Post 2011 - Self employed - APN

[webberg]

If you join a normal Umbrella Company, is the x% fee, that the company charges, included in your taxable income?

If not, why should it be any different if you work for an IoM EBT company?

It shouldn't be but HMRC's position is that the fee paid by various UK entities in the chain of payments might well be allowable to some/all of them as BUSINESS expenses.

To be allowable to a business, the fee has to be wholly and exclusively for business purposes. There are arguments around duality of purpose but usually some apportionment can be agreed if necessary.

To be an allowable EMPLOYMENT expense, it has to be wholly, exclusively and NECESSARILY incurred in the PERFORMANCE of the duties.

An expense incurred to put you in a position to earn a salary is NOT "in the performance of" and therefore not allowable.

Further a fee paid to enable an offshore EBT to be part of the chain, they regard as a fee paid to facilitate tax avoidance and as such is neither a BUSINESS expense and nor certainly an allowable employment expense.

This is consistent with the treatment of film schemes where fees paid to promoters of schemes are NEVER allowable.

I'm not saying HMRC are correct and there are arguments contrary to the above in certain circumstances, but it is an area in which there is some power to their position and it will be hard to crack.

Perversely it is also the case that if they stick to this line, it opens avenues elsewhere.

[WalterWhite]

If you join a normal Umbrella Company, is the x% fee, that the company charges, included in your taxable income?

If not, why should it be any different if you work for an IoM EBT company?

Very good point, well made.

[DonkeyRhubarb]

If you join a normal Umbrella Company, is the x% fee, that the company charges, included in your taxable income?

If not, why should it be any different if you work for an IoM EBT company?

[DonkeyRhubarb]

HMRC's argument is that the money legally and beneficially belonged to you the moment it arose from the payer.

Who is the payer?

In most cases, there will be several payers in the chain, each taking their own commission/fee

End-client -> Recruitment Agent (eg. 15% fee) -> UK intermediary (fee?) -> IoM Company (10% fee) -> EBT -> Contractor

I still think HMRC's argument is absurd.

[webberg]

So HMRC is including tax on promoter fees as well. Anyone challenged this with any success?

HMRC's argument is that the money legally and beneficially belonged to you the moment it arose from the payer.

The fact that you choose to use it to pay a fee and one that is not an employment or business expense, does not make it a payment that arose to another party.

There are many flaws in HMRC's position but strangely on this one they have a number of features in their favour.

To argue for relief on these fees needs an analysis that is not compatible with those used to justify the original plan.

[DonkeyRhubarb]

So HMRC is including tax on promoter fees as well. Anyone challenged this with any success?

That's a bit bonkers isn't it.

How can you be taxed on money you didn't receive? If the promoter made a profit, then they'll have already paid tax on those fees.

It would be like them taxing you on the recruitment agency's commission.

[StrengthInNumbers]

So HMRC is including tax on promoter fees as well. Anyone challenged this with any success?