Disguised Remuneration schemes still promoted

Didn't find your answer?

Hello everyone, 

I just wanted to share with you my surprise at witnessing a scheme being promoted at a property event last night which to me appears to obviously be a disguised remuneration scheme. I was attending the event for the first time and in a personal capacity. As an accountant in industry I do not work in tax or tax planning, so my knowledge of this area is restricted to that would be covered in CPD seminars (the tip of the iceberg!) with no practial experience, but seeing this scheme being eagerly promoted set alarm bells ringing. 

The scheme (which to be clear I in no way condone) was described as follows:

  • Property investors operate through a UK Ltd.
  • The UK Ltd has a provision of service agreement with an EU Entity. 
  • The EU Entity invoices he UK Ltd for the investors time (to extract all profit from the UK Ltd).
  • Investor invoices EU entity for their work as a consultant for which they are paid a small amount of £18,000 a year.
  • The balance of any profit transferred to the EU Entity is loaned to the investor on a 5-year term which is subsequently renewed every 5 years. Alternatively, a 'private annuity' could be used. 
  • The EU Entity annually tranfers the outstanding loan balance for each new loan to a Trust set up so that the investor can have control of the Trust. 

Surely this is disguised remuneration? It is nearly identical to other cases I have read with the only difference being that the money moves through a none UK entity first. 

The promoter also claimed 'this is what the rich and super rich do', 'all these celebrities that have been in the news for these schemes, it only effects their image, none of them have had to pay tax or penalties as its all legal' and that the scheme would come with a 'Personal opinion of a top tax barrister that, if HMRC challenged the scheme, would show that the tax payer had done all they can to ensure the scheme was legal and would only suffer any tax due rather than any penalties'. The company promoting this scheme was set up in 2017 and the individual delivering the presentation previously worked for a contractor's umbrella company that has ceased to trade, with a phoenix company of similar name emerging shortly after the dissolution. A little digging shows that this happens very frequently for the directors who are operating this company. I can find no evidence of any professional qualification for this individual or the company he represents. 

Clearly there is no real deterrent to the promotors of these schemes who will have long since disappeared with their fees by the time any eager yet foolish taxpayer realises they have made a terrible error of judgement.

Replies (6)

Please login or register to join the discussion.

By ireallyshouldknowthisbut
12th Sep 2018 14:00

I'm not at all surprised, property shows are notorious for dodgy schemes and promotions. Lets face it nearly all the advertisers at such events are complete sharks given being a landlord is such a straight forward thing to do, you don't need much help to buy a house and let it out.

I can pretty much bet any client who has bought a property through a property club never does it again.

That said there are many fools who happily shell out tens of thousands of pounds on dubious "training" and schemes to get the sort of basic info you could buy in a £10 book so I guess its "fill your boots time" for the shysters.

Thanks (2)
Hitch photo
By Kevin Kavanagh
12th Sep 2018 14:04

With all the publicity this sort of scheme has received recently, anyone who signs up deserves all they get (or don't get!).

Thanks (3)
avatar
By Justin Bryant
12th Sep 2018 14:56

I am not saying this scheme works (it probably doesn't for one reason or another), but you have not said why it doesn't work and you have assumed it definitely does not work. Non-UK companies are not subject to a s455 charge as far as I am aware and there may be no TP issues here (there has been discussion here previously about using a Cyprus company for a similar scheme) and TAA may not apply due to EU law freedoms (assuming EU company has substance etc.). The final step of transferring the loan book to a trust looks spurious and I cannot immediately see the benefit if any (unless that reduces potential TAA charge due to that being an expense) and to avoid P7A that need to be a non-employee benefit trust, so is presumably a PBT (or whatever they're called) and he cannot be an employee/director of that EU company due to the SC Rangers decision, so he is a contractor of it one assumes (as you say).

So there you go. An easy peasy scheme that I could have come up with myself!

Thanks (1)
avatar
By Maslins
12th Sep 2018 16:22

The people selling these schemes are con artists, nothing more. They don't care if it works or not.

The QC's opinion is purely for marketing purposes, ask enough people if they'll endorse it for a few quid and someone will.

I have little sympathy for the suckers that get pulled into these things...but the promoters should be fined into oblivion IMHO.

Thanks (2)
Replying to Maslins:
By ireallyshouldknowthisbut
13th Sep 2018 09:35

As a general rule of thumb anything with a QC's opinion doesn't work.

if it worked you wouldn't need a QC's to argue the incredibly slim legs it purports to stand on, you could just read the legislation and its there in black and white.

Thanks (1)
By gbuckell
13th Sep 2018 12:25

I would add that I have seen many Counsel's opinions where either the correct question has not been asked or Counsel has caveated his opinion along the lines "if you can justify doing X for commercial reasons then the anti-avoidance rule will not apply". 9 times (or 10 times?) out of 10 there is no commercial justification.

I would treat this scheme with the proverbial barge pole.

Thanks (1)