Contractor question.

[Pit Pony]

I met a contractor today who says he contracts via an Isle of Mann company, gets "paid" minimum wage, and then everything else as a none refundable loan from a charitable trust. Apparently set up by accountants advising the HMRC.
Sounds like a lot of pain and misery, when HMRC want their kg of flesh at some point in the future.
What does PH think ?

[Piersman2]

As a contractor of 20+ years, who was told about these arrangements over 7 years ago, and then decided they were too dodgy and the taxman was bound to sort it our.... I'm disappointed that they are still in place, or that I didn't switch 7 years ago. I reckon I could have saved about £75K in tax in that time.

There must be some influential people who are friends of the establishment using these vehicles to avoid tax for them to still be in place.

[wombleh]

There are threads full of people on contractor websites who have vast bills from HMRC, the scheme vendor can shut up shop and bugger off with the profit because they've done nothing wrong but you're the one who has underpaid tax so ends up with a huge bill. I've also heard scenarios where the scheme vendor sells the entire account and the new owner starts sending requests for the loan to be repaid. Not my cup of tea !

[ralphrj]

Pit Pony said:

Sounds like a lot of pain and misery, when HMRC want their kg of flesh at some point in the future.

Which you can be certain that they will.

Has come up before here.

[spikeyhead]

anonymous said:

[redacted]

Whilst I'll never be glad about paying taxes, or even for anything other than beer gladly, I do think that the IoM loan scheme is more a case of illegal evasion than legal avoidance.

[Pit Pony]

spikeyhead said:

anonymous said:

[redacted]

Whilst I'll never be glad about paying taxes, or even for anything other than beer gladly, I do think that the IoM loan scheme is more a case of illegal evasion than legal avoidance.

I have to agree with you both.

Someone has to pay tax, otherwise the things that we want Local and Central Government to organise on our behalf, can't be paid for.

I'm thinking prisons, roads, nuclear powered submarines, tanks, police, health services, courts, social workers, and any number of things that cost money.

I'm glad that we have this system, but not necessarily happy abou tthe size of my own contribution to it, or how much is wasted.

I'm happy to minimise my tax bill by talking to my very cautious accountant, and not taking the piss, but I still wouldn't usually discuss my conservative tax arrangements in an open office and certainly wouldn't brag in earshot of permies about how little tax I might pay, but this guy was "Gobsteing" it "loud" and I just thought "I hope someone in this office has a brother that works in compliance at the HMRC, and takes umbridge"

[98elise]

I'm a contractor, and I would never touch these schemes.

I don't enjoy paying tax (its my end of year now, so I've just got my VAT and CT Bill! ) but unless I would feel confident arguing the legalities with HMRC I wouldn't get involved.

You are responsible for your tax, not your advisors. Its you they will come after.

Edited by 98elise on Saturday 7th February 20:30

[Don]

That does sound really, really dodgy.

I am all for paying the right amount of tax, and not a penny more, based on the law of the land. If I can legally avoid paying a tax then I was meant not to. That;s fine.

But the IoM things doesn't sound like that. I certainly wouldn't want to be the test case the HMRC decided to follow up.

If you follow the best tax advice from a proper firm based in the UK and with a reputation to lose you should be fine. I doubt any of them are advising to do this....

[robsdesk]

I'm also a contractor, I've seen these schemes touted around for a couple of years, no thank you very much for the reasons above, HMRC have form for tackling this sort of thing (they will want paying - not really any discussion about it being evasion) & you're not in control of the offshore element, neither of which appeal.

As with others I minimize my tax liability legally using the normal methods, but don't object to paying my fair share. (the wastage which goes on with it is another matter)

[Troubleatmill]

Avoid like the plaque.

HMRC are well on top of these schemes.



I posted on another thread that I have been approached by several of these companies

They are all variations of a theme - which they try to tweak one aspect of it to try to stay one step ahead of HMRC.

The company suggesting the dodgy scheme invoices your customers.
They take between 10 and 15% to administer the dodgy scheme.
They put the rest of the money in a trust fund ( onshore/ offshore etc )
You take the cash out as a loan ( which you never repay )

Once HMRC pick you up - you can imagine a lot of legal fees etc needed - and possibly some jail time at the end of it.

Edited by Troubleatmill on Sunday 8th February 19:06

[offshorematt2]

Wasn't this what Jimmy Carr was publically named and shamed for?

I've known a couple of guys on this scheme, or one very much like it. Neither could adequately explain what happened if you died - my query was whether the company could come after your estate for the outstanding loans. Wouldn't leave much for your family I would imagine...

[hidetheelephants]

anonymous said:

[redacted]

It's a shame the same does not apply to other transparently artificial tax avoidance schemes like that used by Google, Starbucks etc. brass plate companies with suspiciously high profit margins in Dublin(or wherever) lending huge amounts to UK companies so they never make any profit?

[fridaypassion]

anonymous said:

[redacted]

This.

By all means set up a Ltd company. Dont pay NI and only ever pay 20% tax thats a perk of being self employed. Beyond that it wouldnt interest me. And I've just paid a tax bill thats just about cleaned us out. You have to invest on the system thats paying you the money in the first place.

[essayer]

"Non refundable loan"