During the past few months much has been reported of HMRC opening a large number of enquiries into the tax affairs of Contractors who do or have been operating through EBT schemes. This could be potentially damaging to Contractors who have used these schemes in the past. The tax at stake plus any penalties and interest now owing is likely to be significant to say the least. Whilst it has been suggested that many intend to defend themselves against these enquiries, this would appear at first glance as more likely to be very stressful and unpleasant.
A key case in EBT schemes is Rangers Football Club administration last year. For the contractor community, there is a very direct link. For several years we have seen some accountancy providers pushing offshore EBT schemes, ‘guaranteeing’ that they will enable contractors to take home upwards of 80% of their income – substantially more that would be taken home even using the most tax efficient, legal, structures in the UK. HMRC have challenged Rangers’ use of offshore EBT’s to pay players and staff, believing this to constitute tax avoidance. HMRC have gone back on over a decade and levied a claim of some £49m. By the time penalties are added Rangers were looking at a claim of around £75m, and that is before legal costs!
There have for many years been allegations of scaremongering pointed at anyone who has dared to challenge EBT schemes as wrong. With most of the traditional Accountancy solutions for Contractors suggesting clients are always better off in the long run operating through a Limited Company, which is an accepted and tax efficient way of operating.
Read more about FW Accounting’s Contractor Accountancy Services
What are EBTs?
EBTs are generally operated by a trust, giving the client a non repayable loan or a loan on favourable terms, which scheme providers have marketed as a legitimate tax planning arrangement but HMRC will argue that the majority of these types of structures are tax evasion.
EBTs have been around now for about twenty years and are predominantly used by higher earning individuals. They tend to operate from a low or no tax jurisdiction where there is no tax charge on the user until the money benefit has been distributed from the trust. There have been many iterations of EBTs often involving loans, non repayable loans, gifts and shares.
Contact us for more information and watch for our blog next week on the risks and future of EBT schemes.
Self Assessment – Q & A
Self-assessments. We have all heard of them, you maybe even know what they are. However, here at QAccounting some of our most frequently asked questions are about self-assessments. So below we have outline some of the most common questions we get asked, and the answers we get so tired of giving… just kidding.
Setting Up a Limited Company – 5 Key Things to Consider
If you are looking at going self-employed, then setting up as a Limited Company (LTD) may be the best option for you.
The Benefits of Having an Online Accountant
Here at QAccounting we are part of one of the UK’s largest contractor service providers. We started operating over a decade ago (around the same time DFS started their first sale) and have been dedicated to serving self-employed professionals ever since. One of the perks of choosing and accountant like QAccounting is that we offer all of our accounting services online.