Contractor Umbrella companies

trendie · Jun 29, 2009

I am posting this, as there seem to be quite a few IT bods at T2W.

Suppose, for the sake of argument, you are an IT contractor.
You are offered a 6-month project abroad, in Luxembourg.
At a bank.

Now, whats the best, tax efficient method of working this?

There are the usual umbrella companies that offer generous expenses. (to mitigate IR-35)

But, then there are the "Isle of Man" or "Jersey" trust fund set-ups. In these, you are paid a minimum wage, but the bulk of your funds are paid into a trust fund, from which you take a loan from. Which is ultimately not called in. (not repaid)

Under these conditions, you are effectively paying only about 10% tax.

Anyone have any experiences of this "trust fund" set-up?

thanks

pedro01 · Jun 29, 2009

trendie said:
I am posting this, as there seem to be quite a few IT bods at T2W.

Suppose, for the sake of argument, you are an IT contractor.
You are offered a 6-month project abroad, in Luxembourg.
At a bank.

Now, whats the best, tax efficient method of working this?

There are the usual umbrella companies that offer generous expenses. (to mitigate IR-35)

But, then there are the "Isle of Man" or "Jersey" trust fund set-ups. In these, you are paid a minimum wage, but the bulk of your funds are paid into a trust fund, from which you take a loan from. Which is ultimately not called in. (not repaid)

Under these conditions, you are effectively paying only about 10% tax.

Anyone have any experiences of this "trust fund" set-up?

thanks

I've been tax free for 14 years. I use Albany - Global Workforce Management Solutions from Albany. I've worked in many countries since leaving the UK & I am absolutely 100% legally tax free.

Talk to them about it - I'd be looking at more that 6 months overseas though. Albany will sort you out. If you can - speak to Martin Glick.

Technically Fundamental · Jun 30, 2009

trendie said:
I am posting this, as there seem to be quite a few IT bods at T2W.

Suppose, for the sake of argument, you are an IT contractor.
You are offered a 6-month project abroad, in Luxembourg.
At a bank.

Now, whats the best, tax efficient method of working this?

There are the usual umbrella companies that offer generous expenses. (to mitigate IR-35)

But, then there are the "Isle of Man" or "Jersey" trust fund set-ups. In these, you are paid a minimum wage, but the bulk of your funds are paid into a trust fund, from which you take a loan from. Which is ultimately not called in. (not repaid)

Under these conditions, you are effectively paying only about 10% tax.

Anyone have any experiences of this "trust fund" set-up?

thanks

All this will cost a bomb. Esp after they've sucked you in. I'd go for a nice cheap Ltd company if I were in your shoes. You'll only pay corp tax and you could reclaim expenses. Would only cost about £100 to set up too.

trendie · Jun 30, 2009

Technically Fundamental said:
All this will cost a bomb. Esp after they've sucked you in. I'd go for a nice cheap Ltd company if I were in your shoes. You'll only pay corp tax and you could reclaim expenses. Would only cost about £100 to set up too.

I already have a Ltd company. was hoping not to have to deal with hassle of double-tax in UK and Lux (I think there is a 183 day rule).

Is there any reason/experience you believe it will "cost a bomb"?

The drawdown of the "loan" element is, supposedly, about a week lead-time. If there were any issues, I would become aware of them asap.

Have done some preliminary checks on providers via CompaniesHouse. Dont know what to look for, to identify concerns.
They say they are FSA registered, Maybe I should have a word with them?

PS: thanks pedro01 for your reply.

Technically Fundamental · Jun 30, 2009

B]

trendie said:
i already have a ltd company. Was hoping not to have to deal with hassle of double-tax in uk and lux (i think there is a 183 day rule).

i'd have to check but i think you'd be alright. I'm sure the 183 day rule would only apply to someone who was employed rather than a uk company supplying another eu member state with services which would make you exempt from vat and also subjected to uk tax laws. You'd have to check on the lux employment laws that relate to the time a company/individual can be contracted before having to be classed as an employee.

is there any reason/experience you believe it will "cost a bomb"?

i've never directly been involved in setting all this stuff up myself but i know a few millionaire types that are involved with all this jazz. My boss knows about all this and from what he's told me its not cheap. Also the companies that do it charge yearly management fees (among other hidden charges) and these things arent very easy to wind up.

the drawdown of the "loan" element is, supposedly, about a week lead-time. If there were any issues, i would become aware of them asap.

what kind of issues?

have done some preliminary checks on providers via companieshouse. Dont know what to look for, to identify concerns.

i think you're better off staying away from her majesty with queries about tax avoidance schemes lol.

they say they are fsa registered, maybe i should have a word with them?

maybe give the fsa a call or email them and exquire as to whether any complaints have been made against the company.

Ps: Thanks pedro01 for your reply.

[/b]

pedro01 · Jun 30, 2009

With Albany, I pay about $300 a month - no LTD company, no loans, just an invoice to the people I work for & a transfer into a UK or offshore bank account 100% free of tax.

When I was in Japan & payment terms were lengthy, then even fronted me the odd $15K here & there without interest. I had been with them a while at that point though.

Technically Fundamental · Jun 30, 2009

Fair enough. As I said I dont have mush experience with offshore accounts and what I do have mainly related to individuals who wish to acquire offshore status which costs a hell of a lot more than £300 per month lol. Still, something about that whole set-up stinks to me. I'm not saying it's illegal but you really are walking a knife edge here.

trendie · Jun 30, 2009

Just to clarify:
I am not setting up anything.
I become an "employee" of a company, based off-shore. My client invoices the company, which then pays me a small, notional salary. The remainder of the invoiced monies are available to me as a loan, via the trust.
Once the contract is complete, I cease to be an employee. My P60 shows the salary, but the loan from the trust is not shown, as it is not defined a benefit-in-kind.
The fees are relatively light, since the trust is already in play.

My head is hurting. I may just go through my own company, and get the recruiter to give me Lux employment law data.

PS: yes, there are annual management fees. but only payable for any year I go through them.

Technically Fundamental · Jun 30, 2009

IMHO this seems very risky and as I said I'm not one of the people that specialise in this area of accounting but I really cannot see any of this standing up in an investigation. You should also realise that the company will be free from liability from prosecution if this were deemed a method of tax evasion. You can offset all your travel and living costs againt profits for the duration of the trip so why the hell you would bother doing all this dodgy sh1t when the difference between the 10% and 21% CT may be negligable after expenses and I think the fact that you will be 100% unarguably legit should be considered.

pedro01 · Jun 30, 2009

Technically Fundamental said:
Fair enough. As I said I dont have mush experience with offshore accounts and what I do have mainly related to individuals who wish to acquire offshore status which costs a hell of a lot more than £300 per month lol. Still, something about that whole set-up stinks to me. I'm not saying it's illegal but you really are walking a knife edge here.

First of all it's $300 a month, not sterling.

Second, I've been offshore for 14 years - working for names you will undoubtedly of heard of. Heard of Ericsson for instance ?

Do you honestly think I'd be on here discussing this if I wasn't 100% above board ?

There is nothing 'stinky' about it. The UK does not tax you on your worldwide income, you arrange a split salary agreement with the company you work with. You have a team of international tax consultants behind you to keep you on the straight & narrow & voila... all legal. I even pay schedule d national insurance contributions of something silly like 7 quid a week.

There is nothing to 'arrange' to get offshore status - you just need to leave. OK - there's a form to fill in, which most don't but you get offshore status by not being resident. You say you don't have 'mush' experience then go on to say it must cost more than 300 quid. FFS.

There is no knife edge in what I suggested - it is merely the life of a very ordinary expat. Lots of people do this but to the uninitiated (i.e. YOU), it sounds extraordinary.

Now - on the other hand - this loan/trust business does sound dodgy.

trendie · Jun 30, 2009

Technically Fundamental said:
IMHO this seems very risky and as I said I'm not one of the people that specialise in this area of accounting but I really cannot see any of this standing up in an investigation. You should also realise that the company will be free from liability from prosecution if this were deemed a method of tax evasion. You can offset all your travel and living costs againt profits for the duration of the trip so why the hell you would bother doing all this dodgy sh1t when the difference between the 10% and 21% CT may be negligable after expenses and I think the fact that you will be 100% unarguably legit should be considered.

fair point TF.

Technically Fundamental · Jun 30, 2009

hahahahahaha. Okay. Do a bit of research on trying to live in the UK and being subject to Jersey, IOM or Guernsey tax and then come back.

You should be paying two tax rates. Nothing extraordinary about it mate lol.

A Dashing Blade · Jun 30, 2009

Gotta feeling in my water that TF's solution is valid if (and only if) you're gonna be a long-term (ie years++) ex-pat. For bog-standard UK-based IT Contractors, variations on that scheme/idea were nixed by HMG a couple of years ago.

Technically Fundamental · Jun 30, 2009

Nope. I've dealt with people who do work abroad before. As I said the only things to consider will be the laws regarding the amount of time that can pass before a contractor should be considered as an employee for tax purposes.

arabianights · Jun 30, 2009

speak to a fooking accountant (not TF obviously, a real one) with experience in this thing trendie - it will pay for itself

Technically Fundamental · Jun 30, 2009

If the tell you to do what I said make sure you come and post it trendie.

pedro01 · Jun 30, 2009

Technically Fundamental said:
hahahahahaha. Okay. Do a bit of research on trying to live in the UK and being subject to Jersey, IOM or Guernsey tax and then come back.

You should be paying two tax rates. Nothing extraordinary about it mate lol.

Who the **** would want to live in the UK ?

You cant live in the UK & avoid UK tax. You can live outside the UK and avoid it.

US taxes you on your worldwide income, the UK doesn't. Certain rules apply. It's that simple.

Technically Fundamental · Jun 30, 2009

pedro01 said:
Who the **** would want to live in the UK ?

You cant live in the UK & avoid UK tax. You can live outside the UK and avoid it.

US taxes you on your worldwide income, the UK doesn't. Certain rules apply. It's that simple.

Im talking about non-domicile status for tax purposes only. You dont have enough money or even the right type of income for what I'm talking about be relevant to you hence you havent ever heard about it from the people you are a paying for your salary split avoidance scheme w volountry NI subs.

pedro01 · Jun 30, 2009

Technically Fundamental said:
Im talking about non-domicile status for tax purposes only. You dont have enough money or even the right type of income for what I'm talking about be relevant to you hence you havent ever heard about it from the people you are a paying for your salary split avoidance scheme w volountry NI subs.

I think the subject at hand is working overseas & not paying tax.

Nice of you to judge me based on your assessment of my income but I am COMPLETELY relevant to the topic at hand.

I admit, my income is 6 figures & not 7,8,9,10 or 11. I merely run a couple of subsidiaries of an MNC in Bangkok & Singapore. I dare say you earn in a day what I earn in a year.

Fact is - the topic at hand is WORKING offshore & not paying tax. I do it, have done it & do not break the law.

On the other hand, your experience is 'not mush'. If you want to pretend to be close to the Rosthchilds & other big-wigs who claim non-dom status to avoid tax on their massive sums - I am very happy for you. The topic at hand, however is working overseas & avoiding tax. Not the same at all.

Technically Fundamental · Jul 1, 2009

pedro01 said:
I think the subject at hand is working overseas & not paying tax.

No its what would be best for this guy who runs his own business.

Nice of you to judge me based on your assessment of my income but I am COMPLETELY relevant to the topic at hand.

If you had knowledge on the schedules of income you'd realise you're not

I admit, my income is 6 figures & not 7,8,9,10 or 11. I merely run a couple of subsidiaries of an MNC in Bangkok & Singapore. I dare say you earn in a day what I earn in a year.<<<<<<<< Bad maths considering you just said you were on six figures

You are employed not contracted

Fact is - the topic at hand is WORKING offshore & not paying tax. I do it, have done it & do not break the law.

You also said you are not registered as living in the UK which is not what this guy wants to do

On the other hand, your experience is 'not mush'. If you want to pretend to be close to the Rosthchilds & other big-wigs(?) who claim non-dom status to avoid tax on their massive sums - I am very happy for you. The topic at hand, however is working overseas & avoiding tax. Not the same at all.

I hope I'm as lucky as you in the future. I couldn't imagine landing a 6 figure job that gives so much freedom I'd have enough time to troll forums during the day. Must be a blast.

Anyway you have issues if you take the fact that I don't agree with your opinion of what would be best for trendie overall as a personal attack on you. You really need to chill out.

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