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TaxRobin
TaxRobin, Tax Consultant
Category: Tax
Satisfied Customers: 15720
Experience:  International tax
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I have recently set up my own limited company offering management

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I have recently set up my own limited company offering management consultancy, and have been approached by an organisation that clams I can keep 85% of my earnings if I go through them. In short, I transfer 93.75% of my gross contract value to them, they pay me a retainer of £11k p.a. to keep me in the tax and NI system, and I then receive an amount as a discretionary loan from a trust. All of my personal tax and NI liabilities are covered by the amount they withhold. Is this legal?
Submitted: 2 years ago.
Category: Tax
Expert:  TaxRobin replied 2 years ago.
Hello and thank you for allowing me to assist you.
Employee Benefit Trusts (EBTs) are legitimate structures, discretionary trusts which a company can set up for the benefit of its employees and directors, either within the UK or offshore. However in HMRC’s view, these have sometimes been misused by granting loans (in effect non-repayable) to create tax-free payments to employees.
HMRC has a settlement offer out to "employers" that used this scheme in the past.
Employers who used an Employee Benefit Trust (EBT) before 6 April 2011 must notify HM Revenue and Customs (HMRC) by 31 March 2015 if they wish to take advantage of the beneficial terms of the EBT Settlement Opportunity (EBTSO) to settle the resulting PAYE and National Insurance contributions liabilities.
You would not want to get into this type of scheme. These are seen as tax avoidance.
Customer: replied 2 years ago.

I think that effectively I am the employee - I would be receiving tax free amounts rather than paying them. Is there still a liability on me, and are HMRC chasing individuals who received tax free payments?

Expert:  TaxRobin replied 2 years ago.
Yes they are. The use of a trust in that manner is not a viable way to reduce tax. It is a scheme seen as avoidance.
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