Offshore Umbrella Co

[geoff from contracta IOM]

I've said it before and I'll keep saying it. HMRC are cracking down hard on all kinds of offshore schemes and have made it very clear they're doing so. Existing users probably are OK, since they will be difficult to challenge but joining one now is probably suicidal.

A CBT is an EBT but for the self-employed. I totally fail to see how it makes any kind of a difference, but nobody has paid me several thousand pounds to render an opinion that it's OK.

Loan "income" isn't taxable, but there is nothing to stop HMRC making an assessment based on the benefit to you of having the money avaialble to spend, assuming you're daft enough to declare it on your annual SA. Oh, hang on, not declaring income....

Gets better and better, doesn't it.

Where to start Mal - "Self employed or employed I fail to see the difference " seriously you cant see the difference ?

Loan " income " loans are not income if they were what effective tax rate are you paying for your mortgage funds ? It was available for you to buy a house wasn't it ? Must be income then ! Have you declared your credit cards , mortgage , personal loan on your SA ? If not why not ? The loans are repayable and incur interest therefore there is no benefit any more so than any other form of loan.

[malvolio]

You left out "and pay through the nose for the privilege"

Not really - £30-ish a week is rather less than the £300 represented by 15% of the average £2000 a week contract. And obviously the tax due is the same since we all work to the same rules...

So what is the monetary value of not knowing that the taxes you aren't paying and haven't paid for the last six years are about to be called in?

[geoff from contracta IOM]

Not really - £30-ish a week is rather less than the £300 represented by 15% of the average £2000 a week contract. And obviously the tax due is the same since we all work to the same rules...

So what is the monetary value of not knowing that the taxes you aren't paying and haven't paid for the last six years are about to be called in?

Is that like the tax that wasn't paid by people using EBT's ?

[LisaContractorUmbrella]

Where to start Mal - "Self employed or employed I fail to see the difference " seriously you cant see the difference ?

Loan " income " loans are not income if they were what effective tax rate are you paying for your mortgage funds ? It was available for you to buy a house wasn't it ? Must be income then ! Have you declared your credit cards , mortgage , personal loan on your SA ? If not why not ? The loans are repayable and incur interest therefore there is no benefit any more so than any other form of loan.

Difference is that a mortgage lender won't want you to work on an IT contract for them for 6 months - they give you the loan with your house as security - not as payment for services performed

[malvolio]

Is that like the tax that wasn't paid by people using EBT's ?

Let#s be very clear here. Your "loans" are probably entirely legal, and they may not be seen as disposable income and so immune from being taxed. I disagree on that latter point, as do HMRC.

I can't do anything more than warn newbies that they are perhaps not a good idea to join from new and HMRC are still trying to work out how to kill them off, taking a whole heap of other genuinely useful things with them no doubt.

So all you like, being a creaky old git I get an entirely legal and perfectly unchallengeable 82% out of my gross these days. More to the point I'm not selling solutions and you are.

I leave it to others to decide which is the unbiased advice.

[geoff from contracta IOM]

Difference is that a mortgage lender won't want you to work on an IT contract for them for 6 months - they give you the loan with your house as security - not as payment for services performed

The loans have nothing to do with employment, by the way the contractors we work with are not employed by anyone. I am amazed how pedantic people can be when it comes to expenses ect. and look at the minutae of the legal position but use broad sweeping statements regarding tax legislation one area where the devil is most definitely in the detail.
Why is it OK for contractors to arrange their affairs to avoid being caught by IR 35 thus avoiding large amounts of tax but doing the same thing with a scheme like mine is getting into league with Satan ? What exactly is the difference ? In both instances it is arranging ones affairs to reduce the tax payable by working within the applicable legislation and trust me it really doesn't matter if that tax rate is 30 % or 3% what should be paid is not open to interpretation as to what is " FAIR " it is either legal or it isn't.

[geoff from contracta IOM]

Let#s be very clear here. Your "loans" are probably entirely legal, and they may not be seen as disposable income and so immune from being taxed. I disagree on that latter point, as do HMRC.

I can't do anything more than warn newbies that they are perhaps not a good idea to join from new and HMRC are still trying to work out how to kill them off, taking a whole heap of other genuinely useful things with them no doubt.

So all you like, being a creaky old git I get an entirely legal and perfectly unchallengeable 82% out of my gross these days. More to the point I'm not selling solutions and you are.

I leave it to others to decide which is the unbiased advice.

Mal as you know I actively encourage informed debate but sweeping statements from either side of the argument are unhelpful to newbies , my advice always has and always will be to do independent research and ask an independent professional . The reason for the is there were a great many people who said EBT's were dodgy and would bite people on the ass the realitity is a very large number of contractors saved up to 20K a year in tax and have that safely in their pockets but the same arguments are still being used despite many doomsayers being proved hopelessly wrong.

[NervousRexx]

Alternatively you can pay a company like mine less than £30 a week, not have to worry about tax returns and be able to sleep at night.

HTH

Thanks for the offer but I’ve been using an umbrella company for 10+ years which I’m more than happy with and making the step to a ltd. co. makes me a bit nervous and a move to an offshore umbrella even more nervous.

[LisaContractorUmbrella]

The loans have nothing to do with employment, by the way the contractors we work with are not employed by anyone. I am amazed how pedantic people can be when it comes to expenses ect. and look at the minutae of the legal position but use broad sweeping statements regarding tax legislation one area where the devil is most definitely in the detail.
Why is it OK for contractors to arrange their affairs to avoid being caught by IR 35 thus avoiding large amounts of tax but doing the same thing with a scheme like mine is getting into league with Satan ? What exactly is the difference ? In both instances it is arranging ones affairs to reduce the tax payable by working within the applicable legislation and trust me it really doesn't matter if that tax rate is 30 % or 3% what should be paid is not open to interpretation as to what is " FAIR " it is either legal or it isn't.

It isn't OK for contractors to arrange their affairs to try to be outside of IR35 when legal precedent would indicate that they are most definitely inside - if they can prove their status by their working practises it is acceptable to HMR&C and therefore not an attempt to try and avoid anything. I don't know how your scheme works - it may be that you use a loophole that HMR&C haven't closed (and that would be their problem and not yours) but I can't see how a commercial loan can be made without security and, if there is no security and no interest payable and the loan has been made by a company that has received a payment from a company that the loan recipient has performed services for, it may be called a loan but it is not behaving like a loan and that IMHO waves a red flag for HMR&C

With regard to your connections to Beelzebub - I think you believe in what you are doing but the mindset of people these days (as the Government puts us further and further into debt) is why should some people get away with only paying 3% tax when the vast majority are paying 20-40% and are employed and therefore have no opportunity to do otherwise. I agree that it is all about choice and risk perception of the individual but I also think that people are new to the contracting world should be able to go into this sort of scheme with their eyes wide open and that includes understanding that 'QC opinion' means squat to HMR&C

[geoff from contracta IOM]

It isn't OK for contractors to arrange their affairs to try to be outside of IR35 when legal precedent would indicate that they are most definitely inside - if they can prove their status by their working practises it is acceptable to HMR&C and therefore not an attempt to try and avoid anything. I don't know how your scheme works - it may be that you use a loophole that HMR&C haven't closed (and that would be their problem and not yours) but I can't see how a commercial loan can be made without security and, if there is no security and no interest payable and the loan has been made by a company that has received a payment from a company that the loan recipient has performed services for, it may be called a loan but it is not behaving like a loan and that IMHO waves a red flag for HMR&C

With regard to your connections to Beelzebub - I think you believe in what you are doing but the mindset of people these days (as the Government puts us further and further into debt) is why should some people get away with only paying 3% tax when the vast majority are paying 20-40% and are employed and therefore have no opportunity to do otherwise. I agree that it is all about choice and risk perception of the individual but I also think that people are new to the contracting world should be able to go into this sort of scheme with their eyes wide open and that includes understanding that 'QC opinion' means squat to HMR&C

Lisa I apreciate you are not an accountant but waving flags really doesn't have anything to do with tax legislation, HMRC would like you to believe in fairness , their intention , overly agressive and the tooth fairy.
Yes it's best not to attract attention if for no other reason than it takes time and effort to deal with enquiries and the reason why people should " get away " with it is because it's legal and thats why people "get away " with many things in life because we have for a few years now relied on legislation to define what is right and what is wrong, the reason being everybody has a different interpretation and this is not " fair " as it provides no clarity for people. I agree that a QC's opinion means nothing to HMRC but in this instance just about every tax QC in the UK has the same opinion so HMRC have to find one that agrees with them in order to justify pursuing a case. ( or just change the law to close the loophole as this is cheaper and quicker )