OAT/NetJets Europe Stage 2

[Nichibei Aviation]

PPS - the section about reverting to the standard first office payscales simply refers to the point when your training costs have been re-imbursed, the €20,000 is no longer tax-free.

The 20 000€ is to make this amount of your paycheck available to the bank in order to avoid you spending the whole 56 500€ and not repaying your loan. It is just there as a warranty to the bank and not because it's tax-free or anything like that because that would be fraud.
The only part that can be tax-reducing in very few EU countries is the interest repayment which can lead to tax discounts. Don't know if it's the case with Portugal. The tax reduction would not be significant anyway, maybe 2 or 3% on average.

[mattia_70]

Jim 79,

take a low cost flight to either Luton or Stansted and then bus to Oxford (you might have to change, I don't remember exactly but check on www.nationalexpress.co.uk).
Then city bus between Oxford centre and Kidlington Airport (where OAT is located). Accomodation: try the hostel in Oxford.

cheers
Mattia

[hollingworthp]

The 20 000€ is to make this amount of your paycheck available to the bank in order to avoid you spending the whole 56 500€ and not repaying your loan. It is just there as a warranty to the bank and not because it's tax-free or anything like that because that would be fraud.
The only part that can be tax-reducing in very few EU countries is the interest repayment which can lead to tax discounts. Don't know if it's the case with Portugal. The tax reduction would not be significant anyway, maybe 2 or 3% on average.

It would take me too long to pick all the holes in your logic - but for now, a quick google reveals:

Application of Section 250 to Pre-Employment Training

5. In order to qualify for exemption under Section 250 ITEPA 2003 the reimbursement must relate to the cost of _"work-related training". Work-related training is defined in Section 251 (formerly, Section 200B(5) and (6) ICTA 1988). The definition includes, inter alia, training for a future job with the employee's employer but does not, except in very limited circumstances (see para 9 below) cover the reimbursement by a new employer of training expenses incurred by the employee before the employment began.

9. We recognise, however, that cases will arise where the link between the employment and the pre-commencement training is so strong that the reimbursement should also qualify for exemption. For example, if an individual has accepted an employment offer from a new employer, to start work in the reasonably near future, and the individual then pays for work related training (within Section 251(1)) for that job, exemption will not be denied if the employer agrees to reimburse those costs after the employment has begun. If there is no such demonstrable link between the individual's undertaking the training and the particular employment that they subsequently obtain, the reimbursement of the pre-employment training costs will continue to be outside the exemption.

The contract is UK-based and the tax-law quoted above only applies to UK residents.

[Nichibei Aviation]

Very possible.
Thanks for the link holling, it is very interesting to know.

Now let me expand further from my side.
2 quotes from: http://www.pprune.org/forums/archive...27664-p-3.html

for FO's :
gross salary = 56500
- 8% of National Insurance tax to the UK
- 25% of income tax to Portugal

=> 56500 - 8% ~ 52000 €
52000 - 25% ~ 39000 € ~ 3250 € / month net salary

Then you can add extra days if you comply with (~250€/month) and per diem. But per diem are used to pay food, transportation to your gateway, ...etc.
For CPT, do the same calculation and you'll find ~ 5400€/month without per diem and extra days.

I suggest you contact the income tax department of your country to check if there is any agreement between Portugal and your country. In Europe, some countries have it and it is not necessary to pay other taxes in our own country. Northern countries don't seem to have these agreement

fred

erikv
23rd February 2007, 07:54

fred,

I believe the 25% and the 8% are both taken out of the basic sum of 56500.

NI: 8% of 56500 = 4520
Tax: 25% of 56500 = 14125

56500-4520-12125 = 37885, roughly 3150 per month.

Erik

Even if contracts are UK based you have to pay the Portuguese taxes of 25% because you are working for a carrier with a Portuguese AOC (except when you are employed by an agency that sells pilot services.)
The additional 8% will come close to offseting the eventual advantage of the 20 000€ tax-free system for UK students.

[redsnail]

For the non UK and non Portuguese, the tax rate is now 20%.

The UK crews get an effective pay rise when they get paid in Euros and let their banks do the converting.

[Adios]

I am pretty sure that double taxation is not allowed in the EU, therefore, Nichibei's claim that 20% will be deducted in Portugal because they hold the AOC and then further taxation in the UK doesn't hold water. It is foolish to give tax advice if you are not an EU tax expert and even more so when your source is to quote from several PPRuNe posts! Perhaps I should say it is foolish to accept tax advice given under the above circumstances. There are plenty of web sites that can help one determine their UK tax liability and they calculate both the income tax and the National Insurance contributions, both of which are excluded in the cadet programme's tax relief feature according to OAT.

[....]

hey!!

I also applied to the NetJets programm and got accepted to stage 2. So ill see you all there.. I am also coming from outside of GB.. The best thing is, land in one of the London airports, then take a train from the airport to one of the main stations, such as victoria, and then there are many trains going to oxford fast or slow.. and then just take a taxi from oxford trainstation to the airport its like 15 mins drive.. not too bad..

have a great day,

Theresa

[Nichibei Aviation]

I am pretty sure that double taxation is not allowed in the EU, therefore, Nichibei's claim that 20% will be deducted in Portugal because they hold the AOC and then further taxation in the UK doesn't hold water.

I did not mention double taxation Adios.
Income tax and insurance tax (what you mention as National Insurance contributions) are two different taxes and are both applied separetely.

For instance Easyjet hires its crews on a French base with a French contract but they pay income taxes in UK because that's where the ailine and aircraft they are flying are registered. Health insurance taxes are paid in France because that's where the employees receive health care.

For the airline, labour law is that applied under the airline's flag, but several EU courthouse's have been contradicting this as we can see under the different problems Ryanair has been having.

I do not pretend to be a specialist, but I know what I'm talking about.

[Jim79]

Hi,

Thanks about travelling tips, see you there..

Jim

[CaptainKill]

Hey Charlotte

I have my assessment on the 10th and 11th March, I've passed stage 1, onto stage 2 now! Yikes

[Char1i3]

Cool see you there!

C

[Adios]

The mathematics in post number 20 seemed a bit questionable to me, so I did a bit of tinkering in Excel. At 7.25% interest (HSBC's current rate), the payment comes to £1116 per month for six years if you assume £5,000 of interest accrues during the training at OAT. In other words, I used £65,000 as the principal instead of £60,000, the original amount borrowed.

This means the total principal and interest repaid would be £80,352.35, not the £141,000 that he arrives at with his calculations.

If you want to check it yourself, the following website shows you how to create a simple spreadsheet to calculate loan repayments: http://www.meadinkent.co.uk/excel-loan-repayments.htm

Using the first example on the above website:
Cell B2 must contain the following value: 65000
Cell B3 must contain the following value: 72
Cell B4 must contain the following value: 12
Cell B5 must contain the following value: 7.25%
Cell D6 must contain the following formula: = C6/12
Cell C7 must contain the following formula: = - PMT(C6, B4, B3, 0, 0)

I don't really know how much interest accrues during training because I don't know when the bank disburses the funds and I didn't want to bother with the rather complicated spreadsheet required to compound interest when no payments are being made, but £5K is probably overly generous. It is also likely that HSBC uses a slightly different method to calculate interest, but I can't think of any common way of calculating loan repayments that would arrive at a £60,000 difference from the above £80,352 on an original loan of £60,000, which is what Nichibei Aviation's mathematics demands.

[hollingworthp]

Adios - I spotted that too, but clearly the concept of Compound Interest was too complicated to grasp for some and could ultimately not be bothered to point out every single flaw in the arguement, but yours is certainly another good point!

[Nichibei Aviation]

You are right Adios, you can borrow only 60 000GBP I have overlooked that.

Which supposes you have to get 6000 further GBP from somewhere else as training costs 66000GBP. Add 4000GBP for Oxford accommodation and you realise that "you have to be rich, to be my girl" before even starting.

I'm bored anyway so let's do the calcs from the start again.

Considering you think Greenwich is the center of the world let's do the calculations for you UK guys:

Initial investment=10 000GBP=+/-13000EUR from own pocket

On loan= 60 000GBP

Interest rate= 5.25% base + 2%=7.25%
Over 8 years is 7.25x8=58%

60 000 + 58% = 94 800GBP = +/-125 000€

Total investment 125 000 + 13 000 EUR = 138 000€

(Caution: this is supposing the bank is a NGO. Don't forget to add all yearly insurance charges of over 300GBP for death, loss of licence, loss of job or loss of medical.)

Now let's consider that a UK contract allows the income taxes to be paid in the UK. That would suggest a taxable income that falls into the 22% tax rate grid. So let's be optimistic and assume the more favorable 20% taxe rate if paid in Portugal.

Now let's look at the NIC: Your taxable weekly income is below 770GBP per week so you will pay 11% NIC taxes in the year 08/09.

Added together that would make a 20+11 = 31% total taxes on taxable incomes.

Year 1: 56 500€ paycheck - 56 500 loan repayment=0€ taxable.
No money for living, loan repayments remaining 68 500€.

Year 2: 56 500€ paycheck - 20 000€ loan repayment = 36 500€ taxable.
36 500 EUR-31%=25 185EUR for living. loan remaining 48 500€

Year 3: same, loan remaining 28 500€

Year 4: same, loan remaining 8 500€

Per diem's if available on the cadet scheme will be very needed for different local expenses. Do not expect any on the first year as you will be on line training, type-rating and on standby most of the time.

The length of the loan repayments of 5 to 6 years mentionned on their website suggest that you are not getting paid during type-rating and line training

not the £141,000 that he arrives at with his calculations.

For your information it's EUR, €, euro. The eye sees what it wants to see.

[Adios]

7.25x8 does indeed equal 58, but that is about the only thing in Nichibei's mathematics that makes any sense. If one is making monthly payments for the last six of those 8 years, the principle goes down each month, so the figure the interest is applied to drops. The result is that each subsequent payment contains more principle and less interest. It's called amortization.

If he wants to get a mortgage on those terms, I'll loan him the money myself because I'll make a killing! Heck, even Northern Rock would still be afloat if that was how banks calculate interest!

I am afraid that if I tried to rebut him line by line that I'd end up with a migraine.

[clanger32]

Oh Deary Me.

Nicibei, I'm sorry, because this is going to seem like I'm now having a go at you directly, and I promise you that isn't the case. In the last two threads I've been active on, you come across as though you have a serious axe to grind with OAA. This does not make you the only one. However, your arguments and discussions lose any credibility when they are so deeply flawed. I am not in any shape related to the Netjets scheme, although I did apply for it and unfortunately got turned down in Lisbon. But.

Firstly, as HollingworthP pointed out, the package NJE are offering their cadets is pretty damn good and is certainly just about the highest starting package I've heard of for any airline for low hour pilots. This includes BA, BMI and certainly Ryanair etc.

Secondly, IF YOU UNDERTAKE TRAINING YOU HAVE TO PAY FOR IT - REGARDLESS OF WHETHER YOU ARE SPONSORED OR NOT. You seem to have got very confused by the fact that this is a Netjets scheme and seem to think that this makes the repayment requirements different from all the rest of us out there self sponsoring. Surely you cannot question that having a portion of your salary paid to you tax free as some kind of reimbursement of your training costs is better for the cadet than having ALL of your starting salary taxed and then having to service a loan post tax? With that in mind, the costs the NJE cadets are expected to bear are no different than those a normal APP FO cadet pays, save that a portion of their salary is paid tax free, to assist with repaying.

Thirdly, you seem to have completely misunderstood the payment NJE are offering. To clarify, although HollingworthP has already stated this clearly - and ONLY looking at basics, so no per diems or extra days, to keep it simple - a "normal" F/O (experienced) FO going to NJE earns about €56500 first year. This is ALL taxed at whatever the national rate is for their country of domicile. For the purposes of simplicity, the NJE cadets get paid €36500 SALARY - which will be taxed at prevailing rates - and a further €20000 as "course reimbursement". This does NOT go direct to the bank, it is paid, TAX FREE in the cadets salary package, to make their salary up to the €56500 NJE first office rate. If you have no loan, you get that €20000 tax free, in toto. Your calculations all include some element of €56500 being taxed then €20000 on top, which is NI'd before being multiplied by the square root of 34005 and growing a daisy....you're overcomplicating the sums needlessly.

Fourthly, you postulate that a NJE cadet will earn nothing first year as the entire first year salary in your sums goes against the outstanding loan. Well, that wouldn't be very good business of NJE, would it? Having their F/Os living in a cardboard box? No. No bank in the world would provide a loan where the entire first year earnings were offsetting against the loan, for the simple reason it is clearly unsustainable. You seem to have a reducing lump sum payment per year - again, not the way the banking industry works I'm afraid. Generally, banks work by taking the capital sum, working out the total interest over the duration of the loan and dividing by the loan term to find a monthly payment. At least this is the way the banks I worked in do it, but clearly you're going to know better than I... So, let's use your figures (I've not looked too hard at them, so I'll assume correct for what it's worth) €138000 total owing. Divided by 6 years, equals approx €1900 per month, or €23000 a year. Oh look, handy how that works out as pretty much the sum that NJE give you TAX FREE to pay your loan back, isn't it... So the NJE cadets, on basic pay alone - and assuming they have to borrow the entire, full amount, are going to walk away with €36500 per year, first year, which will be taxed (lets say leaving €27000) of which a further €3k is needed to service the loan, according to your figures. So take home, AFTER REPAYMENTS would be €2000 per month. Admittedly, you're not going to be buying Buckingham palace on that, but it's still a VERY good salary for a low hour pilot, with all training costs accounted for, plus a type rating you don't have to pay for.

I don't mean to be harsh, but it's quite hard to take your comments seriously on this thread when they are SO wide of the mark in just about every single aspect. It's clear you have either not read the terms of the scheme or have just totally misunderstood them. You may have an axe to grind, but please make sure you have a strong argument before embarking on ginding it!

[Nichibei Aviation]

I'm not blaming NJE/OAA scheme, I'm blaming all kinds and sorts of expensive integrated courses.

65 000GBP, my friend

The problem with such a sponsored course is that the illusion is even more difficult to differenciate from the reality and people start being optimistic like member Hollingworth.

Look at the intial investment: OAA accommodation+the part you can't finance=minimum 10 000GBP.

If you have that cash you can get yourself PPL + Pre-IR requirements.

Work during one year while you train modular to gather 15 000GBP and get CPL IR ME. You can already start applying.

Work another 8 months and put another 10 000GBP together and go to USA for multi-engine hour building during the annual leave.

Work til you find a pilot job.

Find a job at 2000€ per month. If you are engaged by then and want to contract a mortgage to buy a house, the bankier will nod instead of kicking you out of his office if on a OAA loan.

Earn 2000€ per month during 2 years. Pay rise on the third year.
You decide: go to NJE for more money or stay.

You win 2 years over the NJE cadet and have broader carrier opportunities and what's most important: no pressure.

Imagine yourself up a landing with a NJE Hawker on the first year.
You will not pay a cent for the repairs but they'll kindly ask you to leave. Your 300GBP per year job-loss insurance will pay your loan for 6 months.
You will not find another job with any other carrier because you are on the record.

Imagining that only will put you under alot of pressure, certainly during the first years. And such pressure does not belong to be in a cockpit.

[Nichibei Aviation]

I redid the cals in Excel and got this.

Total loan=60 000 +26904 =86904GBP= 117320.4EUR at today's forex rates. This is best case scenario with fixed rate if the bank approves it.
Add 300GBP loan costs per year and we're gonna be pretty close to 125000 total costs without investment.
Pretty close to the approximation we got from 8 x 7.25% seen that you won't be paying a penny for the first 2 years.

the principle goes down each month, so the figure the interest is applied to drops. The result is that each subsequent payment contains more principle and less interest. It's called amortization.

Now really
You see now that the difference is very small because there are no repayments until the first salary is received.

May I also remind you that this is best case scenario for UK people and considering 1GBP=1.35EUR which is a rather optimistic exchange rate.
Non-UK people may need to pay taxes on the 20 000€ per year loan repayment unless Portugal has a UK-like clause which I doubt.

What I wonder about section 250 is how it applies into reality.
As the employer's AOC is Portuguese I do not see how the hell pilots can get a direct UK contract with Netjets.
Hell, if that were true, all contracts would be in Monaco and all pilots would be residing there.

[redsnail]

N.A.

Your scenario re guttsing a Hawker I find a bit entertaining. If you screw up in any company it is difficult to get another job. Just ask around. Whether it be with easyJet, Ryanair, Flybe or Netjets Europe and I do know of a few cases where this has happened.

You are completely incorrect about the contracts. You don't know the details so kindly desist from posting about them.

I too feel the cost of integrated flight training is horrendous. CTC charge a remarkably similar amount and it's not integrated. Go give them a serve too.

[Adios]

I put in a call to HSBC in Oxford today and the NetJets cadet loan repayments are £1,115 per month for six years at the current 7.25%. The first repayment is due 3 months after finishing the fATPL at OAT, so the interest that accrues during the training and the deferral is included in the repayment scheme. Having the facts should make the maths a bit simpler.