EBT's etc

[contractor76]

Hi,

I've been following the recent news about the new EBT legislation with a lot of interest. I'm currently in a scheme and they've told me they have 'sorted out' a new way of doing things which will bring things back to 'normal'. Right now 95% of you are probably thinking - this guy is nuts, he should leave them immediately and your lucky HMRC even sent this warning shot as a chance to escape (which is probably what I will do), but I was just curious:
A. What have other EBT people done? Are they really leaving in droves and turning to ltd company or are most people just hanging out to see what happens in the next few weeks?
B. Completly hypothetically... say I continued with them and thier 'new loophole' and then in a year or 2's time HMRC lost thier patience and issued everyone with massive tax bills. The scheme would no doubt try and fight it (atleast I hope they would!) and there might be a round or 2 of court cases which take up another year or 2. During this time i've moved back to my home country - say AUS or NZ - with my loot and am trying my hardest to forget about the court case. It transpires that the outcome of the courtcase is negative and HMRC want thier money. Now that i'm living back in my home country - what can/would HMRC actually do about recovering the money? Lets assume the principal amount is less than 100k.

Yes I know i'm a fool for even 5% considering sticking with it but am interested in peoples thoughts.

[malvolio]

Hi,

I've been following the recent news about the new EBT legislation with a lot of interest. I'm currently in a scheme and they've told me they have 'sorted out' a new way of doing things which will bring things back to 'normal'. Right now 95% of you are probably thinking - this guy is nuts, he should leave them immediately and your lucky HMRC even sent this warning shot as a chance to escape (which is probably what I will do), but I was just curious:
A. What have other EBT people done? Are they really leaving in droves and turning to ltd company or are most people just hanging out to see what happens in the next few weeks?
B. Completly hypothetically... say I continued with them and thier 'new loophole' and then in a year or 2's time HMRC lost thier patience and issued everyone with massive tax bills. The scheme would no doubt try and fight it (atleast I hope they would!) and there might be a round or 2 of court cases which take up another year or 2. During this time i've moved back to my home country - say AUS or NZ - with my loot and am trying my hardest to forget about the court case. It transpires that the outcome of the courtcase is negative and HMRC want thier money. Now that i'm living back in my home country - what can/would HMRC actually do about recovering the money? Lets assume the principal amount is less than 100k.

Yes I know i'm a fool for even 5% considering sticking with it but am interested in peoples thoughts.

EBTs are still fully legal, the only problem is that any money you get from one since Dec 9th will be liable to full PAYE and NICs. So as far as the provider is concerned, there's no problem, they still get their fees and you get 40% less income... And do you seriously think that the legislation won't cover any revised schemes - it even covers income in the form of goods or having the use of almost anything, fiscal or physical.

SO you;re call but I've already called one ongoing supporter of EBTs a greedy hypocrite and make no apology for it. Don't allow me add "foolish" to that description.

As for running home to Oz, there are reciprocal taxation agreements between them and us, so Hector won't do anything but the local Hector (Bruce?) would.

[RichardCranium]

During this time I've moved back to my home country - say AUS or NZ - with my loot and am trying my hardest to forget about the court case. It transpires that the outcome of the court case is negative and HMRC want their money. Now that I'm living back in my home country - what can/would HMRC actually do about recovering the money?

When I started contracting in the mid 90s, that seemed to be the standard business model for Strines working in the UK: contract for 2 years and then go home having paid no tax at all.

I do not think for one moment that such behaviour is legal, ethical or moral

Edit: , and as a UK citizen I should be appalled. However, since Tony Blair and the current government's advisers think it is OK to take taxpayer's money, hide it overseas and then not pay tax on it, I don't really see how we can object if you do the same. HMRC don't go after them, nor the big companies that don't pay all the tax they should, so it must be all right, mustn't it?

Just don't expect to ever be able to come back to the UK (or to any part of Europia or Airstrip One or Greater Germany or whatever we become)!

[RichardCranium]

As for running home to Oz, there are reciprocal taxation agreements between them and us, so Hector won't do anything but the local Hector (Bruce?) would.

Yep. WMS.

You missed that boat in 2004. Link.

[LisaContractorUmbrella]

I assume that the company you use has explained their 'new scheme' in detail so that you can research the business model and reassure yourself that there will be no chance of any future unwelcome tax bills? As Mal says HMR&C are quite capable of following you to Aus and extracting any unpaid UK tax.

[contractor76]

Well there is no way they will ever give full details about the scheme - anyone that uses such a scheme does so knowing they are taking risks and there are 'unknowns'. And indeed there is no way anybody can say for sure (even if your using Ltd company or umbrella!) that HMRC will never 'go back in time' to get you regardless of how well you think you understand your chosen arrangement.

Prior to the 9th of Dec I was prepared to take the risk - however it seems to me that its now too dodgy so i've decided to go ltd company. The only small problem I have is how to extract the last loan payment from the scheme - it was due to me literally 2 day after the 9th of Dec so it falls under these new guidelines. I'll probably just draw it down and take the PAYE hit in due course.

thanks for your comments.

[Jog On]

I'll probably just draw it down and take the PAYE hit in due course.

We're all in this together

[LisaContractorUmbrella]

Well there is no way they will ever give full details about the scheme - anyone that uses such a scheme does so knowing they are taking risks and there are 'unknowns'. And indeed there is no way anybody can say for sure (even if your using Ltd company or umbrella!) that HMRC will never 'go back in time' to get you regardless of how well you think you understand your chosen arrangement.

Prior to the 9th of Dec I was prepared to take the risk - however it seems to me that its now too dodgy so i've decided to go ltd company. The only small problem I have is how to extract the last loan payment from the scheme - it was due to me literally 2 day after the 9th of Dec so it falls under these new guidelines. I'll probably just draw it down and take the PAYE hit in due course.

thanks for your comments.

Unfortunately you have no choice in paying PAYE on the final payment (if you wish to stay within the law). I accept that some people are bigger risk takers than others but I cannot understand letting someone else have control of my money and the taxes I pay with just 'don't worry its safe' as reassurance.

[slogger]

A major issue I have with companies that run these EBTs are that the schemes appear to me to be contrived - I'm an IT bod so obviously knowledge of law/tax is limited - however I thought the EBT loan was supposedly discretionary - all the EBT schemes told me to a tenth of a percent what my take home would be each month given I earned a particular amount - also they said loan would never under any circumstances have to be paid back - again I'm sure this isn't inline with ebt legislation.. worryingly the scheme providers wouldn't put these statements on paper or email - I believe as this would invalidate the scheme completely from a legal perspective - however if what they say differs from what they put on paper it made me worry that the scheme was artificial in an almost illegal sense,

again apologies if I have the legal/tax side of things incorrect but the gist of my message is that the scheme providers say one thing but then put something else on paper..so staying Ltd for me!

[LisaContractorUmbrella]

A major issue I have with companies that run these EBTs are that the schemes appear to me to be contrived - I'm an IT bod so obviously knowledge of law/tax is limited - however I thought the EBT loan was supposedly discretionary - all the EBT schemes told me to a tenth of a percent what my take home would be each month given I earned a particular amount - also they said loan would never under any circumstances have to be paid back - again I'm sure this isn't inline with ebt legislation.. worryingly the scheme providers wouldn't put these statements on paper or email - I believe as this would invalidate the scheme completely from a legal perspective - however if what they say differs from what they put on paper it made me worry that the scheme was artificial in an almost illegal sense,

again apologies if I have the legal/tax side of things incorrect but the gist of my message is that the scheme providers say one thing but then put something else on paper..so staying Ltd for me!

You are right Slogger, they are completely contrived and that's why HMR&C don't like them and also why the providers won't disclose full details of any scheme in writing.