Reply to: I want to leave a Umbrella Loan Scheme to go LTD

[LisaContractorUmbrella]

Thanks, by sorting out ..shall I just setup a ltd right away..and let the scheme provider do my sa next year and make sure they deal with the incomes accordingly

How ever it is they see legal ... Then it's up to hmrc to approve or not... And the provider to help battle

Or u saying just pay 40 percent on the loans via a new accountant or put in pension??

It doesn't really work like that with HMRC - have a look here HMRC Scheme Enquiries - this will give you an idea of the reality of the situation.

Find yourself a really good accountant that specialises in the contractor market and take there advice on how best to move forward.

[ASB]

There is a small issue with what bb said. Only in as much as it will not be possibke to reclassify the income. This may remove the possibility of some mitigation strategies. E.g. corporate pension contributions.

however if you make the switch now it will stop the scheme impact from worsening. It is at worst 9 months exposure.

you dont actually seem to know what the payments from the scheme are. If they are loan payments you could formally ask for the loan to be forgiven. Assuming they do this then declare these on your tax return and pay. You may even avoid the ni consequences.

If it is a payment for ipr then declare it and pay the tax.

of course it is possible the scheme does meet its aims. But id be doubtful.

[ASB]

Mal,

You are quite right. If there was illegality in the schemes then those challenged would tend to find themselves on the receiving end of criminal charges.

the question is just about whether the scheme is actually effective in its aims.

[BlasterBates]

Thanks, by sorting out ..shall I just setup a ltd right away..and let the scheme provider do my sa next year and make sure they deal with the incomes accordingly

How ever it is they see legal ... Then it's up to hmrc to approve or not... And the provider to help battle

Or u saying just pay 40 percent on the loans via a new accountant or put in pension??

Hmrc will not approve it, they will fight you tooth and nail, you would have to go through a 10 year legal battle which will cost you a fortune and you probably won't win.

Most contractors think this, i.e. nothing to lose wait until HMRC challenges it, but it will take years before they do and then the interest has built up so you now have to pay double or triple the original tax bill.


Go and see a reputable accountant and put your tax affairs in order, i.e. pay tax on the full amount and perhaps put in a pension. There are better ways to mitigate tax.

At least you have the chance to sort things out.

[malvolio]

Thanks, by sorting out ..shall I just setup a ltd right away..and let the scheme provider do my sa next year and make sure they deal with the incomes accordingly

How ever it is they see legal ... Then it's up to hmrc to approve or not... And the provider to help battle

Or u saying just pay 40 percent on the loans via a new accountant or put in pension??

It's not about the legality of the scheme; that's the mistake a lot of people are making. It's about the construction of the scheme and to some extent whether or not you are in a position to use that structure. HMRC are there to collect tax owed. The scheme provider is there to earn money for their own people. Neither have any interest in or obligations towards you.


What I'm saying (others may disagree) is treat what you've earned to date as normal income and ignore the scheme nonsense. That income carries a tax liability. Then whatever you earn from your company this tax year, you don't have to take as salary (or anything else, come to that). You also have to think about IR35, of course. At year end, total up the gross income, calculate what tax is owed, deduct what's been paid, send of the cheque.


But before doing any of that, get a proper accountant to advise you: there are several on here or if all fails go look at the PCG's Accredited Accountants, who will know all about contracting.

[kal]

My advice cash it in and tax it correctly.

I doubt that anyone will get away with any scheme now.

Getting on the wrong side of HMRC is a really bad experience. You don't want to go there.

...and they will come after you even if it is just a year, so don't think in terms of might, it definitely will end up as a COP8 investigation and you will definitely receive a nasty brown letter with a huge bill.

Sort it out now while you're still in the driving seat. You,ve lost the fee but you should be able to sort it out.

Do you really want to end up with a 5 or even 10 year ongoing dispute with HMRC?

Agree, I hope that these schemes are outlawed as too many contractors get sucked in and are then left to bend over and take both barrels from hector, i almost signed up to one of these when I was embarking on contacting not knowing any better, luckily I was advised not to...

[janehatton]

Thanks, by sorting out ..shall I just setup a ltd right away..and let the scheme provider do my sa next year and make sure they deal with the incomes accordingly

How ever it is they see legal ... Then it's up to hmrc to approve or not... And the provider to help battle

Or u saying just pay 40 percent on the loans via a new accountant or put in pension??

[BlasterBates]

My advice cash it in and tax it correctly.

I doubt that anyone will get away with any scheme now.

Getting on the wrong side of HMRC is a really bad experience. You don't want to go there.

...and they will come after you even if it is just a year, so don't think in terms of might, it definitely will end up as a COP8 investigation and you will definitely receive a nasty brown letter with a huge bill.

Sort it out now while you're still in the driving seat. You,ve lost the fee but you should be able to sort it out.

Do you really want to end up with a 5 or even 10 year ongoing dispute with HMRC?

[BlasterBates]

My advice cash it in and tax it correctly.

I doubt that anyone will get away with any scheme now.

Getting on the wrong side of HMRC is a really bad experience. You don't want to go there.

...and they will come after you even if it is just a year, so don't think in terms of might, it definitely will end up as a COP8 investigation.

[malvolio]

Thanks!

It's actually only been from this year I joined I now see...

I guess I can say I thought this accountants advice was professional as she is still Confident with the scheme.

If I open a ltd with a new accountant... I'm confused how the two Wld do my sa for this year. With me keeping the benefits of the scheme ... If legit.

I'd suggest the original one would be the better bet, since they (presumably) understand how the scheme works. However, you should get a disclaimer from them that any penalties or other taxes due will be met by them.


Good luck with that...


However, the other way is to assume all your income to date is UK-based and UK-taxable (which it is, to be honest) , so treating the scheme income as salary and using dividends from your new company for the rest of the year may be the safer option and will keep HMRC off your back. Speak to an accountant that doesn't sell "clever" schemes and does understand contracting and go with what they tell you.

[janehatton]

Thanks!

It's actually only been from this year I joined I now see...

I guess I can say I thought this accountants advice was professional as she is still Confident with the scheme.

If I open a ltd with a new accountant... I'm confused how the two Wld do my sa for this year. With me keeping the benefits of the scheme ... If legit.

[janehatton]

Thanks for the replies...it was only in this tax year I started I now see.

It's not the cost of the sa, I just worried if I leave half way through the year a new accountant wldnt be able to clear this up with out me paying a big amount which the provider accountant can actually justify.

[Clare@InTouch]

I'd suggest that you swap over as soon as possible in order to avoid making your position worse - you'd have a better case for mitigating penalties with HMRC if you can show you moved away as soon as you realised vs. waited until it was tax efficient. Talk to an accountant, get a company set up, and discuss the exact nature of the scheme so they can advise on tax return completion for the periods in question.

Before you give notice to the scheme provider, email them to ask them how to complete your tax return. Get full details then, assuming there's no NDA issues, pass those details to your new accountant too. They should then be able to complete your return.

If you've been in the scheme 10 months then presumably they are doing your 2012/13 tax return anyway, which is due at the end of next month?

[malvolio]

Welcome

You are going to need to first join the PCG - you aren't going to get any advice from them unless you are a paid up member, and to be frank, even then they aren't going to advise you.

Yes they are, but not unreasonably they can't advise you on your specific situation: it's a helpline, not a dedicated corporate solicitor and accountancy practice. However they aren't going to be strong on loan schemes since only about 3% of the members use them. They can talk to you about running a UK Ltd Co though.

I would suggest, that as a start, you find an accountant (many of whom hang around this board), pay them for their Professional advice and take heed of it.

There is no point worrying about who/when your Self-Assessment is done, since the cost of having one done for you, is relatively trivial.

Please let us know the name/details of the scam that you are operating under, and the name of your so-called accountant, who has advised you, so that we can steer clear...

You are going to need some strong pills for the headache that I see forthcoming.

Happy New Year

Ya sockie

[Scruff]

Welcome

You are going to need to first join the PCG - you aren't going to get any advice from them unless you are a paid up member, and to be frank, even then they aren't going to advise you.

I would suggest, that as a start, you find an accountant (many of whom hang around this board), pay them for their Professional advice and take heed of it.

There is no point worrying about who/when your Self-Assessment is done, since the cost of having one done for you, is relatively trivial.

Please let us know the name/details of the scam that you are operating under, and the name of your so-called accountant, who has advised you, so that we can steer clear...

You are going to need some strong pills for the headache that I see forthcoming.

Happy New Year

Ya sockie