BN66 - Time to fight back (Chapter 3)

[poppy01]

Don't mean to be a damp squib but whilst being extremely amusing, this is just an admin error that will be amended isn't it? Nothing for us to get excited about?

If it was drafted that way and is recorded as statute, thats the law. They'd need to make a further amendment to change it I think. Which is why MP have presumably changed the scheme this year, their assumption is HMRC will attempt a further retrospective 'clarification' to their retrospective 'clarification', so they are playing it safe.

This would have to go through the same process as the original change, ie finance bill, treasury comitte etc.. surely they'd be laughed out of the Treasury committee if they came forward with the line 'oh sorry, we werent quite 'clear' enough last time, but this time we're almost sure we've got it right...., what we ACTUALLY meant was '

muppets

also, since MP have been keeping their powder dry on this, I assume they will also be challenging the closure notices with the same clause, i.e. whats to stop us amending our old returns and adding

...For the purposes of subsections (2) and (3) the members of a
partnership include any person entitled to a share of capital gains of the
partnership.

as even though the law was drafted in 2008, it applied in 2001... or would that be us accepting retrospection.....

[robinhood]

In answer to these points:

1) There are few here who would disagree

2) Steed Solutions started work on this argument on the 12 March 2008, but they only put it forward to HMRC after the legislation was passed. A brief spoiler is that HMRC's response 4-5 months ago was as follows:

As the life tenant in an interest in possession trust, your client is entitled to the income to which the trustees of that trust are entitled as partners of a partnership. As such, your client is entitled to the income of that partnership and since s58 puts it beyond doubt that those entitled to the income of a partnership are members of that partnership, it follows that s58 applies.

This is not an argument that has been accepted by Steed Solutions.

3) This is a red herring, HMRC aren't using the change to the TCGA to attack IT contractors they are using the change to section 858 of ITTOIA 2005, which clearly makes reference to income.

Ah this is interesting - so what you are saying is that the changes are as HRMC originally intended and the discussion that there might have been an error in the draft is incorrect.

[bollox]

CGT get out clause

If you look at the 3 clauses affecting the 3 types of entity (company, person or firm), they are inconsistent in terms of the liability to Income & Capital Gains.

I can't understand why they have done this. Was it just an oversight or did they really intend this?

http://www.statutelaw.gov.uk/content...tdocid=3501665

(1)In section 115 of ICTA (partnerships involving companies: supplementary), after subsection (5B) insert—

"(5C)For the purposes of subsections (5) to (5B) the members of a partnership include any company which is entitled to a share of income or capital gains of the partnership."

(2)In section 59 of TCGA 1992 (partnerships), insert at the end—

"(4)For the purposes of subsections (2) and (3) the members of a partnership include any person entitled to a share of capital gains of the partnership."

(3)In section 858 of ITTOIA 2005 (resident partners and double taxation agreements), insert at the end—

"(4)For the purposes of this section the members of a firm include any person entitled to a share of income of the firm."

Hi,

First post, been in MTM since 2002, possibly owe stacks, been lurking since June 08, thanks to everyone for their generally v. informative input..

I might be being captain slow here, and i hope someone with more grey matter than me can explain this but....

i don't get this "capital gains" get out clause stuff, the statute reads

"(4)
For the purposes of subsections (2) and (3) the members of a partnership include any person entitled to a share of capital gains of the partnership."


My laymans interpretation of this wording is that it is merely defining what a member of a partnership is ???, it is'nt saying that the taxation only applies to CGT and not income tax, it's saying that if you are legally entitled to share in any capital gains of a partnership then you are caught.

It does seem a particularly weird and nonsensical way to word it and I really hope I'm wrong but I find it hard to believe that any legal bod who's had possibly years to think this up could get it sooo badly wrong !!

Any extra info much appreciated

Fingers/Legs/Arms and nadgers X'd

[twinkle]

I received mine yesterday too - anybody else?
Have they been held back by MP to keep this info from hector for as long as possible??

I received my SA tax return from MP a couple of weeks ago.

[poppy01]

Hi,

First post, been in MTM since 2002, possibly owe stacks, been lurking since June 08, thanks to everyone for their generally v. informative input..

I might be being captain slow here, and i hope someone with more grey matter than me can explain this but....

i don't get this "capital gains" get out clause stuff, the statute reads

"(4)
For the purposes of subsections (2) and (3) the members of a partnership include any person entitled to a share of capital gains of the partnership."


My laymans interpretation of this wording is that it is merely defining what a member of a partnership is ???, it is'nt saying that the taxation only applies to CGT and not income tax, it's saying that if you are legally entitled to share in any capital gains of a partnership then you are caught.

It does seem a particularly weird and nonsensical way to word it and I really hope I'm wrong but I find it hard to believe that any legal bod who's had possibly years to think this up could get it sooo badly wrong !!

Any extra info much appreciated

Fingers/Legs/Arms and nadgers X'd

Umm, you may be correct. Despite not receiving any capital gains, if were entitled to then the clauses apply, maybe we've gone off on one here. Unless MP have structured the partnership in such a way that we are not legally entitled to a share of capital gains... anyone?

[nuffsaid]

I am not activily using MP since the agency i use stated that it was the end of the road payments through MP, according to the hmrc I am no longer permitted to claim against the DTA .. so I just thought I would ask the guy who does the accounts for my ltd company to complete the return this time round.

MontP will continue to do your SA returns for any year where all or part of your income was through the scheme.
I'm sure they would strongly advise against you doing your own return or getting someone else to do it.

If you file your own return and get enquiries from the HMRC, I think you'll find that you're on your own.
Is it worth the risk?

[deckster]

Umm, you may be correct. Despite not receiving any capital gains, if were entitled to then the clauses apply, maybe we've gone off on one here. Unless MP have structured the partnership in such a way that we are not legally entitled to a share of capital gains... anyone?

Well that is the way that it was explained to me by WG way back in 2001. The partnership puts its profits (and it's still not clear to me whether profits == capital gains) into a trust. The trustees then have discretion over how the trust is distributed; in practice, it comes to us but there is no stipulation that that should be the case and I don't think we are 'entitled' to it in the way that HMRC are implying here. I think

It's all semantics but then we are dealing with technical tax law here and every word is important!

[nuffsaid]

Hold up...

Just in case Turfer's response to DR was missed (because of the newbie posting delays).
See his important point at the end.

From what I have seen on a few 07/08 tax returns, Montpelier are attacking them on at least 3 fronts.

1) The legislation is contrary to human rights.

2) Section 58 FA 2008 has no application as it is my trustee who is the person legally entitled to the profits of the Isle of Man partnership not me. I am entitled to the profits of the trust by virtue of the terms governing the trust not the terms of the partnership.

3) The relevant clause of Section 58 only applies to Capital Gains, not Income:


(2)In section 59 of TCGA 1992 (partnerships), insert at the end—

(4) For the purposes of subsections (2) and (3) the members of a partnership include any person entitled to a share of capital gains of the partnership.

Basically, they seem to be finding holes all over the place.

In answer to these points:

1) There are few here who would disagree

2) Steed Solutions started work on this argument on the 12 March 2008, but they only put it forward to HMRC after the legislation was passed. A brief spoiler is that HMRC's response 4-5 months ago was as follows:

As the life tenant in an interest in possession trust, your client is entitled to the income to which the trustees of that trust are entitled as partners of a partnership. As such, your client is entitled to the income of that partnership and since s58 puts it beyond doubt that those entitled to the income of a partnership are members of that partnership, it follows that s58 applies.

This is not an argument that has been accepted by Steed Solutions.

3) This is a red herring, HMRC aren't using the change to the TCGA to attack IT contractors they are using the change to section 858 of ITTOIA 2005, which clearly makes reference to income.

Turfer, how do you know the HMRC are using the change to section 858 of ITTOIA 2005?

[robinhood]

Well that is the way that it was explained to me by WG way back in 2001. The partnership puts its profits (and it's still not clear to me whether profits == capital gains) into a trust. The trustees then have discretion over how the trust is distributed; in practice, it comes to us but there is no stipulation that that should be the case and I don't think we are 'entitled' to it in the way that HMRC are implying here. I think

It's all semantics but then we are dealing with technical tax law here and every word is important!

Capital Gains is a tax assessed on profits realized from the sale of a capital asset, such as stock. can't see how this applies to us - maybe property developers would be caught

[poppy01]

Well that is the way that it was explained to me by WG way back in 2001. The partnership puts its profits (and it's still not clear to me whether profits == capital gains) into a trust. The trustees then have discretion over how the trust is distributed; in practice, it comes to us but there is no stipulation that that should be the case and I don't think we are 'entitled' to it in the way that HMRC are implying here. I think

It's all semantics but then we are dealing with technical tax law here and every word is important!

excellent, that explains it then. MP arent stupid and I'm guessing they've already taken counsel on it.