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What is tax avoidance?

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    #21
    Originally posted by jbryce View Post
    Gentlemen's agreements have no standing in law, and are not enforceable - so any such agreement is not worth anything.
    I'm not completely convinced about that - I can certainly think of a few examples, but I am happy to move the debate on.

    In any event, even if there ever was the remotest chance of a case for fraud, HMRC just don't have the balls to take it the distance. Take this - just reported today - only one person prosecuted for evasion despite 1,100 targets

    BBC News - HSBC bank 'helped clients dodge millions in tax'

    Comment


      #22
      Interesting comments - so I'll add my contribution.

      Evasion is doing something illegal. If you drive a car at 40 mph in a 30 mph zone, that's illegal. It's treated by the law as being a trivial offence, dealt with via a fine but is none the less illegal.

      If the signage on the roadside is vague, obscured, unclear, then you can argue that your interpretation of the law is acceptable. A judge may say that your interpretation is incorrect based on either the facts or the law. Applying an incorrect interpretation is not illegal in itself (although pushed to the extremes it will be).

      UK tax law has moved in the past 10+ years from a predominantly form over substance approach to the opposite. The law as drafted cannot cope with that and we have seen a lot of vague publications where the "intention" of Parliament is said to have been explained and people are encouraged to respect that intention.

      This varies from what is seen in say the US where a very prescriptive tax law makes avoidance relatively easy. The IRS wages a war on this in some very public ways. Their main weapon however is that a conviction for tax avoidance carries harsh penalties (prison, unable to hold a position of trust, striking off professional registers, etc) and therefore most people in a position to execute such planning (who tend to be relatively intelligent and successful people) just don't do it.

      The UK though is in a halfway house. We have some areas of the law using form over substance (capital allowances, IHT) and some using the opposite (income tax).

      Using a company was attacked in what is universally known as the Arctic Systems case. HMRC tried to say that was a trust arrangement. They lost and promised "rectifying" legislation which we have still not seen. This may return.

      The best advice in considering any scheme is to apply a simple test.

      Am I receiving cash that I can use in any way I wish and upon which a reasonable rate of tax has been deducted?

      If the answer is "no", then look very hard at the law.
      Best Forum Adviser & Forum Personality of the Year 2018.

      (No, me neither).

      Comment


        #23
        Originally posted by StrengthInNumbers View Post
        They are loans with properly witnessed and signed agreements. No side letters or any gentlemen agreement. If trustee will recall loans will have to be paid back whatever a contractor or promotor might say.
        That is correct.

        The question for many people is why don't they recall them?

        The simple answer is that the Trust is in your name and the Trustees are legally obligated to act in the best interest of the beneficiary.

        That's my understanding anyhow.

        Comment


          #24
          Originally posted by prozak View Post
          That is correct.

          The question for many people is why don't they recall them?

          The simple answer is that the Trust is in your name and the Trustees are legally obligated to act in the best interest of the beneficiary.

          That's my understanding anyhow.
          Nup. Trust is not in contractors name and trustees are completely independent. A beneficiary cannot control what a trustee will do.

          Trustee have and turn down requests from beneficiaries of they see fit.

          As soon as trustees will feel it is in the interest of beneficiaries they can and will recall the loans.

          Comment


            #25
            HMRC finger stuck.

            ...but here is the mad thing. Trusts are a legitimate structure, loans out of a trust are legitimate - so all of that is (kindof) defensible. HMRC have used ToAA to attack some schemes (although not an EBT) and the applicability of that is open to question. Boyle was a basket case scheme - not very representative of 99% of schemes and the Rangers case isn't that applicable either.
            So:

            Why the f*** don't HMRC take some EBT schemes to court?
            Why don't they use the GAAR to get a decision against some of the non DOTAS schemes?

            Comment


              #26
              Originally posted by StrengthInNumbers View Post
              Nup. Trust is not in contractors name and trustees are completely independent. A beneficiary cannot control what a trustee will do.

              Trustee have and turn down requests from beneficiaries of they see fit.

              As soon as trustees will feel it is in the interest of beneficiaries they can and will recall the loans.
              Not those that I investigated.

              There was a sub-trust in the name of the contractor.

              Comment


                #27
                Originally posted by prozak View Post
                Not those that I investigated.

                There was a sub-trust in the name of the contractor.
                ...which kind of illustrates HMRCs difficulty. There are many different flavours of EBT trust and the way they are set up is relevant to the subject of tax. The more esoteric trust arrangements are even more complex.
                APNs mean that they don't have to worry toe much about the finer detail which, as we've seen with the IHT fiasco, is not something they are very good at.
                The GAAR means that they can issue APNs against the newer arrangements, post 2013, without having to do too much detail.

                Comment


                  #28
                  Originally posted by prozak View Post
                  Not those that I investigated.

                  There was a sub-trust in the name of the contractor.
                  It depends on the scheme.

                  Early versions had one overarching trust that had a number of beneficiaries. Later versions moved to the sort of structure you see in the Murray Group litigation. Not entirely sure why although I suspect that it was to do with being able to terminate or amend individual trusts without going through a complicated exercise about whether one person might be disadvantaged by another's situation.

                  We were told a few months back that cases are being prepared for litigation and should be in Court this year. That said I also today had a letter from HMRC apologizing for a delay that they admit is their fault and asking for yet more information on a structure that closed 6 (that's SIX) year's ago and which they don't even have a view on legally despite that scheme having been repealed in 2011.

                  I feel a complaint to the Revenue Ombudsman coming on (not that this will do much except cost the client more in fees).
                  Best Forum Adviser & Forum Personality of the Year 2018.

                  (No, me neither).

                  Comment


                    #29
                    Originally posted by centurian View Post
                    I'm not completely convinced about that - I can certainly think of a few examples, but I am happy to move the debate on.

                    In any event, even if there ever was the remotest chance of a case for fraud, HMRC just don't have the balls to take it the distance. Take this - just reported today - only one person prosecuted for evasion despite 1,100 targets

                    BBC News - HSBC bank 'helped clients dodge millions in tax'
                    And in that article ...

                    "And while tax avoidance is perfectly legal, deliberately hiding money to evade tax is not"

                    aarrgghh!

                    Comment


                      #30
                      On ToAA:
                      Many other strong points exist but simplest is if EBT is legal in UK, how can EBTS in IoM be avoidance. ToAA has to apply when avoidance or tax advantage existed when transferring abroad. Thus Rangers case important. Strangely HMRC has not appealed other EBT cases with UBS and deutche bank which both HMRC lost in UTT and court of appeal.

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