Tempted by 80%+ take home pay - read this

**DonkeyRhubarb** · 20 January 2016, 15:49

There is only one situation where I would even remotely consider using a scheme today and that is...

...if I was planning to sell up and bugger off in a few years to Panama, UAE, or some other place where HMRC has no reach, and never return to the UK.

If you are planning to stay in this country then you are in for many years of fear & uncertainty getting involved in one of these scams. And, let's face it, that's what they are. Scams run by spivs.

**WalterWhite** · 20 January 2016, 16:31

I did ask this on another thread but didn't really get an answer.

Do you both feel that no scheme now works? If so how do you think that celebrities are paid/taxed? Do you think they pay full tax on their millions?

Genuinely interested.

As Webberg knows, I recently left a scheme and have yet to have any problems. I was even shown a letter they have sent to HMRC responding on behalf of a contractor and the HMRC reply which looks to be backing off. I am still staying away for now but the APN withdrawals and other things I see and read recently tempt me to go back.

**webberg** · 20 January 2016, 17:01

The problem with tax planning is that a lot of it is confidential and bespoke. As such those who design and execute schemes make fees from their IP and are reluctant to share the results in any form of survey.

I've seen all sorts of estimates as to how to value tax avoidance and the only consistent thing about them is that they're ALL wrong.

HMRC has campaigned against "mass market" avoidance schemes. That is relatively efficient for them and they have had success. This would include film schemes and contractor schemes. Also includes a raft of CGT planning schemes, SDLT schemes and CT schemes that include the use/abuse of EBT/EFURB/EEFURB/ETOPS etc.

Taking action against individuals who have indulged in bespoke planning is much more difficult. A bespoke scheme could well cost several hundred thousand in fees and seed money. Perpetrators therefore are wealthy. Such people have access to and are able to resource some high powered advisers. I have personally witnessed a Magic Circle tax partner (£1,000 an hour, annual salary perhaps £3m+) destroy a party of HMRC "experts", 4 of them, who might earn perhaps a 12th of the partner's profits. Against that sort of firepower, HMRC is therefore making only very slow progress.

Even where some of these schemes are shown to be invalid, most often a quiet settlement is reached and nothing goes to Court or appears in the press.

Is that fair? Certainly not, but it's life - money can buy you protection.

Sports stars have some characteristics that are a tax planners dream. A Premiership footballer might get paid to play for an English club in England. However, the club makes money from the "names" all around the world. A shirt with a name on it, sold in China, who gets the money and where? No different for most other sports these days. Is that player's image valuable ONLY in England?

That said, a lot of football clubs are under enquiry. Will we see anything other than a bland statement that the clubs have reached an agreement with HMRC? No. Will the tax hurt the EPL clubs? No. Will settlements damage the ability of say Wimbledon to bring international stars to the UK? Yes. When the champions league final was played at Wembley as few years ago, Parliament had to pass a law granting the players and employees of the clubs an exemption from UK tax!

HMRC's greatest weapon in the fight against the wealthy, famous, infamous or otherwise is the threat of publicity.

Clearly, a bit like a thriller film with an unexploded bomb, HMRC doesn't want to pull that trigger (occasionally they do for policy reasons let slip a few names or prosecute the worst offenders) as otherwise future investigations will be compromised.

not really an answer - my apologies - but my experiences.

**DaveB** · 20 January 2016, 17:07

Originally posted by webberg View Post

https://www.gov.uk/government/public...ood-to-be-true

The above is old news (September 2015) but relevant.

I've recently had reasons to review a number of such schemes that are available on the market (a 10 second internet search will give you a long list to work through) and to warn some clients of the dangers.

What particularly riles me is that any challenge to the providers is met with evasive and irrelevant answers.

Favourites to date include:

"This is compliant with all GAAR guidelines"? Really, I didn't know GAAR came with a free pass for certain schemes?

"Not subject to DOTAS and therefore safe from HMRC challenge". And here is me thinking that failure to disclose might bring its own penalty - obviously what do I know?

"100% employed scheme and therefore loans are not taxable". Denying 10 years of enquiry in 9 words - if only I could bottle that.

"Endorsed by leading QC's". But you can't see there opinion?

and my favourite

"This is not an aggressive tax scheme".

Check back in a year and that may prove to be "optimistic".

If nothing else, PLEASE PLEASE get all the details you can of any scheme that tempts you and run it past an independent and knowledgeable adviser.

Wise words. I'd add to that, do some due diligence on the company offering the solution. It's not hard and there is a wealth of information out there about the companies, their financial status, who own/runs them etc. You'd be surprised at some of the connections that you can find between them.

**webberg** · 20 January 2016, 17:24

Do I feel that no "scheme" works?

My opinion (and I'm sure others are available) is that any arrangement that starts with you working with/for a client and that client paying an intermediary before the majority of the cash reverts to you is probably fine.

If the funds arriving at the intermediary go through a series of other parties, all of whom are either connected or at least working to a common and agreed plan, before the funds arrive with you is susceptible.

The chance of the arrangements achieving a non taxable position decreases as complexity increases.

Where there are entities in the arrangement whose ONLY purpose is to change the tax nature of receipts or expenses, your chances of a scheme working decrease again.

Whilst HMRC does not use a "standard model" as a benchmark for any transaction and you are free in theory to arrange your affairs as you wish (and note the introductory words of the GAAR which specifically says that the presumption that you can do so to avoid tax, is now specifically denied by HMG), in practice this happens.

You work for client A who has 20 employees doing the same job. The employees get paid £20 an hour and have employee benefits. You get paid £30 an hour because you don't have those benefits. However, you divert £25 of that £30 in a claimed non taxable manner. You have now unbalanced the equation (in HMRC's eyes) and will be challenged.

It is (normally) no longer possible to point to the legislation and say that everything you have done is legal and the consequence of following the law is not to tax the £25. Most tax Courts apply a purposive rule which says, let's get the facts and then apply those facts to what we think Parliament actually meant when it made that law.

If the answer is that they intended the £25 to be taxed the it is.

(Note that is a hopelessly simplistic analysis and will not apply in all cases but it is indicative of where HMRC start from).

So, do schemes work?

My opinion is that schemes relying on clever interpretation of law, executed via a chain of intermediaries with little real purpose outside tax, are likely to fail.

Some sophisticated schemes that rest in tax law which creates its own virtual world, will likely succeed.

Some schemes that involve separate tax personalities such as UK companies and partnerships have a better chance than those using offshore entities.

Schemes involving the individual choosing to divert income through a chain of entities for no good reason when compared to a benchmark model will fail and no amount of marketing spin will change that.

In summary, I think the day of the "scheme" is over.

Where you use a company for commercial reasons (limited liability, money laundering etc) or perhaps join a partnership to share clients/expertise/offer a holistic service, you are on firmer ground.

Ask yourself, do the "arrangements" achieve a commercial objective or a tax one? If the latter, think again.

I know some will argue that tax is an overhead and reducing that will make you more competitive. Perhaps that's true. HMRC and HMG though don't recognise that advantage and think you are just avoiding tax. That's not fair and a Janet and John comparison between say a contractor arrangement and a firm getting Government money for very little, quickly exposes the hypocrisy there, but it's where we are.

Sorry for the ramble and thanks for your patience.

Tempted by 80%+ take home pay - read this