What Is An Employee Benefit Trust |
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| By: Paul Barlow | ||||
Thousands of self employed contractors along with additional high net worth people have taken advantage of the higher rates of pay that can be accomplished through the use of an Employee Benefit Trust payroll system. Where as a typical Umbrella Company supplies a gross to net contract ratio of roughly 65% several Employee Benefit Trust options offer a return of up to 85%. The chance to hang on to an extra 20% of YOUR pay has been seen as a great bonus to high earners. EBTs also were to become prevalent because of the added safety they offered. By using an EBT and becoming an member of staff scheme members were granted complete legal employment rights and benefits. For people who desire to spend more time earning along with a lesser amount of time filling out paperwork this solution was ideal. The advantage over those that chose to make use of an Umbrella or even setup their private company was massive. At this moment you’re in all probability thinking that an EBT sounds too good to be genuine, how come everyone isn’t using them? The response to the second question is simple. Plan providers vary the level at what they accept as minimum earnings, more often than not this hovers around 50,000 a year. In essence it comes down to risk. EBTs were so tax effective because of the nature of the loan payment that was given to the employee (i.e. the contractor). The contractor was rewarded a basic salary and the remainder of the money was “loaned”. Since this was paid as a loan (and not as salary) there was no promise that the loan wouldn’t be called in. This is all brilliant unless the person managing the payroll experiences money problems and perhaps has to sell the loan on. Is there any example where a company that has bought a debt wouldn't ask for the money back? The broad consensus appears to be that those that are based onshore are not effective whilst those offshore were being effective. Despite the benefits of an EBT their acceptance has been on steady decline. A portion of contractors perceive the risk of using an EBT as outweighing any probable savings. A scenario that has not been helped by several scheme providers being investigated by HMRC. But what alternate options are there? Government opinion towards contractors appears befuddled at best, maybe baffling if being straightforward, there is no encouragement. How can you assume people to take the challenges coupled with working for yourself if the bottom line is no better than being employed to achieve the identical job(minus salaried holidays, pension)? |
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| Article Source: http://yourfinance.co.za | ||||
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