Sanzar Partnership? New IOM company

[Ardesco]

The ideal solution might have been sole trader status, but that option isn't open to us. I thought that MSC's had all closed now?

You can still use an MSC but the government will take a large chunk of your money for the pleasure. MSC's are dead because they are no longer profitable, not because they are illegal.

[Fred Bloggs]

Yes, I know MSC's are not actually illegal. I just thought the providers had all closed down and had become accountants? I can't recall seeing one for a year or so now, but then again I avoided them like the plagued anyway.

[kryten22uk]

Anyone had any further correspondence from their respective IOM planners (ie post Budget-08)? BrilloPad, have you received any advice on what is happening from Montpellier?

[iansbud]

montpelier response

I was with Montpelier (formerly MTM) from around 2003 to 2007 and now face a massive bill if hector introduces this retrospective legislation. seems to me like they are admitting there was a loophole - and closing it now - but retrospectively applying it which is totally unfair in my opinion. they wish to charge income tax, and class 4 NI on all partnership earnings - plus 8.5% interest on what they think was owed from the date they think it should have been owed (after bringing in this retrospective amendment!).
Montpelier have sent a letter (co-incidently on the same day as the letter from hector was sent...) stating they believe this retrospective action breaches the Human Rights Act - and if it is enacted - sounds like they wil fight it based upon that - although not sure how they are going to finance this given they will lose all their fee based income - so i am definitely concerned - although they of course also state that they have a new scheme up their sleeve....

it's one thing taking the case to court (as I had been told they were going to do by MTM with 4 test cases planned) and arguing it based on the law which was in place, and then if hector wins - fair enough i pay them tax owed and put it down to experience - but this is quite another case where it seems like they have decided they wouldn't win the court case, so they just retrospecitvely change the law - and then charge you 8.5% interest on top.

[cailin maith]

I was with Montpelier (formerly MTM) from around 2003 to 2007 and now face a massive bill if hector introduces this retrospective legislation. seems to me like they are admitting there was a loophole - and closing it now - but retrospectively applying it which is totally unfair in my opinion. they wish to charge income tax, and class 4 NI on all partnership earnings - plus 8.5% interest on what they think was owed from the date they think it should have been owed (after bringing in this retrospective amendment!).
Montpelier have sent a letter (co-incidently on the same day as the letter from hector was sent...) stating they believe this retrospective action breaches the Human Rights Act - and if it is enacted - sounds like they wil fight it based upon that - although not sure how they are going to finance this given they will lose all their fee based income - so i am definitely concerned - although they of course also state that they have a new scheme up their sleeve....

it's one thing taking the case to court (as I had been told they were going to do by MTM with 4 test cases planned) and arguing it based on the law which was in place, and then if hector wins - fair enough i pay them tax owed and put it down to experience - but this is quite another case where it seems like they have decided they wouldn't win the court case, so they just retrospecitvely change the law - and then charge you 8.5% interest on top.

What makes you think Montpelier only sell one type of tax planning?

Them fighting the IR for changing legislation retrospectively to suit their case is a good thing.

[iansbud]

Yeah i don't know that and certainly hope they have plenty of other revenue streams to help support them fighting it. Just being pessimistic i guess given the nightmare spot i now find myself in!! But there is still a chance that they will fight and win, just it will take a long time to find out and there is the threat of 8.5% interest hanging there as well.

[malvolio]

Yeah i don't know that and certainly hope they have plenty of other revenue streams to help support them fighting it. Just being pessimistic i guess given the nightmare spot i now find myself in!! But there is still a chance that they will fight and win, just it will take a long time to find out and there is the threat of 8.5% interest hanging there as well.

TBH I think you had better start saving. BN66 sems to be saying that they are correcting an anomaly in the interpretation and intent of the original legislation (which dates from 1987...) which makes restrospection quite legitimate.

The scheme (and other similar ones) are so far from the intent of the law that I can't see any court supporting them unless there is some really subtle legal argument; these things usually hinge on how artificial a scheme is whose intent is only to avoid paying taxes, and that in turn is judged by how realistic the business arrangement would otherwise be if that wasn't the whole idea. On that basis...

IR35 - a far more direct and intentional tax - was originally challenged on ECHR grounds and that was thrown out of court as being inapplicable.

[iansbud]

I agree that that is what the legislation suggests (changing something that the government says was not intended to be interpreted in that manner) but that is just the governments opinion clearly. If they thought they could win that in court - why didn't they just take the test cases as had been indicated and if they won then send everyone a bill. The advice we were given was that Montpelier (and other similar arrangements) have had numerous legal opinions from QC's etc. (excerpts of which i have seen) stating that the tax planning was fully robust, backed up with case law examples - so to me this is clearly a case of different lawyers on each side of the argument having different opinions about what is correct under the law.

To me enacting this legislation retrospecitvely just suggests that the government/HMRC thought that the law wasn't clear - or admitting there was a loophole - but obviously I am biased and that is just my opinion. I agree however that should start saving as not sure will win - but there is still a chance.

[BrilloPad]

Anyone had any further correspondence from their respective IOM planners (ie post Budget-08)? BrilloPad, have you received any advice on what is happening from Montpellier?

I know several who have received a letter - but I have got nothing yet. I will scan in relevant parts when I get it.

But I understand it contains a very robust defence and a "HMRC letter is nonsense stuff". But they also allude to some sort of internal changes - so I want to read it properly.

Seems again HMRC just trying to bully everyone - those I know are standing firm. Some will fold.

[cailin maith]

TBH I think you had better start saving. BN66 sems to be saying that they are correcting an anomaly in the interpretation and intent of the original legislation (which dates from 1987...) which makes restrospection quite legitimate.

The scheme (and other similar ones) are so far from the intent of the law that I can't see any court supporting them unless there is some really subtle legal argument; these things usually hinge on how artificial a scheme is whose intent is only to avoid paying taxes, and that in turn is judged by how realistic the business arrangement would otherwise be if that wasn't the whole idea. On that basis...

IR35 - a far more direct and intentional tax - was originally challenged on ECHR grounds and that was thrown out of court as being inapplicable.

And you are a tax barrister, yes?