I personaly would like to undertake some accounting/taxation work on your behalf. There is no need for concern because I only ever charge "nominal" fees.

I have found two products that I have satisfied MYSELF will work, returning 82% to 85%, neither of which involve the contractor in receving loans from trusts. That is not to say that any given individual would agree with my analysis. A big part of this is down to the individuals attitude to risk.

I have to accept that if something like this works then at some point HMRC will get legislation through to block it. Until then, I see a window of opportunity. There is of course also the chance that I am wrong and these two options will not work. I am certainly not suggesing that there will be no risk, that would be unrealistic.

I have done my homework and would expect anyone considering such a move to do the same and ask and ask and ask until you are happy. I think most of us know that HMRC will look at these but if it is set up properly and IMPLEMENTED PROPERLY then they can work.

[geoff from contracta IOM]

If you can't find an accountant or chartered tax adviser to give it the thumbs up walk away !
I suspect IMO from the sounds of this arangement that would be very difficult to do, some points of concern jump out straight away.

[cojak]

Take a look at this thread

http://forums.contractoruk.com/accou...er-trusts.html

Does it sound familiar?

Your concerns are very valid, and an accountant will be able to explain this but in the meantime I would read the whole thread carefully.

[Obiron]

I am getting the 'hard sell' from Rousseau International. They are claiming they have a loophole to avoid IR35 but seem unwilling or unable to explain it clearly to me.

The plan seems to be:
I raise a timesheet to their brolly
The brolly invoices my client
They pay me £300 net from the invoice and cater for the tax and NI.
I 'lend' the LLP a nominal amount (lets say 50K)
The LLP repays this loan at a rate that uses up the remainder of the invoice value. This way the money comes to me as a loan repayment and is therefore neither income or captial growth......

BUT... I have never transferred any money into the LLP so I am concerned that one of a nubmer of things may occur. A) The LLP goes into receivership and I am comitted to finding the actual lent amount to balance their books. B) the LLP goes bust meaning it cannot 'repay' the loan and the balance in the brolly is inaccessible. C) HMRC will lift the veil of incorporation and still come back at me for the unpaid tax AND will regard the scheme as money laundering.

Does anyone have any experience of this type of scheme or of Rousseau International themselves. They are predicting I could keep 82% of the net invice value which seems akin to the pre IR35 tax rules. Is there anyone else who offers this kind of scheme and if so, what is there to prevent me from forming my own LLP and running the same process myself and saving their admin commission.

TIA

Obiron