Surely this can't be legal/moral?

**Steven@Parasol** · 15 December 2010, 10:03

Originally posted by ilovehr View Post

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** · 15 December 2010, 10:11

Cheers Steven

You're preaching to the converted here - I've worked with umbrellas before I went Ltd including your esteemed organisation

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** · 15 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** · 9 January 2011, 00:16

Sorry, whose legality/morality are you asking about?

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

Originally posted by ilovehr View Post

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** · 17 January 2011, 10:00

Originally posted by contractoralan View Post

Sorry, whose legality/morality are you asking about?

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

All 3 could be questioned I think

**pastalista** · 17 January 2011, 17:41

Surely not?

Originally posted by LisaContractorUmbrella View Post

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** · 18 January 2011, 09:13

Originally posted by pastalista View Post

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** · 2 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** · 3 June 2011, 08:25

Originally posted by djshuggg View Post

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?

Surely this can't be legal/moral?