Reply to: I have been tricked into a loan scheme

[DealorNoDeal]

It's impossible for me to say whether such entities deliberately used this sort of subterfuge...

I'd bank on it. These days agencies are highly suspicious of any intermediaries, apart from a MyCo, that they don't know to be 100% kosher. If the intermediary is not on their umbrella list then you can probably forget it.

[webberg]

There may be many reasons for the use of such schemes.

From a tax perspective, the theory was that ever tightening DR rules meant that payments to individuals were more and more likely to be seen as remuneration. Therefore direct links between individuals and the promoters etc were likely to be attacked.

Inserting a PSC into the mix would perhaps distance this.

As to the predilection for agencies, end users etc to turn a blind eye to this sort of scheme which was presented as an engagement with a PSC (rather than an individual), I am not really qualified to comment on.

It's impossible for me to say whether such entities deliberately used this sort of subterfuge or were themselves victims of better minds.

[DealorNoDeal]

You have a variant of what we would call a double limited scheme.

I'm guessing scheme operators have done this to hide the offshore element/avoidance from agencies and clients? To the agency or client, it just looks like you're running your own Ltd company (MyCo) like other contractors do. Sneaky.

In recent years, agencies have wised up to the schemes. They have always been reluctant to deal with offshore intermediaries but more recently they've shied away from any UK intermediaries which look like fronts for schemes.

With agencies I've gone through, it's always been MyCo or umbrella. In some cases, if you want to use an umbrella, it has to be one of their approved ones.

[webberg]

You have a variant of what we would call a double limited scheme.

Most schemes operated by means of an individual receiving pay and loans from one source, usually two legal entities who are connected. The point however is that it was an individual contractor.

Now assume that the individual contractor is actually that contractor's company (PSC). Now you have to funnel funds through the PSC (company one) into the promoter company (#2). Hence double limited.

Where your PSC is "close" almost always the case, for many tax purposes the PSC and you are seen as one and the same. certainly it is possible for PSC liabilities to be transferred to the individual shareholder/director.

You will not be able to restore the situation to one that is fully tax compliant by amending just your return. You will need to change the PSC returns as well.

These schemes are not illegal and HMRC has no power to close legally operating companies. You cannot therefore claim that HMRC could, by acting in a way outside their remit, have prevented you from undertaking the tax avoidance. The clue is in the name - self assessment. The assumption is that you are sufficiently aware of your tax obligations to understand the consequences of what you do. If you are not, Google can find you advisers who are.

In this connection it is NEVER a good idea to use a firm recommended by the scheme.

You should drop this scheme - NOW.

You should find an unbiased and non conflicted accountant - NOW.

[DealorNoDeal]

From the other thread, I thought you received dividends not loans (or grants )? If they were genuine dividends, you shouldn't be subject to the LC.

You're declaring the dividends on your SATR and paying tax on them?

HMRC may investigate it as disguised remuneration, and there may ultimately be additional tax to pay on top of what you've already paid on the dividends.

I don't think there's any need to panic though. You should get out of the scheme immediately, and start putting money on one side just in case you do need to pay more.

[NotAllThere]

How are they able to legally operate on UK territory using a bank in the same territory? From your question, I deduct that I could easily do money laundering here because all I need to do is open a bank account and then I can do whatever I want. Nobody will ask me anything.

I don't know the law here is very weird...

You can open a limited liability partnership where one of the partners is e.g. BCSL and another is a UK company or individual. They're supposed to list the beneficial owners, but there's little enforcement. The Panama papers demonstrated that this one vehicle whereby British companies are used for money laundering. BCSL is not a UK company.

But it's irrelevant. They're almost certainly operating legally here. I.e. they're doing nothing that is contrary to criminal or civil law. Having a UK bank account doesn't mean they're giving good advice. The fact that their website clearly shows a Cyprus registered address should have been what triggered alarm bells.

[Tavy]

And?

How are they able to legally operate on UK territory using a bank in the same territory? From your question, I deduct that I could easily do money laundering here because all I need to do is open a bank account and then I can do whatever I want. Nobody will ask me anything.

I don't know the law here is very weird...

[cojak]

But the bank they use is Barclays and it's in the UK?

And?

[BrilloPad]

You should appoint a new knowledgeable accountant to deal with HMRC. On no account deal with them yourself.

This.

[Tavy]

I'm afraid it doesn't matter if the staff are British or from Timbuktu - they are a Cyprus based company.

It is very hard to prove companies such as this are doing anything illegal (if they are) - in the eyes of the law, its up to each individual to ensure their tax affairs are legal in the UK.

You say you can't afford a lawyer - without one, I doubt you'll get far and will just have to work something out with HMRC.

But the bank they use is Barclays and it's in the UK?

[NotAllThere]

Change your accountant. You need someone who understands that just saying something is a grant doesn't mean that it is a grant. Sorry, I have no recommendations.

[Paralytic]

BCSL advertised themselves just like any other services out there. That's how I found them talked to them and I wasn't in the UK at the time so I trusted them to be operating legally and not mislead clients. HMRC hasn't contacted me I did report this to them because I want to be legal and fully compliant. Also you say HMRC will do nothing to BCSL but how are they legally able to operate then? The staff is British... I don't get it. Technically I can setup then a similar company, trick my clients and involve them in these schemes and when things go down I walk away free of jail/penalty? How is this possible ? I wasn't born in the UK to know the laws that's why I paid for "professional services" to help me out.

I'm afraid it doesn't matter if the staff are British or from Timbuktu - they are a Cyprus based company.

It is very hard to prove companies such as this are doing anything illegal (if they are) - in the eyes of the law, its up to each individual to ensure their tax affairs are legal in the UK.

You say you can't afford a lawyer - without one, I doubt you'll get far and will just have to work something out with HMRC.

[Tavy]

Do you have a copy of any paperwork you signed (even if digitally)? What led you to selecting this company?

Reporting BCSL them to HMRC will do nothing - they don't care about anything except getting their money.

Have HMRC contacted you, asking you whether you involved in any avoidance scheme? ie. Are you part of the Loan Charge fiasco? If so, what steps have you taken to date? And, if so, have you read the very helpful threads on this board?

The good news might be that your 2018-19 SATR is not due till end January, so, assuming you have funds (and assuming you've not just ignored any Loan Charge or other HMRC letters), you should be able to sort things out easily for that tax year. But, if you've gone against all recommendations and spent it all, then that's another issue.

BCSL advertised themselves just like any other services out there. That's how I found them talked to them and I wasn't in the UK at the time so I trusted them to be operating legally and not mislead clients. HMRC hasn't contacted me I did report this to them because I want to be legal and fully compliant. Also you say HMRC will do nothing to BCSL but how are they legally able to operate then? The staff is British... I don't get it. Technically I can setup then a similar company, trick my clients and involve them in these schemes and when things go down I walk away free of jail/penalty? How is this possible ? I wasn't born in the UK to know the laws that's why I paid for "professional services" to help me out.

I've contacted the accountant to redo both SATR 2017-2018 and SATR 2018-2019 and declare these grants. I keep chasing her on these things. She tells me grants are not taxable but I doubt...

[Paralytic]

Do you have a copy of any paperwork you signed (even if digitally)? What led you to selecting this company?

Reporting BCSL them to HMRC will do nothing - they don't care about anything except getting their money.

Have HMRC contacted you, asking you whether you involved in any avoidance scheme? ie. Are you part of the Loan Charge fiasco? If so, what steps have you taken to date? And, if so, have you read the very helpful threads on this board?

The good news might be that your 2018-19 SATR is not due till end January, so, assuming you have funds (and assuming you've not just ignored any Loan Charge or other HMRC letters), you should be able to sort things out easily for that tax year. But, if you've gone against all recommendations and spent it all, then that's another issue.

[Tavy]

Someone else in the same boat. Possibly. https://www.contractoruk.com/forums/...ml#post2695485

You'll have to pay interest and the tax owed. I think it is unlikely there will be any penalties applied. You should appoint a new knowledgeable accountant to deal with HMRC. On no account deal with them yourself.

Regarding being tricked - what was it that convinced you to use them?

They said they would set up the company for me and they will manage everything for me (tax-wise). They never said they were using such scheme and I never knew about it since it was the first time I was contracting. I also have an accountancy company CompleteAccounting which I use and pay for (and they are based in the UK). They are the ones who should have told me if something was wrong but they didn't which makes me very angry... Can't sue them because I have no such money ...