Reply to: Umbrella companies using growth share schemes

[NotAllThere]

I think we'll call it a day there. I'll update the OP's first post to make it clear.

Tl;DR Growth share schemes a bad thing, don't get involved

[piebaps]

A new member who signed up yesterday.
A new "wheeze" for improving take-home to 71% in an example which was later edited out (thanks NAT).
No details of the offering company either.

Can anyone else smell bulltulip?

[DealorNoDeal]

By the way, and maybe it's just my perception, but you seem to be implying that people should have an open mind about this arrangement.

If that's the case, then I couldn't disagree more.

It doesn't matter what the underlying mechanism is, if the net result is not paying full PAYE tax/nics on earned income then it will end in tears.

[DealorNoDeal]

There are many who are new to IR35, and contracting so no, this isn’t naive, it’s about being informed.. as you lot on this board are so in the know I find it quite Surprising that none of you have come across this plan, scheme, option either! ������������*♀️

I am merely asking questions, not looking to be attacked.. as I’ve said previously..So calm down dear and wind that uppity neck in ������

It hasn't cropped up on this forum yet because it's probably still at stage 1 (the honeymoon period).
https://www.contractoruk.com/forums/...ml#post2775153

Promoters have come up with all manner of devices over the years. I'm not aware of a single one that has succeeded, which is why we urge people to avoid like the plague.

[Isuvu]

Not quite. But it is highly misleading.

Growth Share plans attempt to replicate employee share plans (restricted to listed companies) to unlisted/private held companies. On that basis, they seem not entirely unreasonable. Of course HMRC take a dim view, and there are warnings that such schemes - even where they do replicate employee share plans and really are linked to company growth - will soon be/are being under attack.

Most sensible reply yet, thank you

[Isuvu]

I am fascinated that there's still naive/greedy people out there who believe this stuff works. There must be customers, or there would be no market for this.

Let's be very clear, this is nothing new. Ever since the year dot when income and capital became taxed differently, there has been a desire to convert income into capital gains, and vice versa. It's nothing new and in many cases it's a recognised tax strategy. However, if this is a scheme being marketed to naive/greedy contractors, then just like all the other schemes before, it will result in pain for the client and gain for the scheme promoter who will disappar without trace. Be under no doubt, if anyone is thinking of using this or any scheme that turns wages into something else not fully subject to PAYE then it's going to end badly for you.

Most of us have heard it all before. HMRC have never been better equipped to deal with these outrageous schemes and the gullible/greedy users of them. It's going to end badly.

I hope NAT is soon able to name names for the benefit of everyone out there who doesn't believe in magic beans ot pixies dust solutions to taxation.

Meanwhile, if you really want to convert your income to a capital gain free of tax - I recommend 100% you start investing in an ISA. After you have paid your tax on your wages, naturally. All gains in an ISA are genuinely, tax free.

[DealorNoDeal]

Since the scheme is basically a sham scheme (solely designed to avoid or evade tax, with no other purpose) it will be an epic fail under GAAR anyway.

+1

Even if, for whatever reason, HMRC don't GAAR it, they'll get the Govt to retro clobber it.

[Fred Bloggs]

Not quite. But it is highly misleading.

Growth Share plans attempt to replicate employee share plans (restricted to listed companies) to unlisted/private held companies. On that basis, they seem not entirely unreasonable. Of course HMRC take a dim view, and there are warnings that such schemes - even where they do replicate employee share plans and really are linked to company growth - will soon be/are being under attack.

Since the scheme is basically a sham scheme (solely designed to avoid or evade tax, with no other purpose) it will be an epic fail under GAAR anyway.

[NotAllThere]

Once this part has been completed, the remaining amount is transferred into a Growth Share plan which is a method of employee benefit used by businesses throughout the UK.

This sentence is basically a lie.

Not quite. But it is highly misleading.

Growth Share plans attempt to replicate employee share plans (restricted to listed companies) to unlisted/private held companies. On that basis, they seem not entirely unreasonable. Of course HMRC take a dim view, and there are warnings that such schemes - even where they do replicate employee share plans and really are linked to company growth - will soon be/are being under attack.

[NotAllThere]

Hi Everyone

I've scoured through the boards and can't find anything specific to this topic, apologies in advance if I have missed anything.

I am looking for information on the use of growth share schemes used by umbrella companies to make use of capital gains allowance to reduce tax liability. I know if something seems to be to good to be true it usually is, but using growth shares is a legitimate practice and I'd like more informed info on how close to the wind this sails, if at all, so any information from those familiar would be welcomed.

Info I have received from the provider is as follows;

The growth share scheme involves paying taxes on 100% of your income and making a full declaration to HMRC through your self-assessment. You have the salary and your employer offers a Growth Share plan as an incentive the proceeds of which incur a CGT liability. There is no loan or advance in play.

The contract of employment is mutually agreed with the Umbrella company and the salary can be set at a level you feel comfortable with, but must be at least £425.00 per week to comply with the minimum wage requirement. PAYE and NI are calculated and deducted from these figures and paid across to HMRC keeping you up to date with all statutory deductions.

Once this part has been completed, the remaining amount is transferred into a Growth Share plan which is a method of employee benefit used by businesses throughout the UK.

Growth Shares allow gains to be taxed as Capital in the hands of participants and are used as a tax efficient alternative to options, this also enables the use of an individuals £12,300.00 annual exemption, and the lower 10% and upper 20% rates of CGT.

• Fully declarable on your tax return
• The tax treatment is formally accepted and acknowledge by HMRC
• Complies with IR35
• More take home pay from your contract

Therefore, an illustration for this would look similar to the below:
5 Days at £400.00 = £2000.00 Gross
Salary after deductions = £316.45 (1250L tax code)
Growth Share payment = £1,117.27
Total take home pay after all costs and taxes = £1,433.72

Growth Shares allow gains to be taxed as Capital in the hands of participants and are used as a tax efficient alternative to options, this also enables the use of an individuals £12,300.00 annual exemption, and the lower 10% and upper 20% rates of CGT.

Editing your post after people have responded to specifics in it is a bit off. For continuity and ease of understanding, I restore it here.

[DealorNoDeal]

Be under no doubt, if anyone is thinking of using this or any scheme that turns wages into something else not fully subject to PAYE then it's going to end badly for you.

That well and truly hits the nail on the head.

[Fred Bloggs]

Round and round and round we go.........

I am fascinated that there's still naive/greedy people out there who believe this stuff works. There must be customers, or there would be no market for this.

Let's be very clear, this is nothing new. Ever since the year dot when income and capital became taxed differently, there has been a desire to convert income into capital gains, and vice versa. It's nothing new and in many cases it's a recognised tax strategy. However, if this is a scheme being marketed to naive/greedy contractors, then just like all the other schemes before, it will result in pain for the client and gain for the scheme promoter who will disappar without trace. Be under no doubt, if anyone is thinking of using this or any scheme that turns wages into something else not fully subject to PAYE then it's going to end badly for you.

Most of us have heard it all before. HMRC have never been better equipped to deal with these outrageous schemes and the gullible/greedy users of them. It's going to end badly.

I hope NAT is soon able to name names for the benefit of everyone out there who doesn't believe in magic beans ot pixies dust solutions to taxation.

Meanwhile, if you really want to convert your income to a capital gain free of tax - I recommend 100% you start investing in an ISA. After you have paid your tax on your wages, naturally. All gains in an ISA are genuinely, tax free.

[Isuvu]

Earlier you said there were several companies offering it.

So, who is the company that is offering it? If you don't want to name them in public, you can PM me their details and I'll do some digging.

PM’d

[WTFH]

I am thinking that company offering this has a history of Phoenixing

Earlier you said there were several companies offering it.

So, who is the company that is offering it? If you don't want to name them in public, you can PM me their details and I'll do some digging.

[Isuvu]

We'd be interested just to get the name of one of them, maybe the one that gave you the information in your first post.

It's highly likely that they are an "umbrella" linked to a business that may have tried running schemes in the past, and it can serve as a useful warning to others.

I am thinking that company offering this has a history of Phoenixing.. I’m
Not going to be going this way myself,I operate via a ltd company at the mo and thankful I can for the time being.. but I’d never heard of this approach and currently looking at GAAR and spotlights there is no mention of it.. no doubt there will be in time.