Contractors’ Questions: Can my contract income be paid through a trust?

Contractor’s Question: It’s an area I previously looked into but disregarded due to the ambiguity of information and implication that it’s a loophole waiting to be closed, but I still keep wondering whether I could boost my take-home pay by being paid through a trust.

The calls and emails offering this aren’t abating and, in light of the new dividend tax from April, why shouldn’t I make the most of my income by moving to this trust format if it’s not illegal? Anyway if I got caught, couldn’t I simply revert to my existing limited liability status as a PSC?

Expert’s Answer: Much has been written in recent years about “being paid through a trust,” and having admitted that you’ve looked into it previously, I suspect you have read much of it. I’m sure the emails and calls that you’ve received have all sought to assure you that everything would be 100% legal and compliant. And I sense from your wording that you are looking for a reply along those lines. If that’s the case, I’m going to disappoint you.

The juxtaposition of “if it’s not illegal” and “or I get caught” suggests to me that you are being a tad cavalier in assessing the risk element. If I’m wrong and you are seriously considering a move to being paid through a trust, I would urge you to obtain full details of the proposed arrangement and ask HM Revenue & Customs to give you an assurance that it complies with current guidelines and legislation.

The expert was ‘Roger the retired taxman,’ an adviser to industry group All Umbrella Companies Are Equal.

Editor’s Note: Related Reading –

Contractors’ Questions: Is this tax scheme viable or to be avoided?

Contractors’ Questions: Why did IT contractors use EBTs?

Contractors’ Questions: Is this tax scheme too good to be true?