you would have thought full disclosure would protect you from retrospective legislation....if you were being underhand and not disclosing then I feel retrospective is justified...
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This just goes to show what a shambles the HMRC is currently in.
HMRC have a responsibility to collect tax.
If you send in a SA form declaring everything they should be able to read the form and tell you if it is incorrect, and how much tax is owing if that is the case.
The fact that they have ignored this to increase fines and now want to legislate retrospectively to get more money is wrong and in my opinion is a result of the current mindset of our current money grabbing government who have overspent and are now desperately looking for ways to claw in more money to pay for their debts.
I personally would not use one of the IoM schemes because in my opinion it is too great a risk, however that does not give the government the right to screw over people who have been using a scheme that appears to be legal and has never been challenged in court because they think they will lose.
It has started here but where will it end? Oh we decided that the base rate should be 30% not 22%, and we meant to say this 5 years ago so everybody who paid 22% for the past five years now owes us an extra 8%. We will be fining you and charging you interest for the past 5 years as well after all it's only fair.....
Sound stupid? Maybe so but it is exactly what they are doing here. I wish you all the best of luck and hope you give them a damn good bloody nose!!!Comment
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It has started here but where will it end? Oh we decided that the base rate should be 30% not 22%, and we meant to say this 5 years ago so everybody who paid 22% for the past five years now owes us an extra 8%. We will be fining you and charging you interest for the past 5 years as well after all it's only fair.....
Except this would lose them votes.
Call me cynical but I suspect the reason they went after freelancers in the first place was they saw us as a soft target. They reckoned IR35 would bring in a nice chunk of change without jeopardising too many votes. After all, they probably figured that the majority of self-employed people voted Tory anyway.
And now of course we are even more vunerable. They must realise that they have lost these votes for good, so what have they got to lose by really sticking the boot in (income shifting etc.)Comment
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Depends when you do it. Do it just as you win the general election and then use that money to give people nice tax breaks 2 years down the line and enthuse about the wonderful economy you have created and people will soon forget....Originally posted by DonkeyRhubarb View PostComment
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Interest calculations
Did some calculations last night. I was in the scheme 2001/2, 2002/3 and 2003/4, so have already clocked up a lot of interest. People who haven't been in as long shouldn't be as badly off.
I have a statement from a couple of years ago showing what Hector reckons I owe in tax/nic. Adding the interest on uplifts that by approx 34%.
This may not work for other people, but the tax/nic I owe works out at roughly 36% of the trust income ie. the figure in the Foreign Income section of the return.
If you are looking to make a tax deposit to cover your a*rse, then the following may be close enough.
Trust income * 1/3
Then multiply by the following to get the interest since the due date:
1 year - 1.075
2 years - 1.15
3 years - 1.24
4 years - 1.33
5 years - 1.44
For example, suppose you got 100k of trust income in 2002/3, then your approx tax/nic liability would be 33k. The due date was 31st Jan 2004, so you need to add on 4 years interest ie. 33k*1.33 = approx 44k.
This may not be exact but it would cover the bulk of your liability.Comment
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Simple Interest
Apparently, although don't quote me I believe that interest on tax is calculated as simple interest and not compound. That is you only ever pay interest on the original amount, never on the interest itself.
This means the interest charged is actually slightly more reasonable, so in the example at 7.5% interest it works out at 37.5% interest over 5 years not 44%.
However, I am not sure that tax would be payable on 31 January 2004 for the tax year ending 5th April 2003. I've got a hunch they would charge us interest on the basis we should have made a payment on account 31 January 2003 and the rest 31 July 2003. Perhaps some informed person could comment on whether I am mistaken (which I hope I am).Comment
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No, I think what's actually happened is Hector (who's not that bright or he wouldn't be a Civil Servant) looks at the tax fom, sees "Foreign Income" and assumes it's been tax-paid in the country of origin. As has been said, it's up to you to declare not only your income but also the tax due on it, which you clearly (in his eyes if not yours) haven't been doing.Originally posted by smalldog View Post
As for IR35, it doesn't apply to well over 9o% of all genuine freelance contract roles if you understand the criteria, so I for one am not hiding anything. The two are not really comparable.Blog? What blog...?
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No, I think what's actually happened is Hector (who's not that bright or he wouldn't be a Civil Servant) looks at the tax fom, sees "Foreign Income" and assumes it's been tax-paid in the country of origin. As has been said, it's up to you to declare not only your income but also the tax due on it, which you clearly (in his eyes if not yours) haven't been doing.
I wouldn't have a problem with this if it had taken Hector 5 years to realise that something might be amiss but this was not the case.
The first year of the scheme was 2001/2. Tax returns were filed January 2003. By the end of 2003, virtually everyone had been placed under enquiry by the Special Compliance Office. SCO have dragged their heels for the past 5 years trying to figure out what to do, realised they probably couldn't win in court, so retrospectively "clarified" the law in their favour.
Our tax returns clearly state the following:
Profits of IOM Trust. Claim for exemption under Article 3 of the UK - IOM DTA.
Hector might not be that bright but it didn't stop him spotting this straight away and jumping on it within a matter of months. It's just a shame he then took 5 years to do anything about it. Talk about incompetence!Comment
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calculations
Hi
Do the 34-38% of trust income figures used for rough liabilities include the NIC due ?
ThanksComment
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FAO - bananarepublic
Apparently, although don't quote me I believe that interest on tax is calculated as simple interest and not compound. That is you only ever pay interest on the original amount, never on the interest itself.
This means the interest charged is actually slightly more reasonable, so in the example at 7.5% interest it works out at 37.5% interest over 5 years not 44%.
You know what, I believe you are right. Thanks for that, this saves us quite a bit over the years.
However, I am not sure that tax would be payable on 31 January 2004 for the tax year ending 5th April 2003. I've got a hunch they would charge us interest on the basis we should have made a payment on account 31 January 2003 and the rest 31 July 2003. Perhaps some informed person could comment on whether I am mistaken (which I hope I am)
In this case, you will be pleased to know that you are mistaken. I have got an HMRC statement in front of me, and interest for tax year 2001/2 is only chargeable from 31st Jan 2003.Comment
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