BN66 - Time to fight back (Chapter 3)

[ChimpMaster]

Hi all

I have now received an Inland Revenue letter saying that "Edge Consulting" is under investigation. I was in an EBT scheme for a couple of years and was paid via loans. A couple of other guys got the letter yesterday too.

How are HMRC targeting these companies? I thought they were solely concentrating on the BN66 issue but it appears that they are widening their net.

[dezze]

How are HMRC targeting these companies? I thought they were solely concentrating on the BN66 issue but it appears that they are widening their net.

Sounds like at least teh Norla and ASMG loan schemes are being looked at by HMRC. However, as they were disclosed it was expected that this will happen.

I'm not sure if they all follow the same model and procedures to pay the loans...it may mean that some get caught and some don't?

[DonkeyRhubarb]

How are HMRC targeting these companies? I thought they were solely concentrating on the BN66 issue but it appears that they are widening their net.

They are going after anything and everything. I was speaking to a senior partner with one of the Big 4 last week, and he said it is now HMRC official policy to litigate against anything where they stand the slightest chance of winning. Also, unlike in the old days where they were prepared to negotiate settlements, they are not allowed to offer or accept deals anymore.

Because of this, he said HMRC are falling way behind on cases and are having to farm out legal work to expensive law firms.

The bottom line is if you use a tax avoidance scheme and put a scheme reference number on a self-assessment, then you will be automatically investigated, and in most cases it will take many years to obtain a resolution. If you lose, then you will not only have to pay the tax but also several years worth of interest.

PS. and if the scheme is widely used, then expect a visit from the HMRC retrospective time machine!!!

[dezze]

They are going after anything and everything. I was speaking to a senior partner with one of the Big 4 last week, and he said it is now HMRC official policy to litigate against anything where they stand the slightest chance of winning. Also, unlike in the old days where they were prepared to negotiate settlements, they are not allowed to offer or accept deals anymore.
Because of this, he said HMRC are falling way behind on cases and are having to farm out legal work to expensive law firms.

The bottom line is if you use a tax avoidance scheme and put a scheme reference number on a self-assessment, then you will be automatically investigated, and in most cases it will take many years to obtain a resolution. If you lose, then you will not only have to pay the tax but also several years worth of interest.

There's going to be a lot of bankrupt people if they manage to stuff the tax avoidance schemes going. Is this what they want to do? I think I'd better put my name down on the council housing list now!

[ChimpMaster]

Sounds like at least the Norla and ASMG loan schemes are being looked at by HMRC. However, as they were disclosed it was expected that this will happen.

The bottom line is if you use a tax avoidance scheme and put a scheme reference number on a self-assessment, then you will be automatically investigated, and in most cases it will take many years to obtain a resolution. If you lose, then you will not only have to pay the tax but also several years worth of interest.

So we have learned the following from HMRC's teachings:-
1) HMRC have come across an amazing money making scheme - dragging out cases for years and hence collecting huge amounts of interest. Especially useful when the official Bank rate is so low.
2) A scheme number indicates that your legal tax avoidance scheme will be made illegal. Have no doubt about this. The whole purpose of the "scheme number" was to give HMRC a ready made list to attack.
3) Don't put a scheme number on your Tax Return and you have more chance of escaping the net. That's the upside... what's the downside?

[DonkeyRhubarb]

There's going to be a lot of bankrupt people if they manage to stuff the tax avoidance schemes going. Is this what they want to do? I think I'd better put my name down on the council housing list now!

They opened a right can of worms with IR35. If they had done a proper risk assessment they would have realised that:
a) they were dealing with people who were natural risk takers, who would not think twice about finding another way to maximise their income
b) they would be handing the tax planning industry a golden opportunity

It will serve them right if many entrepreneurs simply leave the country, taking their spending power with them.

[Squicker]

So we have learned the following from HMRC's teachings:-
1) HMRC have come across an amazing money making scheme - dragging out cases for years and hence collecting huge amounts of interest. Especially useful when the official Bank rate is so low.
2) A scheme number indicates that your legal tax avoidance scheme will be made illegal. Have no doubt about this. The whole purpose of the "scheme number" was to give HMRC a ready made list to attack.
3) Don't put a scheme number on your Tax Return and you have more chance of escaping the net. That's the upside... what's the downside?

They now have a tiered penalty system so they'll consider that tax avoidance and charge a higher penalty. But if they are merely going to use their time machine to screw legitimate people to the point of bankruptcy then yeah, don't disclose.

As we're all computer bods here I am sure we're all to aware what happens when you put a system in place that is so strict it penalises people for just doing their job, they circumvent it and you have less governance!

Ben

[DonkeyRhubarb]

3) Don't put a scheme number on your Tax Return and you have more chance of escaping the net. That's the upside... what's the downside?

If you are using a registered scheme then this would be illegal.

You can just see the process can't you:

Step 1) place all tax returns with a scheme number under enquiry
Step 2) work out which schemes are using the same loophole
Step 3) do nothing for a few years
Step 4) now work out which loopholes have avoided the most tax
Step 5) close said schemes retrospectively
Step 6) issue tax demands + interest

And do you know what the real beauty of this is? Most of the time is spent on step (3) which HMRC are perfectly adapted for.

[ChimpMaster]

If you are using a registered scheme then this would be illegal.

So set up a scheme and don't register it? After all, it's somewhat subjective what constitutes an avoidance scheme. Or is this a stretch of my imagination too far?

nd do you know what the real beauty of this is? Most of the time is spent on step (3) which HMRC are perfectly adapted for.

Absolutely correct on the Step 3

[Squicker]

If you are using a registered scheme then this would be illegal.

You can just see the process can't you:

Step 1) place all tax returns with a scheme number under enquiry
Step 2) work out which schemes are using the same loophole
Step 3) do nothing for a few years
Step 4) now work out which loopholes have avoided the most tax
Step 5) close said schemes retrospectively
Step 6) issue tax demands + interest

And do you know what the real beauty of this is? Most of the time is spent on step (3) which HMRC are perfectly adapted for.

And this is why, surely, our JR will succeed. I have not lost faith in the UK so much that any judge in the land will allow such a preposterous precedent to be set.

And if we fail I'll simply go bankrupt and then sod off somewhere hot and lay on the beach by day serve drinks in a bar by night. As all my friends have done while I've stupidly been working hard and attempting to build up a business.

So I win either way ;-)