Reply to: Restructure of Ltd in face of budget changes

[Felix22]

Thanks for your responses; having followed up on some of your comments and done some research I'd agree it's just not worth the risk.
Plus on the diminishing day rate I command I don't think it's worth the hassle relative to the potential saving.
So I'll continue to plod on with my Ltd. As for the other guy... he's already signed and sealed into the scheme so time will tell...

[jmo21]

If it was anyone else I'd say the same, but this guy is an experienced contractor - been in the game 10+ years and generally on most matters I'd trust his opinion.
Hence my query here - it doesn't sound right to me, but on the other hand I find it hard to believe as a seasoned contractor he would fall for a scam.

There have been a lot of these schemes around for years, and many people used them fine. It is only much later, when HMRC come calling that everything falls apart. It turns out the company don't want to know, you can't get answers, they eventually fold, and you are left holding the can.

"But, but... they SAID it was legal".

"HMRC approved", "So and So QC's legal opinion".

It's sad, but it has happened to a lot of people, with a lot of schemes.

Your mate just hasn't been caught up in it yet.

Any contractor going with any of these schemes after all that has happened the last few years must have rocks in their head.

[cojak]

Indeed!


If it was anyone else I'd say the same, but this guy is an experienced contractor - been in the game 10+ years and generally on most matters I'd trust his opinion.
Hence my query here - it doesn't sound right to me, but on the other hand I find it hard to believe as a seasoned contractor he would fall for a scam.

Then I'd go back to trusting him with your bar order, but make sure he gives you your change back as he's not to be trusted with money.

[cojak]

A contractor mate has told me they've changed their operations from standard PSC Ltd to a part-umbrella company part-limited co, running out of the Isle of Man as this provides a tax break. Apparently will provide 80-83% tax efficiency.

Wondered if anyone else has heard of this or restructured in light of the upcoming changes?

HAHAHAHA!

[Felix22]

Is that because your "mate" is a figment of your scheme-promoting imagination?

No. I'm not promoting a scheme, I've just never come across this before - been happily working thru Ltd for 5 years and it was only when I happened to mention I'd be optimising my dividends for this tax year due to the budget that he mentioned his new set up.

[jamesbrown]

generally on most matters I'd trust his opinion

Is that because your "mate" is a figment of your scheme-promoting imagination?

[DaveB]

What about penalties and interest, what is a CTD and why do they not apply

Certificate of Tax Deposit.

Essentially you deposit cash with HMRC against future tax liabilities but unlike a payment on account you retain control of the cash and have access to it. If a tax bill turns up you can then use the CTD to pay it. If the CTD was taken out before the tax was deemed to be due then it is regarded as having been paid on time and no interest etc is applied.

After 6 years, or whatever the time limit is, if HMRC haven't challenged your arrangements and have run out of time to do so you can cash in the CTD and get your money back, potentially with interest.

[SimonMac]

Playing devils advocate for a second.

If you are contracting in the public sector you could use one of these schemes to sidestep the new PSC rules and get paid as before without being caught under PAYE etc.

Put the difference in tax you would have paid against what you pay through the scheme in a CTD and the only downside is the scheme providers fees.

If/When HMRC come calling you have the cash to pay the tax bill. If they never come calling you get the CTD cash back.

Just a thought.

What about penalties and interest, what is a CTD and why do they not apply

[Pondlife]

I did say I was playing devils advocate.

If the tax that could be owed is in a CTD then you won't have to lose any sleep over it anyway. CTD means no interest or penalties when the bill turns up provided you took it out before the tax liability payment was due.

Wouldn't the existence of the CTD mean someone's going to start prodding about in your bins?

It's hypothetical I know.

[DaveB]

Why not just turn down the gig in the PS and go get another one that means you won't have to sleep with one eye open for the next 6 years?

I did say I was playing devils advocate.

If the tax that could be owed is in a CTD then you won't have to lose any sleep over it anyway. CTD means no interest or penalties when the bill turns up provided you took it out before the tax liability payment was due.

[northernladuk]

Playing devils advocate for a second.

If you are contracting in the public sector you could use one of these schemes to sidestep the new PSC rules and get paid as before without being caught under PAYE etc.

Put the difference in tax you would have paid against what you pay through the scheme in a CTD and the only downside is the scheme providers fees.

If/When HMRC come calling you have the cash to pay the tax bill. If they never come calling you get the CTD cash back.

Just a thought.

Why not just turn down the gig in the PS and go get another one that means you won't have to sleep with one eye open for the next 6 years?

[DaveB]

Playing devils advocate for a second.

If you are contracting in the public sector you could use one of these schemes to sidestep the new PSC rules and get paid as before without being caught under PAYE etc.

Put the difference in tax you would have paid against what you pay through the scheme in a CTD and the only downside is the scheme providers fees.

If/When HMRC come calling you have the cash to pay the tax bill. If they never come calling you get the CTD cash back.

Just a thought.

[northernladuk]

And have a look at this thread as well...

http://forums.contractoruk.com/hmrc-...ml#post2228321

[northernladuk]

If it was anyone else I'd say the same, but this guy is an experienced contractor - been in the game 10+ years and generally on most matters I'd trust his opinion.
Hence my query here - it doesn't sound right to me, but on the other hand I find it hard to believe as a seasoned contractor he would fall for a scam.

He may genuinely believe he's beaten HMRC and has a fool proof method. Thing is it might be now but with retrospective taxation and penalties it's going to unravel hard and fast.

Just because people have 10+ years it doesn't mean they aren't gullible idiots. PC has been contracting for over 10 years hasn't he? Should we trust him?

[northernladuk]

Ask him for his opinions on this....

https://www.gov.uk/government/public...-and-avoidance

Dealing with tax avoidance schemes

We are designing legislation that minimises the scope for tax avoidance.

The government has introduced a General Anti-Abuse Rule (GAAR), aimed at deterring and preventing artificial and abusive tax avoidance schemes.

We will also introduce new measures to deal with tax advisers who sell contrived and aggressive tax avoidance schemes. The government has announced it will consult on proposals to introduce significant new information disclosure and penalty powers, to make it more difficult for the promoters of abusive schemes to continue to market them in the future.

We are using settlement opportunities to encourage users of avoidance schemes to agree their tax position with us, and investing in additional resource to accelerate litigation for those who do not settle.

We are making better use of anti-avoidance communications to influence the behaviour of taxpayers and promoters of avoidance schemes. We are also improving the quality of information available on avoidance to help taxpayers realise the potential downsides and risks.

and hiding it in the IOM?? Same document...

Increasing our ability to identify offshore tax evasion and avoidance

We are working more closely with other tax administrations to prevent offshore evasion.

At the G8 Summit in June 2013, the UK reached a major new agreement with G8 member states to move to establish the automatic exchange of information between tax authorities. G8 countries agreed to work with the OECD to develop a model for this.

This builds on the prior commitment made by France, Germany, Italy, Spain and the UK to pilot the automatic exchange of tax information. This initiative has since been joined by 12 other EU Member States and Mexico and Norway.

The UK Crown Dependencies and Overseas Territories (Guernsey, the Isle of Man, Jersey , the Cayman Islands, Anguilla, Bermuda, the British Virgin Islands, Montserrat, Gibraltar and the Turks and Caicos Islands) have also joined this initiative, agreeing to automatically exchange information about accounts held in those jurisdictions with the UK and others.

We have also set up a new centre of excellence within HMRC to bring together and enhance our expertise in dealing with offshore evasion. The team will look at how HMRC can best use data to identify offshore tax evasion.

Also tell him to have a read of this...

https://www.gov.uk/government/upload...2015_AD_V6.pdf

Particularly from page 9 onwards which explains what GAAR applies to. There are many comments such as the following, which I would say fits your mates situation to a tee... and there are lot more examples, all which sound like they were written with this scheme in mind.

The GAAR applies to ’tax arrangements’ which are ’abusive’. In broad terms a tax arrangement is any arrangement which, viewed objectively, has the obtaining of a tax advantage as its main purpose or one of its main purposes. ’Tax advantage’ in this context is also broadly defined.

Let him fill his boots, crack a beer and wait until HMRC pop and ruin his life.