EBTs and BN66

[Jonny4Eyes]

Hello,

Can anyone tell me if there is a connection between Employee Benefit Trust Schemes (EBT) and the BN66 / HMRC tax case? I'm on the verge of signing up with an EBT but want to ensure there won't be any retrospective action against me should I wish to proceed.

I've read threads about a company called Montpelier but this doesn't strike me as being an EBT.

Any input would be cool

Cheers
Jon

[Malvolio]

Why in God's name are you even thinking about signing up with an EBT?

They are people out there looking at six figure tax bills for using a scheme that was legal when they started it but no longer is. HMG are now actively looking at all such schemes and are closing them down properly. Offshore EBT's are probably the hardest to stop, but stopped they will be. They are also the most risky place to put your money outside shares in RBS.

You're being a greedy prat. I suggest you have a rethink...

[Jonny4Eyes]

Thanks for the info. I'm not being greedy, I just don't want to pay 40% tax through an umbrella company!!!!! I've had a mixed bag of reactions to the whole EBT thing. Some (like you) tell me to stay well clear, others suggest "it will be ok". Honestly, i'm not sure either way. What do you do tax wise?

Cheers
Jon

[Malvolio]

Originally Posted by Jonny4Eyes

Thanks for the info. I'm not being greedy, I just don't want to pay 40% tax through an umbrella company!!!!! I've had a mixed bag of reactions to the whole EBT thing. Some (like you) tell me to stay well clear, others suggest "it will be ok". Honestly, i'm not sure either way. What do you do tax wise?

Cheers
Jon

I (and a couple of million other people) run my own limited company. That is the only sensible approach if you are running your own business: EBTs are dangerous and stupid, umbrellas are safe but expensive.

[LisaContractorUmbrella]

Originally Posted by Jonny4Eyes

Thanks for the info. I'm not being greedy, I just don't want to pay 40% tax through an umbrella company!!!!! I've had a mixed bag of reactions to the whole EBT thing. Some (like you) tell me to stay well clear, others suggest "it will be ok". Honestly, i'm not sure either way. What do you do tax wise?

Cheers
Jon

How has the scheme been described to you Jon and what take home pay rate have you been promised?

[Jonny4Eyes]

Originally Posted by LisaContractorUmbrella

How has the scheme been described to you Jon and what take home pay rate have you been promised?

c 85%-90% Take Home. I think the official line was something like "safe as houses"

Cheers
Jon

[uptonaccountants.com]

Have to agree with Mal, these things have been mentioned in the last few budgets as being targetted by HMRC for investigation. We have a few clients who went through these for a number of years before joining us and setting up limited companies. They're now facing massive tax bills.

IMHO, these schemes should be avoided.

[LisaContractorUmbrella]

Originally Posted by Jonny4Eyes

c 85%-90% Take Home. I think the official line was something like "safe as houses"

Cheers
Jon

There are several possible scenarios here - the most likely is that you will pay income tax and NI on minimum wage and the balance of your contract income will be paid to you as a 'loan'. The problem is that as soon as the loan is written off it becomes taxable in full. If the loan is not written off, then you obviously still owe the money to scheme provider – this money can be called in at any time and at any point in the future.

A number of contractors signed up to this type of scheme in good faith after promises that, when they left the loan would be written off. The problem is, now these people are receiving letters from the scheme provider reclaiming the debt.

There is also the risk of being hit twice for the debt. The ‘loan’ is a benefit in kind (BIK) and if it’s not declared on your tax return as income, you also potentially face a huge tax bill and fine, on top of repaying back the original loan.

Most of the scheme providers also charge an extremely high fee (I have seen anywhere between 5% and 10% of contract value).

As with any form of tax avoidance (and there are a lot) it all depends how much of a risk taker you are as HMR&C could catch up with you anytime in the next 7 years - IMHO a long time without a proper night's sleep

[Malvolio]

Originally Posted by Jonny4Eyes

c 85%-90% Take Home. I think the official line was something like "safe as houses"

Cheers
Jon

Snag is, your house is not one of the safe ones...

[The SMG]

So to conclude....

Setup your own LTD or use an umbrella company. You'll take home somewhere in the region of 60-70% (max) through and umbrella and roughly 75-80% through your own limited company (assuming you're outside IR35).

You could always work PAYE at the agency, but nobody wants that (particularly not your agency )

G