Still not clear about Umbrella Loan

[Fred Bloggs]

Any legal arguments may delay payment for a while but no judge is going to agree that it is reasonable to earn your living in the UK and not pay tax.

And, let's be frank about it, most UK citizens would agree with that view.

[PhilAtBFCA]

Offshore Schemes

why are these threads still appearing?

Yes it does seem a good question.

One answer , IMHO, is that many "Contractor Information Websites" still take their advertising spend and so it adds to their "credibility".

Anyone considering this type of scheme does need to go in with eyes wide open and stop kidding themselves about how "safe" it is to do it. If you have to even ask the question, then you may want to consider why you want to risk all the hassle you read about in the BN66 thread for instance.

PAYE with the agency, PAYE Umbrella or run your own business as a Ltd Company - why would you want to risk any greater hassle ?

Phil

[sal626]

What I don’t get, is that if these schemes are so easy to defeat why have they not been closed down already? As far as I am aware, special commissioner has twice ruled against HMRC on this issue. Not one case has even got to court. The last one…HMRC actually withdrew the appeal. I’m not recommending these schemes to anyone, just saying that it’s not 100% certain that these schemes will be closed down, without a change in law.

[PhilAtBFCA]

Offshore Schemes

sal626

Yes, I would agree with you that the schemes are not easy to "defeat" . They are often very clever, well thought out and have had plenty of money in adviser fees spent on them. ( Most likey seen as an investment by the scheme provider as they will earn stacks out of a successfully marketed scheme)

A couple of things to consider though:-

1. Who still earns the fees whether the scheme fails or succeeds ( Scheme Provider )
2. Who is held responsible to pay the tax,penalties,and interest if the scheme fails ( the tax payer )
3. Who lives and works in the UK after all of this goes wrong ( the tax payer not the scheme provider in most cases )


Phil

[ASB]

I just cant see these 'loans' being justified to be anything of the sort in a court of law. I will only take one such case and the whole lot will fall down leaving a thousands of bankrupt contractors given to option to pay up or face tax evasion proceedings.
Whenever that day comes, contractors in these schemes will be left holding the baby.

'Lets see, 85% of a contractors revenue for few years, plus interest and fines: that will be everything you have and more please sir'. (spoken in the voice of a HMRC investigator).



PZZ

They are difficult to challenge and HMRC have lost a couple of cases (on specific facts of course). However it seems likely to me that they wil be challenged sucessfully eventually. The question then is how far back they go, even without BN66 there is an argument that it can go back to FA 2005 due to the criteria in there about "scheme" registration. Of itself that becomes a minefield, if it turns out it is a "scheme" under those rules then it should be registered. If it is not then a user can be penalised up to 5k per day - though the initial point of attack is the promoter in theory.

Certainly if one is UK domiciled and resident I can see absolutely no reason to take the risk. Of course other folk do, but in some cases I don't think they are remotely aware of the risks they face in the event of a revenue challenge.

Certainly there is probably some mileage for some people in very specific circumstances - eg overseas income and non dom, but then there are probably better ways of dealing with that.

[sal626]

Phil, I agree that if the schemes are defeated, the liability will be with the taxpayer.

But two of your questions are presuming that the schemes have been defeated. But my point is that these schemes are not that easy to challenge. I agree with ASB that they will eventually be successfully challenged, but I don’t believe that will happen until laws are changed. Also, BN66 should not have any bearing. In that case, HMRC have tried to say that BN66 clarified a specific piece of legislation, making certain schemes illegal. That argument does not work with these loan schemes, nor has it been made by HMRC…and there is a good chance it may not even work in the non –loan schemes affected by BN66.

Any tax avoidance scheme or measure has its associated risks, but that doesn’t mean tax avoidance is illegal - or that anyone who has used, is using or going to use these schemes is 100% going to get done.

[pzz76077]

They are difficult to challenge and HMRC have lost a couple of cases (on specific facts of course). However it seems likely to me that they wil be challenged sucessfully eventually. The question then is how far back they go, even without BN66 there is an argument that it can go back to FA 2005 due to the criteria in there about "scheme" registration. Of itself that becomes a minefield, if it turns out it is a "scheme" under those rules then it should be registered. If it is not then a user can be penalised up to 5k per day - though the initial point of attack is the promoter in theory.

Certainly if one is UK domiciled and resident I can see absolutely no reason to take the risk. Of course other folk do, but in some cases I don't think they are remotely aware of the risks they face in the event of a revenue challenge.

Certainly there is probably some mileage for some people in very specific circumstances - eg overseas income and non dom, but then there are probably better ways of dealing with that.

Seems to be a point of legal definition - how can a loan be a loan if you never have to pay it back??
The bottom line is that no judge will agree that UK tax payers should not pay UK tax on all of their income what ever you want to call it.
PZZ