BN66 - Time to fight back!!!

[BrilloPad]

Well I was so intrigued by DR's excellent question I asked! Montpelier said :-

We don't know either - has been our argument all along why do they need them when everything is on the tax return?? Only thing we can come up with is they want the accounts to re-enforce their view that the self-employed contractor is a "member" of the partnership and therefore entitled to a share of the profits.... rather than via the trust. However p'ship a/c's show trustee as partner not individual.

[smalldog]

I wonder if they are using them to prove they can apply IR35 rules somehow?

[DonkeyRhubarb]

Now its starting to calm back down I realised that I for one have always expected this to happen and we have known all along HMRC would challenge it.

Except (jug half empty) we were expecting to defend our position based on existing legislation, and not to have to overturn the will of parliament. Whilst this is still possible, it's got to be a lot harder.

At the moment I'm neither optimisic nor pessimistic because I've simply no idea what our chances are.

[malvolio]

AFAIK the new Montpelier scheme is quite like the sanza scheme. So the self-employed bit is easy. But the trust is a loan. And that is NOT from montpelier - just what I have gleaned.

See there's a problem with the perpetual loan-based system as well. How exactly do you stop? Because AIUI (and I may be wrong), when you do you are liable for tax on the entire loan amount as though it were earned income if you haven't been paying it all along....

[smalldog]

See there's a problem with the perpetual loan-based system as well. How exactly do you stop? Because AIUI (and I may be wrong), when you do you are liable for tax on the entire loan amount as though it were earned income if you haven't been paying it all along....

So If I walk into a bank and borrow some money but dont make regular payments against it, purely pay it off by lump sum Im liable to tax, HUH!?

[malvolio]

So If I walk into a bank and borrow some money but dont make regular payments against it, purely pay it off by lump sum Im liable to tax, HUH!?

Not what I said. If I lend you £10k then by some sleight of hand don't ask you to pay it back but write it off and lend you another £10k, as far as Hector is concerned you have had £10k's worth of income, even though the net effect to you is zero. It's that virtual £10k which is liable for tax. Do that for five years and you owe the tax on £50k earned income.

You won't if you pay tax each year of course, but where's the fun in that. Far better to get stuck with a £100k tax bill you weren't expecting.... Ah, oops...

[poppy01]

Well I was so intrigued by DR's excellent question I asked! Montpelier said :-

We don't know either - has been our argument all along why do they need them when everything is on the tax return?? Only thing we can come up with is they want the accounts to re-enforce their view that the self-employed contractor is a "member" of the partnership and therefore entitled to a share of the profits.... rather than via the trust. However p'ship a/c's show trustee as partner not individual.

seems obvious to me they want to asses the total income generated in the uk, that includes all fees paid over to Montpelier.

[Lewis]

See there's a problem with the perpetual loan-based system as well. How exactly do you stop? Because AIUI (and I may be wrong), when you do you are liable for tax on the entire loan amount as though it were earned income if you haven't been paying it all along....

Some schemes use a 'soft currency loan', e.g. they loan you £10K worth of ZWD. You pay interest in ZWD at HMRC approved rate. A year later that £10K loan is magically only worth 1p because Zimbabwe currency is in freefall. You give them 1p plus some nominal interest. Loan is cleared.

[smalldog]

Im curious that according to HMRC's own guidance (I am quoting someone else here so not sure how true this is) MontP would actually be responsible for our bills and not us as they operate the scheme. Im wondering if HMRC are actually going after Montp and not us. If we have paid fees for a service (which trust accounts prove) under advice that we arent liable for tax then can HMR come after the individual...Ultimately if they are only after us, then Montp live on to fight another day to create more new schemes, wonder if they are going for the throat to shut them down entirely......

just thinking out loud here

[malvolio]

Some schemes use a 'soft currency loan', e.g. they loan you £10K worth of ZWD. You pay interest in ZWD at HMRC approved rate. A year later that £10K loan is magically only worth 1p because Zimbabwe currency is in freefall. You give them 1p plus some nominal interest. Loan is cleared.

Yes, I know. But you have earned £something deemed income, as a sort of Benefit in Kind, because you have had the personal use of the money. And it might seem a bit unlikely but if your source currency goes down rather than up...? It can happen.

By all means take on such a scheme, but be very clear what the exit strategy is...