Disputes should be resolved much quicker thanks to the ADR team (Alternative Dispute Resolution), who as an independent HMRC entity will help resolve any disputes at the compliance check stage, before an assessment is made. It’s hoped that this should help many more disputes to be resolved before they get anywhere near the tribunal stage, saving both time and money and no doubt a huge amount of frustration for small businesses.

The way the world is right now anything that makes government more efficient and cuts costs has to be applauded, the fact that this should help build a better relationship between the tax man and the types of business the UK government is relying on to dig it out of a whole is just a massive added bonus. Will the ADR fulfill its potential? Only time will tell.

Dispute With HMRC? Things Should Get Better is a post from: UK Contractor Services Offshore Contractors

The Employee Benefit Trust has been a popular alternative to the Umbrella Company for many years. Hundreds if not thousands of self employed contractors and other high net worth professionals (such as those in the creative arts) have taken advantage of the higher rates of pay that can be achieved via the use of an Employee Benefit Trust payroll solution. Where as a typical Umbrella Company gives a gross to net contract ratio of around 65% many EBT solutions offer a return of up to 85%. The opportunity to keep an extra 20% of YOUR pay has been seen as a massive bonus to high earners.

Employee Benefit Trusts also became popular because of the added security they offered. By using an Employee Benefit Trust and becoming an employee scheme members were granted full statutory employment rights and benefits. The lack of a need to keep complicated expense details also endeared this solution to those who preferred to spend more of their time earning money instead of doing paperwork. This was a massive advantage over those that either used an Umbrella Company or who chose to setup their own Limited Company. At this point you’re probably thinking that an Employee Benefit Trusts sounds too good to be true, how come everybody isn’t using them?

The answer to the second question is simple. In order to gain any advantage from an EBT you really need to be earning above a certain level. Some scheme providers set this level at 40,000 a year, others at 50,000 a year. The too good to be true bit is a little harder to explain. In essence it comes down to risk. Employee Benefit Trusts were so tax efficient because of the nature of the loan payment that was given to the employee (i.e. the contractor). The contractor was paid a basic salary and the rest of the money was “loaned”. Because this was paid as a loan (and not as salary) there was no guarantee that the loan wouldn’t be called in. Of course all providers marketed that this wouldn’t happen and that they had various methods of making sure the loan wouldn’t be asked to be repaid. Fine unless the payroll provider encounters money problems which could result in the loan being sold as an asset. Could you imagine the company that now owns that debt not asking for the money back? As far as the legalities go there has been a split with regard to EBTs. The general consensus appears to be that those that are based onshore whilst those offshore were effective.

So even with all the advantages that an Employee Benefit Trust offers their popularity has declined massively.For many contractors the risks associated with an EBT are seen to out way the advanatges. A scenario that has not been helped by several scheme providers being investigated by HMRC. The question is what alternatives are there? The governments stance on contractors seems to go against encouraging innovation and excellence within business. How can you expect people to take the risks associated with working for yourself if the bottom line is no better than being employed to do the same job(minus paid holidays, pension)? It’s all too easy for Civil Servants in comfy 35 hours a week, 30 days a year holiday, final salary pensioned posts to interfere in areas of business where they have no understanding. It is every contractors duty to be paid in a compliant tax efficient manner and Employee Benefit Trusts have played there part in this process.

Unsure about using an Employee Benefit Trust, find out more about a more robust solution.

Employee Benefit Trust. An Alternative That Actually Works! is a post from: UK Contractor Services Offshore Contractors

Montpelier in a media release described the raid as “heavy handed and wholly inappropriate”. They have also expressed their disappointment with the Manx government in allowing UK HMRC officers to be sworn in as special constables for a day. It was perhaps this element that most had the finance sector baffled. The company will now have their legal fees covered by the police and will be looking to sue for unlawful entry, search and seizure of property.

We’ll have to wait and see how this one finally turn out but for now it is surely a big embarrassment for the Manx government but of no consolation to those that lost their jobs.

Montpelier Raid Ruled Against is a post from: UK Contractor Services Offshore Contractors

Following the Written Ministerial Statement on 6 December 2010 and as announced at the June Budget, the Government is introducing legislation to tackle arrangements involving trusts or other vehicles used to reward employees which seek to avoid or defer the payment of income tax or National Insurance Contributions (NICs). The arrangements covered include the provision of a tax-advantaged alternative to saving beyond the annual and lifetime allowances available in a registered pension scheme. In many cases, these third party arrangements allow an employee to enjoy the full benefit of a sum of money paid or assets provided while arguing that, because of the structure of the arrangements, there is no legal right to the money or assets. This argument is used to support a proposition that income tax and NICs is due (if at all) only on the use of the money or assets during the period of the employee’s employment and not on their full value.

HM Treasury
9 December 2010

Obviously anybody thinking about changing their circumstances should seek professional advice. We can only go on (and repeat) what we’ve been told but it’s very rare to get such an undivided opinion on a matter like this, an opinion that says that this is the end for Employee Benefit Trusts.

Currently using an EBT but looking for a tax efficient alternative? APS may have the solution for you! Find Out More

Contractors Tax Gets Simpler – EBTs Ruled Out is a post from: UK Contractor Services Offshore Contractors

Montpelier Tax Consultants Raided is a post from: UK Contractor Services Offshore Contractors

When one high profile government minister was asked on live TV if he goes out of his way to pay more tax than he possibly could, of course he replied “no”. That is everybody’s right, to work within the law to reduce your tax burden is being prudent, in fact some would call it common sense. We can’t see that changing in the next 12 months, can you?

This has all come about as the UK government makes a commitment to crack down on people using tax evasion and avoidance. Prosecuting tax evaders is absolutely right. On the other hand cracking down on people who are operating 100% within the law to reduce their UK tax burden seems a curious decision. Not really sure how that’s going to work. As part of this commitment there is mention again of targeting people using trusts as a way of avoiding tax. This of course has a massive impact on the UK contractor market, at the very least it causes a lot of unease and muddies the water on what schemes do and don’t “work”. We couldn’t answer that question, nor would we ever try to. You ask 100 people about any payroll scheme and I’m sure you’ll get 100 different answers. What we can say though is that we have spoken to several EBT scheme providers and it seems as though some are resigned to the fact that their current scheme is very unlikely to be viable after the 2011 budget.

The truth is that whatever the UK government decides to change in legislation will have to be spelled out. There is no room for assumption. Until that is done no payroll scheme provider can guarantee that their solution will still be in operation in 2011. It all depends what is written into law in the 2011 budget, until then it’s very much as you were.

Is Tax Avoidance The New Tax Evasion? is a post from: UK Contractor Services Offshore Contractors

Robert Huitson an IT contractor had been using the scheme offered by Montpelier for several years but received a tax bill after HMRC changed legislation in 2008. The landmark case was the very first time that a judge had backed the retrospective element of BN66 and has left a great many contractors disappointed, many now face large retrospective tax bills. It’s almost certain that there will be more challenges to BN66 and the UK governments ability to penalise people under new tax legislation retrospectively. It should be noted the fuss and objection that was made by members of parliament when it was announced that expenses rules would be applied retrospectively. It appears as though independent high earners are not afforded the luxury of simply refusing like MPs. The scheme provider in this instance, Montpelier, have vowed to appeal the decision – although it will certainly be some time before this case will be heard by a higher level.

With this ruling it is now more important than ever to make sure that your payroll provider is acting in your best interests. For our recommended payroll solution please follow the link. This solution doesn’t rely on a double taxation agreement so BN66 has no impact.

BN66 Contractor Loses Court Case is a post from: UK Contractor Services Offshore Contractors

The offshore islands that surround the UK have long looked to attract these sort of high earners and this could be the push that many need. Where is the incentive of working when half your money is taken at source? Top amongst the offshores targeting these individuals is the Isle of Man. Having a top rate of tax of only 18% may well be incentive enough for many entrepreneurs/contractors/business owners to consider the Isle of Man an attractive proposition. But when you also take into account a tax cap that limits an individual from paying more than £100,000 in personal income tax it suddenly becomes very attractive to the very rich. Besides the financial reasons the offshores offer much to the UK resident looking for an escape from Gordon Browns hatred of private business. Not least being a level of safety and quality of life that far surpasses anywhere in the mainland UK.

Whilst it’s still early days yet there are already some very big names in UK business contemplating the move, would you consider following?

“ONE of Britain’s best known entrepreneurs is reportedly considering relocating to the Isle of Man.
Peter Hargreaves is one of the UK’s super rich residents who has been angered by Alistair Darling’s decision to impose a 50 per cent rate of income tax on annual earnings of £150,000-plus.

There is a tax cap on total income tax payable per person of £100,000 or £200,000 for a married couple, alongside a drive to provide the sophisticated facilities entrepreneurs expect.”

Would You Consider Moving Offshore? is a post from: UK Contractor Services Offshore Contractors

First of all we should make it clear that this is not a very high trafic website, it is however very well targeted to the contractor market. Over the period of the poll a total of 17 contractors voiced their opinions. Of those seventeen, thirteen of them expressed a preference for the Conservatives to be in power after the next election. Three people would prefer Labour to stay in power and 1 person voted other (the 3rd option was for the Liberal Democrats but not a single person voted for them). I know we are not talking about huge figures but from that and conversations I’ve had I’d say it was indicitive of the feeling amongst the contractor community at the moment.

The big question is will UK contractors get their wish and will the Conservatives win the next General Election?

UK Contractors Want The Conservatives To Win? is a post from: UK Contractor Services Offshore Contractors

The dentists avoided tax by placing the funds in the Isle of Man via Belgium and the Netherlands. A Stockholm subsidiary of a Dutch based company set up a scheme for the dentists to facilitate this. Investigators have confirmed that the scheme worked by the dentists paying themselves a small wage while the rest of their salary was deposited into life assurance policies held in the Isle of Man. If they are found guilty the dentsists will not only have to pay back the taxes due but could also face hefty fines and even possible jail time.

This case helps to highlight that not all payment schemes are legitimate. As an individual it is vital that you get confirmation of a POSITIVE legal opinion from your payroll provider for any schemes that they may run. It is this positive legal opinion that will form form the basis of any defence should any wrong doing be suspected from the relevant tax authorities. In a funny sort of way it also helps the image of the under pressure Island at the heart of this. By being open to information sharing (and not acting as a tax haven) the fraud associated with the life policies in the Isle of Man was easily discovered and traced back to the true beneficiaries.

Not All Offshore Payment Schemes Are Legitimate is a post from: UK Contractor Services Offshore Contractors