Is 90% Really A Realistic Return?

In all probability no, no it’s not. Perhaps we should clarify that, for anybody earning much more than minimum wage then a 90%+ return just isn’t realistic. So how do the UK contractor payroll companies get away with advertising that? Here’s some information from one of them Darwin that shows you just why there is so much confusion around this.
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A Very Mixed Autumn Statement

Yesterdays Autumn statement brought both bad news and not so bad news for contractors (we couldn’t quite bring ourselves to call it good news).
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HMRC To Write To 1500 Tax Avoiders

Just when you think things can’t get any more confusing HMRC have decided to write to 1500 individuals suspected of Tax Avoidance. The 1500 are all assumed to be members of one scheme which from the wording of the letters sent out HMRC plans to challenge in the near future. Of course just challenging a tax avoidance scheme doesn’t mean HMRC will win the challenge.
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Public Sector Problems With PSCs Shouldn’t Affect Private Sector

Contractors have had more than enough legislation changes to deal with in recent times so it’s good news for most that the Chartered Institute of Taxation (the CIOT) have come out and said that the UK government should be able to address the issue of high ranking public sector employees using “personal service companies” (PSCs) without bringing out any new legislation. This has been a big deal ever since revelations came out about Public Sector “employees” avoiding the employment route in favour of contracts based on the use of PSCs.
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K2 Tax Avoidance – Alternative

Retain More Of Your Self Employed/Contractor Earnings

Can anybody explain to me what law Jimmy Carr broke? Can anybody explain to me what he did that justified the Prime Minister getting involved into what are the private financial circumstances of a UK citizen? Anybody who keeps money in an ISA is avoiding tax. Anybody paying into a pension is avoiding tax. Tax avoidance is not illegal, some see it as morally suspect but nobody can say it is illegal. Everybody has the right to limit the amount of tax they pay to that which is defined by law, as long as you are not breaking any laws you are not obliged to pay any more tax than you need to. I only wish that the UK government would acknowledge the number of EU citizens who use the UK to avoid paying tax but I suspect they’d prefer to keep quite about that one. The only time the avoidance issue becomes an issue for the papers in the UK is when the any mention of “offshore” is made, much as the case with Jimmy Carr and his use of the K2 scheme.
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Could 2012 Be Your Best Year Yet?

April is always seen as a time for upheaval in the employment world and now that’s out of the way, there is little change in regulations and it appears as though things are set to stay settled for another 12 months, could 2012 be your best year yet?
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The 2012 Budget Is Nearly Here

It has been a really tough year for the UK economy. Unemployment has increased, inflation is still a huge problem for people and pay increases are a dim and distant memory for most employees. Just how quick have those years since 2008 gone, it really has been a blur? Amongst all the doom and gloom the contractor market has stood up well though. As employers look to lower their long term risk by hiring “staff” on shorter contracts the sector has seen little if any decrease in demand, rates of pay are still good and contractors are now seen as a vital part of the UK economy. Vital AND valued, well that remains to be seen.
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Rangers And The Tax Man

All of a sudden EBTs are big news, isn’t it strange how law changes are made that affect huge swaithes of the population and nobody bats an eyelid, yet when something impacts on a football club the whole UK goes into mental breakdown about it? What people have to remember is that it wasn’t the fact that Rangers used Employee Benefit Trusts to pay their staff (footballers) that was a problem, it was in the detail of how they operated their EBT scheme.
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Dispute With HMRC? Things Should Get Better

If there’s one thing that annoys self employed people and small business owners it’s the feeling that you’re getting nowhere with HMRC. When a dispute arises, unless you’re very lucky, it’s hard to not feel like you’re banging your head against a brick wall and getting nowhere. With any luck changes announced by HMRC recently should make things a little better in the future!
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Employee Benefit Trust

Learn About An EBT Beating Alternative

Employee Benefit Trust, The Right Choice?The Employee Benefit Trust has been a popular alternative to the Umbrella Company for many years. Hundreds if not thousands of self employed contractors and other high net worth professionals (such as those in the creative arts) have taken advantage of the higher rates of pay that can be achieved via the use of an Employee Benefit Trust payroll solution. Where as a typical Umbrella Company gives a gross to net contract ratio of around 65% many EBT solutions offer a return of up to 85%. The opportunity to keep an extra 20% of YOUR pay has been seen as a massive bonus to high earners.

Employee Benefit Trusts also became popular because of the added security they offered. By using an Employee Benefit Trust and becoming an employee scheme members were granted full statutory employment rights and benefits. The lack of a need to keep complicated expense details also endeared this solution to those who preferred to spend more of their time earning money instead of doing paperwork. This was a massive advantage over those that either used an Umbrella Company or who chose to setup their own Limited Company. At this point you’re probably thinking that an Employee Benefit Trusts sounds too good to be true, how come everybody isn’t using them?

The answer to the second question is simple. In order to gain any advantage from an EBT you really need to be earning above a certain level. Some scheme providers set this level at 40,000 a year, others at 50,000 a year. The too good to be true bit is a little harder to explain. In essence it comes down to risk. Employee Benefit Trusts were so tax efficient because of the nature of the loan payment that was given to the employee (i.e. the contractor). The contractor was paid a basic salary and the rest of the money was “loaned”. Because this was paid as a loan (and not as salary) there was no guarantee that the loan wouldn’t be called in. Of course all providers marketed that this wouldn’t happen and that they had various methods of making sure the loan wouldn’t be asked to be repaid. Fine unless the payroll provider encounters money problems which could result in the loan being sold as an asset. Could you imagine the company that now owns that debt not asking for the money back? As far as the legalities go there has been a split with regard to EBTs. The general consensus appears to be that those that are based onshore whilst those offshore were effective.

So even with all the advantages that an Employee Benefit Trust offers their popularity has declined massively.For many contractors the risks associated with an EBT are seen to out way the advanatges. A scenario that has not been helped by several scheme providers being investigated by HMRC. The question is what alternatives are there? The governments stance on contractors seems to go against encouraging innovation and excellence within business. How can you expect people to take the risks associated with working for yourself if the bottom line is no better than being employed to do the same job(minus paid holidays, pension)? It’s all too easy for Civil Servants in comfy 35 hours a week, 30 days a year holiday, final salary pensioned posts to interfere in areas of business where they have little understanding. It is every contractors duty to be paid in a legally compliant tax efficient manner and Employee Benefit Trusts have played there part in this process in the past.

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