Any tax specialists here. IR35 and minimising tax paid

[MaidinDevon]

Hi all

Brief summary.
I am a locum social worker, working for a LA via an Agency. Previously I held a LTD company, but Ir35 legislation meant that I moved to an Umbrella company, on PAYE.

However, my Agency have suggested exploring other alternatives that would increase my take home pay.

I have an email detailing their way of working but I am concerned that HMRC will see it as tax avoidance, and come after me.

Briefly, their system is that of a cross between Umbrella and Ltd.

Umbrella deals with PAYE on a minimum wage rate.
A LTd company is set up, to manage the surplus.
Thus is where i have some doubts.
Instead of dividends, they propose to use Capital Gains Tax, to pay tax due, and further, that the Company is run for 24 months minimum, to access CGT at 10%, rather than the usual 20%

The way they set this up, is that they have loads of contractors, growing thir business, and then selling a nominal amount of shares in their company back to the Consultancy firm, therefore attracting Capital Gains.

Has anyone heard of this scheme? I can provide the information that has been shared with me, if needed.
The outcome is approx 25% uplift on my net income.

It all seems to good to be true, but apparently they are compliant.

Karen

 

[Jimbohorlicks]

If you use an accountant I would speak to them for advice.

 

[Gromett]

Sounds risky as all hell. If you do go ahead with it, calculate how much tax you would have paid otherwise and I would save the difference + a percentage to cover the fine.
In 10 years if they find it illegal and the court cases back HMRC up you would have to pay it all back.

I have deleted the rest of this post.

 

[Ingwe]

What Gromett said.

Personally, I wouldn’t do it. It smacks of an evasion scheme. Acting for liquidators for many years, I have pursued directors who’s companies employed benefit trusts to avoid paying tax. Such schemes which used schemes often involving “loans” to employees in effect never to be repaid thereby avoiding tax, were said to be HMRC approved which turned out not to be the case.

It is, of course, a matter for you but I would take advice from a good source such as a chartered accountant, registered tax advisor or solicitor dealing with tax matters. I’m really not preaching just urging to be cautious.

Good luck.

 

[Otter Spotter]

Hi all

Brief summary.
I am a locum social worker, working for a LA via an Agency. Previously I held a LTD company, but Ir35 legislation meant that I moved to an Umbrella company, on PAYE.

However, my Agency have suggested exploring other alternatives that would increase my take home pay.

I have an email detailing their way of working but I am concerned that HMRC will see it as tax avoidance, and come after me.

Briefly, their system is that of a cross between Umbrella and Ltd.

Umbrella deals with PAYE on a minimum wage rate.
A LTd company is set up, to manage the surplus.
Thus is where i have some doubts.
Instead of dividends, they propose to use Capital Gains Tax, to pay tax due, and further, that the Company is run for 24 months minimum, to access CGT at 10%, rather than the usual 20%

The way they set this up, is that they have loads of contractors, growing thir business, and then selling a nominal amount of shares in their company back to the Consultancy firm, therefore attracting Capital Gains.

Has anyone heard of this scheme? I can provide the information that has been shared with me, if needed.
The outcome is approx 25% uplift on my net income.

It all seems to good to be true, but apparently they are compliant.

Karen

Sounds like they want to generated more fees.
Speak to HMRC helpline and ask them if they have any objections, they may put you in touch with the correct department or get an answer from them, otherwise speak to an accountant.

just remember these agencies were pushing IR35 method for years before HMRC got hold of it and retrospectively charged people back tax and fines So you d9 need to get an independent view.

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[Norfolk Nige]

If it sounds too good to be true it probably is. I would talk to my accountant and follow their advice

 

[BikerGraham]

I would avoid it like the plague. It's bound to come back and bite you.

The whole point of the legisaltion was to tackle disguised employment and differentiate it from actual consultants / contractors who generaly work for a number of clients at a time.

Can you not get the LA to employ you on a fixed term contract. Would be much easier and really as it should be.

 

[The Wino]

Hi all

Brief summary.
I am a locum social worker, working for a LA via an Agency. Previously I held a LTD company, but Ir35 legislation meant that I moved to an Umbrella company, on PAYE.

However, my Agency have suggested exploring other alternatives that would increase my take home pay.

I have an email detailing their way of working but I am concerned that HMRC will see it as tax avoidance, and come after me.

Briefly, their system is that of a cross between Umbrella and Ltd.

Umbrella deals with PAYE on a minimum wage rate.
A LTd company is set up, to manage the surplus.
Thus is where i have some doubts.
Instead of dividends, they propose to use Capital Gains Tax, to pay tax due, and further, that the Company is run for 24 months minimum, to access CGT at 10%, rather than the usual 20%

The way they set this up, is that they have loads of contractors, growing thir business, and then selling a nominal amount of shares in their company back to the Consultancy firm, therefore attracting Capital Gains.

Has anyone heard of this scheme? I can provide the information that has been shared with me, if needed.
The outcome is approx 25% uplift on my net income.

It all seems to good to be true, but apparently they are compliant.

Karen

Presumably they're suggesting using entrepreneurs relief to get the CGT down to 10%. The thing you've missed out in your tax saving estimate is their fee. I would be very sceptical. They will presumably be off with the fee etc well before the tax people start chasing you!

 

[Christy]

Ask Jimmy Carr - he should be able to help!

 

[Podney]

Ask your accountant.

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[MaidinDevon]

Hi everyone and thanks for your advice and input.

I don't have am accountant at the moment, as I have done my own self assessments.

However, I was thinking of employing one this year.

Any recommendations in Worcestershire or Herefordshire?

Also, my intention is to save as much as possible this tax year towards retirement, but need guidance about whether to save into pension, or elsewhere.

As I am "employed " by the umbrella company I pay my own employee and employer pension contributions.

I have some other income hence the self assessment.

To be honest, i don't know what to do about it all.

I don't think I will take the scheme any further. I would worry about tax evasion. Also, I suspect their motives. They have their own agenda. And it seems unlikely that I will be able to get tax relief on pension contributions.

Any suggestions or recommendations for accountants or wealth managers gratefully received, or at least a steer on hiw to find someone reputable and knowledgeable

Thanks
Karen

 

[Otter Spotter]

Presumably they're suggesting using entrepreneurs relief to get the CGT down to 10%. The thing you've missed out in your tax saving estimate is their fee. I would be very sceptical. They will presumably be off with the fee etc well before the tax people start chasing you!

Very well put.

 

[MaidinDevon]

I have been contacted by another company. They sound even more dodgy. Minimum amount Paye, and then an Employers advance, which isn't declared to HMRC. I turned it down.

 

[Ingwe]

Minimise the tax you pay lawfully, then pay the tax you owe and sleep soundly.

 

[Gaston aires]

Ive used the same accountant for years. He is very good and reasonably priced.
His advice to me has always been treat the taxman in a reasonable fashion and they will leave you alone. Take the p—s and they will investigate your affairs for ever and a day. I’ve heeded this advice ever since..
Phil

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[Ingwe]

Ive used the same accountant for years. He is very good and reasonably priced.
His advice to me has always been treat the taxman in a reasonable fashion and they will leave you alone. Take the p—s and they will investigate your affairs for ever and a day. I’ve heeded this advice ever since..
Phil

I’ve dealt with the Revenue, as a solicitor, over many years. I could tell my clients, from the words used in the Revenue’s letters, how serious the matter was. Like lawyers in cross-examination who never ask questions to which they don’t already know the answer, the use of idiom by HMRC in their correspondence tipped you off what they already knew. If the letter began “Dear Mr X, it would seem from your return dated x January 2021, that we require further information on……….” That told you that they were already aware of a defalcation and it was your reply that would most likely be the bit that did for you. I developed a three light warning system green amber and red to be applied to their correspondence.

Since those days (1990s to 2010) spending cuts have vastly reduced the number of tax inspectors so now there is a much greater chance of tax fiddles going undiscovered. For me, I believe in taxation as it funds public goods and I pay what I owe and don’t worry. But no one should pay more than they need to so good advice is paramount and avoid schemes, especially from enterprises that contact you and offer you savings.

 

[The Wino]

Hi everyone and thanks for your advice and input.

I don't have am accountant at the moment, as I have done my own self assessments.

However, I was thinking of employing one this year.

Any recommendations in Worcestershire or Herefordshire?

Also, my intention is to save as much as possible this tax year towards retirement, but need guidance about whether to save into pension, or elsewhere.

As I am "employed " by the umbrella company I pay my own employee and employer pension contributions.

I have some other income hence the self assessment.

To be honest, i don't know what to do about it all.

I don't think I will take the scheme any further. I would worry about tax evasion. Also, I suspect their motives. They have their own agenda. And it seems unlikely that I will be able to get tax relief on pension contributions.

Any suggestions or recommendations for accountants or wealth managers gratefully received, or at least a steer on hiw to find someone reputable and knowledgeable

Thanks
Karen

If you maximise the pension contributions you could well avoid paying most of the tax anyway

 

[Steve and Denise]

Just use an accountant and be on the safe side.

 

[dunnah01]

Doesn't matter how you avoid employer and employee NI and your tax, if you're not confident that you could show that you're not a worker then you'll always be risking being found out by the tax man