EBT Pay Structures
Contractors fall into the Trap of EBT/PBT Schemes
Many contractors seem to have fallen into the trap of the EBT/PBT structures, taken in with the 'it's 100% legal' and the 'Counsel Approved' sales pitches, along with the 85%+ take home!
In light of recent news items, some contractors have opted to run their own Limited Company looking to escape these scheme’s, however, it now seems that a certain amount of naivety caused by glorified claims is coming back to bite them as HMR&C expand their investigations.
A recent letter received from HMRC by a contractor starts with "Thank you for your Tax Return for the year ended 5 April 2011." The letter goes on to say, "I would now like to check your return. My check will be made under Section 9A Taxes Management Act 1970, and under HMRC Code of Practice 8 - cases where serious fraud is not suspected."
They go on to explain few general things about how they will conduct this check fairly, and go on to say;
"I note that during the year you took part in arrangements whereby you had entered into a contract of employment with an offshore employer CLIENTNAME and in due course received sums of money in the form of loans or expenses."
Would you please let me know:
• What sums you received in the form of loans or expenses during this year ended 5 April 2011, either directly or indirectly with your engagement with CLIENTNAME.
• What amounts of loans you have since repaid, and on what dates.
As you can imagine, this is enough to worry most people especially as it becomes apparent that HMR&C is now targeting everyone who used the company.
So if you have already provided them with the amounts on my Tax Return, you may ask why are they asking for the same figure again?
Well the appropriate amount of tax will have been paid according to the company who set up the scheme not according to HMR&C and it won't be the tax QC who 'approved' the scheme that will be required to pay your tax bill when it arrives.
So if you do get a letter from HMR&C, we would suggest that you don't panic but get proper representation and certainly don't think that any amount of Government hypocrisy will prevent HMR&C from pursuing people that they have determined have avoided paying their 'fair share'.
“Lisa Keeble is the Managing Director for ContractorUmbrella, one of the UK’s Most Respected and Compliant Umbrella Companies. You can learn more about Contractor Umbrella by connecting with us on Google+.