BN66 - the road to Judicial Review

[Tax_shouldnt_be_taxing]

BN67 - Admission of Failure on SA's and Schemes

[QUOTE=DonkeyRhubarb;904101]I'm not sure how this relates to the angle you are looking at, but here are a few things to bear in mind.

DR, here's my thinking.

HMRC claim they only became aware of the extensive use of the Scheme a couple of years ago. Yet, SA's were under investigation since the Scheme started. Now BN67 is aimed to improve the reporting of Schemes via SRN's on an SA which were not required in the FA2004. Specifically, BN67 states that s.311 of the Act leaves doubt about whether full disclosure of the Scheme is all that a promoter is required to do to satisfy they have complied with HMRC regulations and that it can be infered that receipt of an SRN confirms that. The IA and CD acknowledge this (para 25) and BN67 has been applied prospectively to ensure that HMRC are able to identify Schemes, close loopholes and investigate in a more timely manner.

So there is clearly an issue with FA2004 and how it relates to identifying Schemes which HMRC have now rectified. Therefore, investigations aside, HMRC claim they only came to be aware of the extent of the Schemes use quite recently - because of the issues in s.311 of FA2004?? If this argument stands, then it is the fault of HMRC and FA2004 that Schemes were not quickly identified and closed (infered by BN67), not the Scheme promoters or users who are now being attacked by retrospective leglislation.

Interestingly, the PMG suggested that retro should only go back to 2004 (coincidence?).

My view is that BN67 fixes the issue that HMRC were unable to track Schemes on SA's due to their lack of appropriate guidance on SA's not listing the SRN. Quite rightly, BN67 addresses the issue going forward and acknowledges problems in previous leglislation. BN66 may in part be trying to cover up the problems in FA2004 s.311 where due to poor accountability on the part of HMRC they were unable to track Scheme usage effectively.

If FA 1987 has always applied and an SRN was on a given SA from 2004 onwards then HMRC would have been able to act faster and remove the doubt and uncertainty caused by the failings of s.311 in FA2004. The right to legitimate expectation has been impacted by the failings of FA2004.

If HMRC knew a given Scheme did not work which they would have been more able to demonstrate via an SRN on an SA they could have moved more quickly to resolve. This is the key behind the BN67 IA and is stated by HMRC in the IA. They did not and have not due to the deficiencies of FA2004 s.311. Hence why it's taken this long for them to get their act together. The responsibility is on HMRC to have all the required info on an SA to act quickly wrt Schemes. They know they were deficient and BN67 addresses this. So at the very worst, SA's after 2004 and before BN66 should be allowed as HMRC admit to problems in identifying Schemes quickly. And if post 2004 SA's are allowed then those before 2004 must be also. But not those after March 12th 2008 if BN66 stands prospectively like BN67 does.

Hector admits he did not ask for all the information on an SA to work quickly on failed Schemes, he admits that s.311 is open to interpretation and when he finally fixes the problem with BN67 applies his error retrospectively anyway (and further back than even the PMG recommended) via BN66. "It (the Scheme) never worked, but because our system sucked we didn't know at the time. Now we do, so we're going to get you for our past mistakes and then some. Sorry you may have been misled by s.311 but that's not our fault. Yeah you disclosed everything except the SRN and because of that we're late off the mark identifying you. That's our legitimate expectation"

The Defence Rests...

[silver_lining]

[QUOTE=Tax_shouldnt_be_taxing;904527]

I'm not sure how this relates to the angle you are looking at, but here are a few things to bear in mind.

DR, here's my thinking.

HMRC claim they only became aware of the extensive use of the Scheme a

The Defence Rests...

The Jury hereby finds in favour of "Tax_shouldnt_be_taxing"

Not read up on the notes, IAs etc you refer to, but it sounds interesting as a side arguement and maybe be worth presenting to our representatives.

[DonkeyRhubarb]

Summary

Tax_shouldnt_be_taxing,

Have I got this right?

In 2008, HMRC said they had only recently become aware of the scale of the scheme through the disclosure regime*, despite the fact that the regime was introduced in 2004. Hence the justification for BN66.

In 2008, HMRC also introduced BN67 to improve deficiencies in the disclosure regime. Prior to BN67, HMRC said these deficiencies hampered them from using the disclosure regime effectively to close schemes promptly.

Conclusion
In other words, their own (defective) disclosure regime prevented them from indentifying and closing the scheme quickly, which in turn became a justification for retrospection. Ie. we are being penalised because they cocked up the original disclosure regime.

* Unfortunately I have one BIG problem with this, namely that this whole premise is based on a total lie. Here are the facts:

1) In 2007, HMRC placed 935 SAs for 2005/6 under enquiry.
2) By the end of 2007, HMRC had a total of 3189 SAs under enquiry spanning 5 tax years.

The whole disclosure business is a complete smokescreen for their prior total and utter incompetence and failings.

The likes of Brannigan & Co are not getting away by blaming this on the disclosure regime when in 2007 the lazy bastards were sitting on over 3000 tax returns!!!

[Tax_shouldnt_be_taxing]

Tax_shouldnt_be_taxing,

Have I got this right?

Conclusion
In other words, their own (defective) disclosure regime prevented them from indentifying and closing the scheme quickly, which in turn became a justification for retrospection. Ie. we are being penalised because they cocked up the original disclosure regime.

* Unfortunately I have one BIG problem with this, namely that this whole premise is based on a total lie. Here are the facts:

1) In 2007, HMRC placed 935 SAs for 2005/6 under enquiry.
2) By the end of 2007, HMRC had a total of 3189 SAs under enquiry spanning 5 tax years.

The whole disclosure business is a complete smokescreen for their prior total and utter incompetence and failings.

The likes of Brannigan & Co are not getting away by blaming this on the disclosure regime when the lazy bastards were sat on over 3000 tax returns!!!

Nearly DR.
How they came to determine the Scheme was in their view not working in 2008 is an issue to follow up on.

The fact they had 3189 SA's under enquiry spanning 5 years suggests that the absence of an SRN caused delays in closing loopholes and failed Schemes as inferrred in the IA.

But, and this is great. If an SRN was on an SA after 2004 then BN67 states that HMRC would be efficient to resolve Scheme issues and loopholes. So if anyone had an SRN on their SA after 2004 then BN67 is rubbish if they had not closed a Scheme or loophole quickly. If on the other hand an SRN was not on an SA then by their own admission (IA and the CD para 25) they were guilty of maladministration and neglect of duty to ensure legitimate expectations were clarified and Art 1 of ECHR was preserved (HMRC quote the purpose of receiving an SRN and applying it to an SA was open to interpretation). So for me 3000 odd investigations as of 2007 is rather good. Those SA's with an SRN did more than FA2004 required and should have been dealt with efficiently according to BN67. Those without an SRN cannot be dealt with efficiently due to the issues about s.311 being raised by HMRC. Either way, HMRC have failed to apply the principles of clarity, confusion or uncertainty relating to the Scheme. For me BN67 drops HMRC right in it. If it had been law in 2004 they would have resolved this quickly (but if your SA had an SRN on it they did not). If no SRN, then HMRC recognises the "weakness" in s.311 and hence BN67. Either way, due diligence, obligations, Article 1, legitimate expectations all come home to roost. That's why I think BN67 helps undermine HMRC over this matter.

BN66 might be the stick, but BN67 is a carrot and the latter should be used to tempt the donkey (sorry DR, not you, but Hector) into admission of neglect and failings of protocol all which undermine ANY retrospective legislation. "Sorry I was crap before, but know I'm smart so I'll pretend I was always smart" does not wash it with me nor the JR and JCHR hopefully.

[DonkeyRhubarb]

Tax year 2001/2

As an aside...

We know that HMRC have not opened enquiries on every single person who used the scheme. A significant number have so far escaped the net.

I wonder how many of the 2001/2 tax returns have gone unchallenged?

The reason I ask is that the SA deadline for these was 31st Jan 2003, and the time limit for discovery assessments is 6 years. Which means these returns are now beyond HMRC's grasp.

In other words, there may be a few people out there who are already home and dry.

[Tax_shouldnt_be_taxing]

The reason to look at BN67 and more

[QUOTE=silver_lining;904719]

The Jury hereby finds in favour of "Tax_shouldnt_be_taxing"

Not read up on the notes, IAs etc you refer to, but it sounds interesting as a side arguement and maybe be worth presenting to our representatives.

Thanks Silver_lining. I think it is important to not just focus on BN66 as it's an all or nothing, heads or tails issue. We need supporting evidence that shows that HMRC have lacked the required due diligence in the whole avoidance story. BN67 for me is part of that. The more we can demonstrate their incompetence and maladministration the more we look like rock stars.

In this example, BN67 clearly addresses "weaknesses" to quote HMRC in their FA2004 leglislation. BN66 suggests to me something similar but with the difference that HMRC know that will find it hard to produce evidence of the Scheme not working so they have simply stated that it doesn't and never did. The fact that HMRC conducted an IA and Consultation Document shows they knew there was an issue and wanted it brought to light with BN67. Yet BN66 does no such thing. Why? Perhaps because any IA or CD would make it hard to explain why BN66 was justified. If you can't prove something, just apply your rule and hope the threat makes people tremble. Not sure that is in keeping with Article 1 Protocol 1 of ECHR though.

We all need to investigate beyond BN66 to see what other elements can be associated with it to undermine its implementation and principles to further discredit the Act.

[BrilloPad]

As an aside...

We know that HMRC have not opened enquiries on every single person who used the scheme. A significant number have so far escaped the net.

I wonder how many of the 2001/2 tax returns have gone unchallenged?

The reason I ask is that the SA deadline for these was 31st Jan 2003, and the time limit for discovery assessments is 6 years. Which means these returns are now beyond HMRC's grasp.

In other words, there may be a few people out there who are already home and dry.

I know one chap who of his first 6 years only got investigated once (that 1970 standard letter). No CNs, no thing else. He was one of the first 5 in the scheme. I bet HMRC would love to know his name!

[DonkeyRhubarb]

As an aside...

We know that HMRC have not opened enquiries on every single person who used the scheme. A significant number have so far escaped the net.

I wonder how many of the 2001/2 tax returns have gone unchallenged?

The reason I ask is that the SA deadline for these was 31st Jan 2003, and the time limit for discovery assessments is 6 years. Which means these returns are now beyond HMRC's grasp.

In other words, there may be a few people out there who are already home and dry.

Correction

The time limit for discovery is 5 years (not 6) from the 31st Jan following the end of the tax year. So, for 2001/2, the deadline is 31st Jan 2008.

This means that the first 2 tax years of the scheme (2001/2 & 2002/3) are now out of reach from discovery assessments.

What's more, HMRC only have 6 months left to investigate 2003/4.

http://www.hmrc.gov.uk/manuals/salfmanual/salf411.htm

This has the potential to create inconsistencies (some claims allowed, others not), which sounds like discrimination to me.

[Tax_shouldnt_be_taxing]

The AAA - HMRC's last emergency service

What's the cost of BN66 compared to the potential gain of £200 million? I mean 600 quid for an FOI based on 3.5 days man effort. So 3000+ investigations over 5 years on average, plus the JR costs and ongoing costs. Surely, that comes close or exceeds £200 million? So what's the point if the net is a loss? Surely HMRC could be more cost effective than the BN66 approach and simply drawn a line prospectively. If HMRC want to protect revenue, why are they spending so much time and money not doing it?

Given the potential risk to the UK AAA credit rating, surely HMRC should look to spend less and generate a prospective solution that all could agree on without the additional fiscal cost of their current strategy.

[Tax_shouldnt_be_taxing]

Correction

The time limit for discovery is 5 years (not 6) from the 31st Jan following the end of the tax year. So, for 2001/2, the deadline is 31st Jan 2008.

This means that the first 2 tax years of the scheme (2001/2 & 2002/3) are now out of reach from discovery assessments.

What's more, HMRC only have 6 months left to investigate 2003/4.

http://www.hmrc.gov.uk/manuals/salfmanual/salf411.htm

This has the potential to create inconsistencies (some claims allowed, others not), which sounds like discrimination to me.

So DR, given that even a fraudulent investigation can only go back 20 years how come BN66 reckons it can apply to 21 years? Surely HMRC can't go even further back than their own rules? Yet another oversight / maladministration example of BN66??