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Umbrella Remuneration Trust

Scenario:-

Self-employed higher rate professional who cannot incorporate under the terms of his contract has heard of an umbrella remuneration trust "to save tax" (his words)

In 2011/12 40% tax band was £23500 chargeable.

Are these suitable for self-employed taxpayers? Particularly those who need this income level to maintain lifestyle?

Has anyone in Practice had any experience of success with any of the various organisations offering these schemes, and are they still considered safe as HMRC tries to attack more and more schemes?

In other words- if it sounds too good to be true........

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By cliveth
28th Nov 2012 10:19

Umbrella Remuneration Trusts

As far as I am aware, the principle is that this is a general purpose trust established for a variety of traders and professionals alike.The client might be asked to give some names of suppliers (utility companies etc.) and they would be included as potentially benefitting from the trust. By doing this it is meant to reinforce the commercial purpose of the contribution to the trust and hence its deductibility against profits.

In reality what usually happens is that the client takes out the contribution, net of fees, by way of loan within a short time of making the contribution.

It will not surpise you to learn that HMRC are not too keen on the arrangement and will almost certainly raise an enquiry. I believe these are relatively new and I know there are several firms offering "self employed benefit trusts" or similar. They are usually backed by Counsel's Opinion, so even if the arrangement was successfully challenged, HMRC should not be able to charge penalties.

As to much talked about "morality" of tax avoidance, in my opinion HMRC always want morality, unless the result doesn't suit them.

My advice would be to point out the potential downside to the client, as well as the upside. If they want to go ahead be prepared for a long and tortuous journey with HMRC!...and tell the client not to spend the tax saving until there is absolute certainty that there is no tax to pay.

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30th Nov 2012 13:18

Many thanks cliveth

 

Thanks for that. I agree with your thoughts.  And whilst HMRC are charged with tackling avoidance/evasion I feel the client risk element is quite high!

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By carlh
04th Dec 2013 16:36

URTs

Wally, I have been using a URT personally for the last 2 years and I also offer these, they have been around for 23 years now, and they are openly disclosed to HMRC and not DOTAS classed,

From my understanding out of 400 that I know of about 8 got HMRC enquiry letters nothing came of them, (I think about 1200 people are known to use these)

Also they are insured so should anything ever get challenged/legal (highly doubtful) worse case you would be in the same position as before entering into a URT. So the risk element is smaller than you think.  

HMRC have to be seen to be doing something and try to scare you but their bark is worse than their bite,  

My personal view is they are about as bomb proof as you can get, and I am perfectly happy about using them and would not use any other. I pay the exact amount of tax that I owe that is required by law and not a penny more.

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