Reply to: Aston Management - Take home 86% of gross?

[cojak]

HI just like to say I was searching for some info (as many regulars always suggest people do), and I disagreed with some of the content so put in my bit! Seems it's tails I loose and heads you win on forums but been on a few so will take it!!

Hopefully most users find it beneficial to have some professional input at times to their questions. Back in my shell now! LOL J

Now if you'd said that at the beginning we would know why you were resurrecting old threads.

It's considered trolling to bring up old threads without an explanation as to why you were doing it.

[Stan.goodvibes]

I wouldn't touch anything with 'overseas', 'offshore', 'innovative' or 'scheme' in the description. It's like wearing a T-shirt with 'HMRC come and get me' on it.

LOL. Nicely put.

I find the simplest and easiest way to minimise your paperwork and tax is to simply not pay any then leave the country for 10 or so years.

[jetrimby]

HI just like to say I was searching for some info (as many regulars always suggest people do), and I disagreed with some of the content so put in my bit! Seems it's tails I loose and heads you win on forums but been on a few so will take it!!
The revenue "spotlight" is a lovely thing which highlights things the revenue dont like but obviously can't immediately stop, or else they would get on and do it! I think the phrase is saber rattling. Meaningless but designed to put the frightners on people and it works as comments on this forum show. The BN66 issue is an odd area of law and is not in any way part of popular schemes out there at present but seems to be casting a long shadow here. I'm sure the magazine will not mention the recent court of appeal case they just lost regarding a current tax scheme. They haven't found a way of closing the loan/EBT arrangement yet despite it being around for many years. The IHT issue ony potentially hits if the loan arrangement can be attacked sucessfully and do not effect the contractor schemes as the contractors are not part of a close company (this is an attempted attack on schemes for owner managed companies using a similar end game in the plan)..

AND the continued mention of the loans being called in by the companies is RUBBISH the loans are with the employee trust and the original company has no control over these trusts whatsoever. The trustee companies should be (and normally are) large internationally used trust companies with far more clout than a small tax savings company and international clients who would be seriously pissed off if they started to act unfairly to their clients.

FINALLY yes I do go on forums to raise profile (as do all the other accountants and solicitors on here) but also to learn (which is how I found this site as was looking for some info at the time) and to help. I'm not a contractor specialist (got 3 on books who would probably fit as contractors) nor am I looking to become one - a few more might be nice though!! I do sell a contractor solution (none sold yet!), and part of my learning was finding out what people out in the industry thought of them so I could deal with issues if asked and to make sure the scheme itself had a reasonable name in the industry. Hopefully most users find it beneficial to have some professional input at times to their questions. Back in my shell now! LOL J

[malvolio]

Which is what I've been saying for a couple of years. The tax doesn't disappear, it is merely deferred and if all else fails will come out of your estate.

[ChimpMaster]

One of the contractors I work with uses one of these schemes and all his P slips from Hector are marked as "Tax Avoidance Scheme", the HMRC website does have these schemes listed on their Spotlight page which means quite simple: BUYER BEWARE in big, bold and bright letters because should these be closed down and tax retrospectively applied or the schemes get cold feet and call in their loans, think about how much out of pocket you would actually be! Greed is man's greatest downfall!

Spotlight 5? --- but interesting point below in bold.

Spotlight 5: Using trusts and similar entities to reward employees - PAYE (Pay As You Earn) and National Insurance contributions (NICs), Corporation Tax and Inheritance Tax
We're aware that companies have been seeking to reward employees without operating PAYE/NICs by making payments through trusts and other intermediaries that favour the employees or their families. The arrangements usually seek to secure a Corporation Tax deduction, as if the amounts were earnings at the time they are allocated, and also defer PAYE/NICs or avoid them altogether. Our view is that at the time the funds are allocated to the employee or his/her beneficiaries, those funds become earnings on which PAYE and NICs are due and should be accounted for by the employer.

In addition our view is that an Inheritance Tax charge may arise on the participators of a close company. Unless the participators are excluded beneficiaries and have not had funds applied for their benefit, such as the receipt of a loan, a charge to Inheritance Tax arises on participators of close companies at the time the funds are paid to the trustee by the close company. Relief is only available to the extent that a deduction is allowable to the company for the year in which the contribution is made. Later payments of earnings out of the trust that may trigger a deduction to the company would not qualify for relief.

Participators affected by this may need to self-assess a liability to Inheritance Tax. There is further technical advice on Inheritance Tax on Contributions to Employee Benefit Trusts on the HMRC Internet site.

We are actively challenging examples of such arrangements and considering legislative options to end further usage of these schemes.

[Mozart]

One of the contractors I work with uses one of these schemes and all his P slips from Hector are marked as "Tax Avoidance Scheme", the HMRC website does have these schemes listed on their Spotlight page which means quite simple: BUYER BEWARE in big, bold and bright letters because should these be closed down and tax retrospectively applied or the schemes get cold feet and call in their loans, think about how much out of pocket you would actually be! Greed is man's greatest downfall!

[ChimpMaster]

there are far far heavier users than contractors

Fair point though - there are very likely far more powerful/rich people using these kinds of schemes.

[cojak]

He's a self-publicising accountant.

That's what they do if there hasn't been any posts for some days that he can pontificate on.

[DaveB]

Raised a thread from them dead.

FFS Threaded, will you keep that bloody time machine locked!

[jetrimby]

For clarity
the reason for using an EBT is two fold. First the organising company needs to get tax relief on the payment (it wouldn't if the loan was direct from it self)
The fact they use I of M etc is the tax regime allows the use of an EBT in a more simplistic way than in the UK (can be done in the UK as it is done for profit removal schemes to reduce corporate taxes, but too complex for the smaller sums involved in these arrangements)
Secondly and most importantly to the user, the EBT is what it says it is. EmployEE benefit trust. It doesnt matter if organising company goes bust as not their money it is the employees monies. The trustees have to act in the best interests of the employees, These should be professional trustees so the idea that they call in a loan is unlikely unless it is in that employees best interests, Even if called in the monies are still the employees Cant be used for anything else.

These type of schemes use basic tax laws which is why they have not been closed down yet, as the knock on effect on others is too great. The BN66 thread etc schemes used double taxation treaties, and were therefore much more complex in their tax structure as (for anyone who has ever reseached these treaties will know) they are often very complex/changing/sometimes parts are not binding etc etc... I have now doubt that at some point the EBT tax saving route and interest free loans will be closed (there are far far heavier users than contractors) but with the monies involved there are some very big users who will help ensure that backdating anything is going to be very painful for the tax authorities and in most peope's view, impossible. It will be legislative changes which generally can't backdate.

[outperform]

I used Aston in 2007 for a 3 month contract. In an earlier like I was a Tax Consultant at E&Y and PwC, so understood how the scheme works:

1. YOu are an employee of Aston and get paid a minimal salary

2. You receive an interest-free loan from the Aston EBT.

3. The loan IS A RECOURSE LOAN i.e. IN THEORY IT IS REPAYABLE

4. You must pay the tax on the difference between the rate of interest (0%) and the official HMRC rate (6.25% for 07/08) so you have to ensure that is saved up to pay over

5. They deduct their fees.

6. My daily rate was 725 at the time and I received around 600 quid net (post Aston fees and tax differential) which is around 83%

7. The time period between loans is NOT weekly or monthly...in fact it is not periodic (in order to maintain charges of it being akin to being effectively a salary). Hence I received my loans after 2, 7, 11 and 15 weeks. This is something to consider from a cashflow perspective

8. Their customer service was polite, but this did mess up a couple of times (paying me by BACS and not CHAPS)

All in all, I would say my experience was a positive one and from a tax perspective, I cannot see how this could be attacked, given that the fundamental principles are TRUST law and not Tax. As such, I believe the longevity of this scheme is due to the fact that HMRC knows it would have to amend trust law.

On the downside, their is always the inherent risk that they could call in the loan.

Hope this helps...I have tried to be balanced and this is not an endorsement or rebuttal, just my experience

[Alan @ BroomeAffinity]

SJD are the accountants and Bauer & Cottrell cehck the contracts. You've got it the wrong way round.

[French con in UK]

Thanks for your feedback...

Thanks for all your advices.
I got in touch with the accounting company sjd accountancy to have them check my contract regarding the IR35 legislation.

Some of you gave me the name of Bauer and Cottrell as accountant, are they particularly better or any accounting company will provide pretty much the same level of services?

Thanks again.

[BrilloPad]

they are just about the most risky mechanism on the face of the earth. Since the money received is not salary (quite the opposite in fact) you have zero protection if anything goes the slightest bit wrong.

agree strongly. Now everyone offshore uses a loan scheme(montp switched in March). I am sure HMRC will have these schemes firmly in their sights.

[mailric]

Does the word "LOAN" not give it away?

loan = def: a grant of the temporary use of something

Theres loads of these kind of agreements going on. When the 'scheme' starts to get looked into a bit more then do you think the company is going to cover your ass?

What defence have you got? If your only defence is "well, its a loan" then be prepared for the response "well, pay it back then"