EII scheme - is this fraudulant proposition?

A

aristotle

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Hi,

One of my friends has proposed a scheme to me related to the EII scheme(used to the Business Expansion Scheme).

I am fairly sure this is tax fraud and subject to criminal consequence.

Idea is my friend, who is not a tax payer in Ireland but is Irish (they have been working abroad for years), gives me 20k to invest into a company via the EII scheme.

I get tax relief at 41% (30% year 1, 11% in year 3) and my friend wants two thirds of all that tax relief. Essentially I get a few quid out of it.

Basically he wants to do an EII investment and get most of the tax relief on it via using me as he does not qualify for tax relief. I know there may be CGT due if the shares are sold for a profit and he will pay that.

How quickly should I run?

Thanks
A
 
Run....
Stay away as this is clearly an abuse of the system and with the amounts going through being over 10k then Revenue may look for information.

You don't need this and it will end in tears...
 
Most people who invest in schemes like this borrow the money.

In this case you are borrowing from a friend instead of from the bank.

There is nothing inherently wrong with that.

Your friend would probably be subject to tax on any profit he made on loaning you money. If that is taxable in Ireland would depend on his domicile and residence. While you certainly do not want to assist your friend in avoiding tax, it is basically not your concern if he pays his taxes.

Finally there is risk involved in these EII investments. The better ones have low returns, (often much lower than the top line rate that might be advertised) and the bad ones are very risky.

CGT would be a fine problem, who will cover the losses ?
 
My friend would pay any CGT related costs (but who is to say in a few years time if he could afford to and it would all be in my name).

I understand that me borrowing money from a friend is fine but when you look at the bigger picture he is trying to invest money into the EII scheme in order to gain tax relief, all by using my tax record. We would have an agreement that he gets the benefits on the investment and 2/3's of the tax relief.

Does that really stand up to scrutiny?
 
Whats the difference with him loaning me 20k to put into my pensions and get the relief on that and then in 30 years time giving him the proceeds of the pension?

Is it not the same thing?
 
If you suddenly turn up with 20K to invest in an EII, the Revenue are going to want to know where it came from... What are you going to say? Are you going to tell them the details of the arrangement or are you going to tell them a story??

Your friend is just using you for financial gain and you are the one taking the risks!
 
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