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View Full Version : Surely this can't be legal/moral?



ilovehr
15th December 2010, 09:46
One of my pub friends (who's a bit wet behind the ears) has recently picked up a contract via a small agency. He really wants to use an EBT or some other HUGE RETURN service but has been told by the agency that he can only use a UK Umbrella or go via his own Ltd Co. He wants to maximise his returns but can't be bothered to go Ltd. The agent has recommended that he use *********** as they can get him about 85% via a UK brolly.

He's asked me to look into it and after a bit of digging and asking around some friendly agents, it appears that this "brolly" are actually acting as an invoicing vehicle for an IOM EBT firm! From what I can tell, they get you to join and liaise with the agency under their brolly name but you actually become part of the offshore scheme. The brolly invoice the agency, the agency pays the brolly, the brolly then pays the offshore firm (presumably taking a margin) and the agency is non the wiser (or at least the more senior team at the agency are non the wiser - I'm sure the agent is on a decent incentive).

It wouldn't surprise me if this happens more and more now that the pressure is on the offshore providers and they are forced to become more creative with their schemes......

Steven@Parasol
15th December 2010, 10:03
One of my pub friends (who's a bit wet behind the ears) has recently picked up a contract via a small agency. He really wants to use an EBT or some other HUGE RETURN service but has been told by the agency that he can only use a UK Umbrella or go via his own Ltd Co. He wants to maximise his returns but can't be bothered to go Ltd. The agent has recommended that he use *********** as they can get him about 85% via a UK brolly.

He's asked me to look into it and after a bit of digging and asking around some friendly agents, it appears that this "brolly" are actually acting as an invoicing vehicle for an IOM EBT firm! From what I can tell, they get you to join and liaise with the agency under their brolly name but you actually become part of the offshore scheme. The brolly invoice the agency, the agency pays the brolly, the brolly then pays the offshore firm (presumably taking a margin) and the agency is non the wiser (or at least the more senior team at the agency are non the wiser - I'm sure the agent is on a decent incentive).

It wouldn't surprise me if this happens more and more now that the pressure is on the offshore providers and they are forced to become more creative with their schemes......

Last week the Govt. announced new legislation that effectively shut down the practice of using EBTs to defer or avoid tax (The Finance Bill 2011).

Standard Life has been quoted as saying that contractors who use EBTs may now have problems.

Can I just stress that EBTs are not umbrella companies and in my opinion your friend, depending on how adverse they are to risk (and there are fair few threads on here which clearly demonstrate the risk you can be exposed to working via an EBT) should approach offers like this with a great deal of care.

When offers made by some umbrella companies appear too good to be true they usually are!

The agent can not force your friend to use a particular umbrella company.

ilovehr
15th December 2010, 10:11
You're preaching to the converted here - I've worked with umbrellas before I went Ltd including your esteemed organisation:tongue but I've never touched and EBT or other spurious scheme.

I'm pretty sure that the offshore guys are paddling like crazy under the water to come up with new schemes with QC's opinion etc, etc but I still think there will be more and more situations like the one I described in my post so they can try and get business from agencies who will not allow contractors to work offshore.

The problem is that there are plenty of new contractors out there who will be blinded by the 85% return headlines!

I'm thinking of naming and shaming but I don't fancy getting sued in the face.

LisaContractorUmbrella
15th December 2010, 10:12
I would say this is neither legal nor moral but, as you say, likely to become more common. I would have thought though that any reputable agency would know better than to recommend a brolly offering an 85% across the board return

contractoralan
9th January 2011, 00:16
Sorry, whose legality/morality are you asking about?

Agent's/Umbrella's/your friend's ? :tongue


One of my pub friends (who's a bit wet behind the ears) has recently picked up a contract via a small agency. He really wants to use an EBT or some other HUGE RETURN service but has been told by the agency that he can only use a UK Umbrella or go via his own Ltd Co. He wants to maximise his returns but can't be bothered to go Ltd. The agent has recommended that he use *********** as they can get him about 85% via a UK brolly.

He's asked me to look into it and after a bit of digging and asking around some friendly agents, it appears that this "brolly" are actually acting as an invoicing vehicle for an IOM EBT firm! From what I can tell, they get you to join and liaise with the agency under their brolly name but you actually become part of the offshore scheme. The brolly invoice the agency, the agency pays the brolly, the brolly then pays the offshore firm (presumably taking a margin) and the agency is non the wiser (or at least the more senior team at the agency are non the wiser - I'm sure the agent is on a decent incentive).

It wouldn't surprise me if this happens more and more now that the pressure is on the offshore providers and they are forced to become more creative with their schemes......

LisaContractorUmbrella
17th January 2011, 10:00
Sorry, whose legality/morality are you asking about?

Agent's/Umbrella's/your friend's ? :tongue

All 3 could be questioned I think

pastalista
17th January 2011, 17:41
All 3 could be questioned I think

Surely taxation is not a moral issue? If as an individual taxpayer one considers oneself to have a "moral duty" to pay the maximum amount of tax possible then fair enough. To try to impose those morals on everyone else, or to judge other people whose appetite for risk is a little greater than one's own, is surely not reasonable?

Unless a contractor has opted to go PAYE (thus ensuring the maximum amount of tax has been paid) then I think it might be a case of glass houses and stones. If any tax is being avoided by using expenses or dividends then surely the moral case collapses?

Don't do Hector's job for him - question the legality or downright common sense of something but not the morality of it. Once you start down that road, Hector has forever won.

Pastalista

Pastalista

LisaContractorUmbrella
18th January 2011, 09:13
Surely taxation is not a moral issue? If as an individual taxpayer one considers oneself to have a "moral duty" to pay the maximum amount of tax possible then fair enough. To try to impose those morals on everyone else, or to judge other people whose appetite for risk is a little greater than one's own, is surely not reasonable?

Unless a contractor has opted to go PAYE (thus ensuring the maximum amount of tax has been paid) then I think it might be a case of glass houses and stones. If any tax is being avoided by using expenses or dividends then surely the moral case collapses?

Don't do Hector's job for him - question the legality or downright common sense of something but not the morality of it. Once you start down that road, Hector has forever won.

Pastalista

Pastalista

I think the question of morality comes from the fact that the schemes and those who recommend them know the risks involved but don't necessarily communicate that to their potential customers. With regard to the individual - no-one likes paying huge amounts of tax but there is a difference between legally minimising your liability using the services of a good IFA and using a scheme which has been specifically designed to create a totally artifical situation to exploit an area of tax planning which, in reality, is completely inappropriate and unlawful. Unfortunately in Contractor World loads of schemes have been set up and then heavily advertised as offering a huge net return to the individual - this has brought the attention of HMR&C to the industry as a whole which surely cannot be good for anyone?

djshuggg
2nd June 2011, 20:50
Funny last but one contract i had i was told i HAD to use Parasol.So your comment about an agent not forcing you to use a particular agency is total botty water.

LisaContractorUmbrella
3rd June 2011, 08:25
Funny last but one contract i had i was told i HAD to use Parasol.So your comment about an agent not forcing you to use a particular agency is total botty water.

Were you told what the consequences would be if you didn't go along with it?

wim121
14th June 2011, 20:00
Funny last but one contract i had i was told i HAD to use Parasol.So your comment about an agent not forcing you to use a particular agency is total botty water.


Were you told what the consequences would be if you didn't go along with it?

I know exactly what djshuggg means. Some give you a list of "preferred umbrellas", some dictate you have to use their agreed one.

The consequences if you don't go along with it Lisa is they won't give you the assignment and might not bother offering you any in the future. Some may be able to afford to pass up work, but a lot of us just have to get in bed with the devil and hope everything works out.

Some agencies may say when pressed, they will pay you through your own limited company if you have one.

Tanya@SC Lee Accountant Ltd
19th June 2011, 19:50
Your agent is business people so they just want to get more commission from their preferred umbrella to get more money out of you.



I know exactly what djshuggg means. Some give you a list of "preferred umbrellas", some dictate you have to use their agreed one.

The consequences if you don't go along with it Lisa is they won't give you the assignment and might not bother offering you any in the future. Some may be able to afford to pass up work, but a lot of us just have to get in bed with the devil and hope everything works out.

Some agencies may say when pressed, they will pay you through your own limited company if you have one.

Steven@Parasol
20th June 2011, 12:28
Your agent is business people so they just want to get more commission from their preferred umbrella to get more money out of you.

Rubbish, we for one do not pay referrals to agents in any shape or form.

We are on the majority of PSLs though because of our compliance track record and membership of the FCSA. Its about protection and risk mitigation, not profit.

LisaContractorUmbrella
20th June 2011, 13:24
Rubbish, we for one do not pay referrals to agents in any shap or form.

We are on the majority of PSLs though because of our compliance track record and membership of the FCSA. Its about protection and risk mitigation, not profit.

Ditto (although not FCSA) bit. Most umbrella companies are now vary wary of becoming involved with paying referal fees because of the anti-bribery legislation that was published recently - any payment that is deemed to influence the decision of the agency could be considered to be a bribe.

Dave Copeland
4th August 2011, 11:46
Firstly I am new around this topic and contracting generally and hope I am in copmpliance with forum rules in posting this. My problem is that I have been offered a contract which must be run through a Ltd. Co. or umbrella. Speaking with an accountent yesterday I was offered a tax planning strategt which without naming the supplier I can describe as below

A UK company invoicves client.
I am an employee of the UK company.
I get paid minumum wage through PAYE
Balance of income is held in trust (IOM Trustees)
Trust rules are that trust can only operate for my benefit.
Each month I borrow my income from the trust.
The loan is never repaid
They forecast net to me of 81% of contact value.

Seems great but I am nervous re the "loan" and "trust" elements.

Does anyone have experience of such schemes or comment generally

Thanks

LisaContractorUmbrella
4th August 2011, 12:46
Firstly I am new around this topic and contracting generally and hope I am in copmpliance with forum rules in posting this. My problem is that I have been offered a contract which must be run through a Ltd. Co. or umbrella. Speaking with an accountent yesterday I was offered a tax planning strategt which without naming the supplier I can describe as below

A UK company invoicves client.
I am an employee of the UK company.
I get paid minumum wage through PAYE
Balance of income is held in trust (IOM Trustees)
Trust rules are that trust can only operate for my benefit.
Each month I borrow my income from the trust.
The loan is never repaid
They forecast net to me of 81% of contact value.

Seems great but I am nervous re the "loan" and "trust" elements.

Does anyone have experience of such schemes or comment generally

Thanks

You should be nervous - please refer to the BN66 thread in Accounting and Legal

DaveB
4th August 2011, 12:55
Firstly I am new around this topic and contracting generally and hope I am in copmpliance with forum rules in posting this. My problem is that I have been offered a contract which must be run through a Ltd. Co. or umbrella. Speaking with an accountent yesterday I was offered a tax planning strategt which without naming the supplier I can describe as below

A UK company invoicves client.
I am an employee of the UK company.
I get paid minumum wage through PAYE
Balance of income is held in trust (IOM Trustees)
Trust rules are that trust can only operate for my benefit.
Each month I borrow my income from the trust.
The loan is never repaid
They forecast net to me of 81% of contact value.

Seems great but I am nervous re the "loan" and "trust" elements.

Does anyone have experience of such schemes or comment generally

Thanks


a contract which must be run through a Ltd. Co. or umbrella

This is not a problem, it is normal practice.

Talk to another accountant, one of the ones who post on here would be a good start (Nixon Williams, SJD, InTouch are the ones I can think of right now).

Anything involving offshore trusts, currency exhange schemes or which promises to return 80% or more of your day rate should, IMO, be avoided at all costs.

Probably 90% of the people on this forum operate under the Ltd Co. + Accountant route, the rest generally use a brolly or do their own accounts.

Dave Copeland
4th August 2011, 15:55
Thanks for the comments so far. I would be interested also to get feedback from anyone who has used such a scheme. Can anyone advise if the forum rules prevent me from giving details of the company. Dave

Wanderer
4th August 2011, 19:49
Thanks for the comments so far. I would be interested also to get feedback from anyone who has used such a scheme.

I'm sure they have lots of satisfied customers. What the customers don't know is that 6 years down the line they could get investigated, the off shore company disappears into thin air (along with their "guarantees") and the contractors may get lumped with a huge tax bill. You may get away with it but these schemes are widely considered to be risky.

Dave Copeland
6th August 2011, 13:07
Thanks to those who responded. I am now talking with an accountant to go the Ltd. Co. route.

I like to sleep at night. Dave

LisaContractorUmbrella
8th August 2011, 07:05
Thanks to those who responded. I am now talking with an accountant to go the Ltd. Co. route.

I like to sleep at night. Dave

Wise man :yay:

pacharan
14th February 2012, 13:54
I know exactly what djshuggg means. Some give you a list of "preferred umbrellas", some dictate you have to use their agreed one.

The consequences if you don't go along with it Lisa is they won't give you the assignment and might not bother offering you any in the future. Some may be able to afford to pass up work, but a lot of us just have to get in bed with the devil and hope everything works out.

Some agencies may say when pressed, they will pay you through your own limited company if you have one.

I actually got told by a client co that they would only renew if I went with a brolly.

Was a stipulation made by their end customer who was a local gov organization.

northernladuk
14th February 2012, 13:59
This is the third post you have quoted Wim121 today and you dredged this up from 8th August? Something going on here? You two coming out because it is Feb 14th?

LisaContractorUmbrella
14th February 2012, 15:23
I actually got told by a client co that they would only renew if I went with a brolly.

Was a stipulation made by their end customer who was a local gov organization.

I would guess that this was because they perceive less risk from legislation if an individual is employed by an umbrella company rather than self-employed although status and therefore liability are determined by tribunals and therefore this perspective can't be relied upon. And why have you dredged up WIM121??????