BN66 - JR Judgement Day

[smalldog]

panc

There has been a lot of panic on the forum recently – it’s been a week since the judgement was handed down and it’s now time to be rational and level headed.

The Judicial Review
The Judicial Review was dismissed. But this is far from over. I have studied the judgement and I can tell you that to my layman’s eye it is flawed in both fact and law. However, the judge has done us a great service in bringing this into the court system and sending us to a higher court.

Update
In the next few days, everyone who used the scheme should receive an update from his or her provider. This will not give exact details of the basis of appeal, and there will be no substantive discussion of the same on the forum either. But it is clear that there are strong grounds for appeal.

Amnesty?
In addition, while it might be tempting for HMRC to offer an amnesty, the tax planning industry cannot allow this judgement to stand. Because of how the judgement was worded, it is essential to their business that this judgement is corrected. We now stand with some of the biggest names in the industry.

Can HMRC demand payment?
I think the biggest question on everyone’s mind is whether HMRC can now demand payment of any tax that they claim is ‘due’. I don’t believe they can. If you have received a closure notice then your provider should have appealed that notice. All notices under appeal are suspended pending the outcome of the judicial review. The judicial review is not over until either a verdict is accepted (ie 28 days have passed without an appeal) or the courts have refused appeal.

If HMRC pushed for payment then the taxpayer would demand a hearing at the tax courts. That court would be bound to adjourn pending the outcome of the higher court (in this case the Court of Appeal or (if we’re lucky) the Supreme Court). If HMRC are extremely awkward then we can ALL demand a hearing. HMRC could combine all the cases for the purposes of the DTA part but due to the structure of the scheme every single individual has elements of the scheme that would have to be decided individually – they would have to grant all 2 – 3,000 hearings. It’s in their interests to wait on this one.

Should I save cash?
Yes, if only to reduce the stress of the threat. Put the money in a Cash ISA with a interest rate better than HMRC's rate.

When will the next hearing be?
It’s going to be months until this gets back to court. There will be a written application for an appeal – this will probably be rejected (just as our original JR was), then there will be an oral hearing. Then a hearing will be heard. This will probably be at the Court of Appeal but it could go directly to the Supreme Court as this has now become a very important and constitutional issue. Our case could be fast tracked but the word right now is that it will be towards the end of the year.

So what to do?
If you receive any letters from HMRC consult your provider. Don’t be alarmed, you know their letters will arrive on a Saturday morning and you know they are bullies. Let your provider deal with them.

If you receive any ‘unusual’ or particularly alarming letters from HMRC – then report them on here. We can still write to our MP’s. It’s high time that HMRC had a ‘duty of care’ imposed on it – the rest of us have.

The Way Ahead
Other than that, get through Winter, look forward to Spring, have a great Summer and we’ll see you back here in the Autumn.

toocan im actually bored of saying dont panic...so totally with you on that one...ive seen too many people posting with panic questions in the last week who dont actually appear to be bothering to read the recent posts which is annoying me slightly.....hope im not turning into Mal!!!!

SOOOO JUST TO REITERATE:

1) IF U SETTLE THATS IT!!!!! YOU NEVER SEE THE MONEY AGAIN IF WE WIN
2) BY ALL MEANS BUY A CTD BUT YOU ARE BETTER OF PUTTING ANY SPARE CASH IN A HIGH INT ACCOUNT OR PROBABLY PAYING IT INTO YOUR MORTGAGE OR ANY OTHER INVESTMENT. YOU WILL IN ALL LIKELIHOOD OUT PERFORM HMRC INT RATE, THEIR RATE BACK TO US IS PANTS!
3) WAIT FOR MP's INFO AND ADVICE BEFORE YOU DO ANYTHING, THEY ARE OUR ADVISORS YOU DONT KNOW BETTER AND ENTRUSTED THEM IN THE FIRST PLACE SO STOP SECOND GUESSING!!!!

sorry if that seems harsh but im bored of all the speculation and supposition

[BolshieBastard]

Should I save cash?
Yes, if only to reduce the stress of the threat. Put the money in a Cash ISA with a interest rate better than HMRC's rate.

Thanks for this information. However putting money in an ISA doesnt stop HMRC's interest being added to the tax outstanding. Only a CTD would do that.

So surely a CTD is the best way to go as at least one's exposure isnt continuing to grow, yes?

[OnYourBikeGB]

Thanks for this information. However putting money in an ISA doesnt stop HMRC's interest being added to the tax outstanding. Only a CTD would do that.

So surely a CTD is the best way to go as at least one's exposure isnt continuing to grow, yes?

Don't forget the current rates being charged by HMRC are pretty low, and the interest you are saving isn't being compounded. ISA's are tax free and compounded. If you can get an offset mortgage, seeing as we might well be in for a long haul, you get zero interest, but the amount gets deducted from the outstanding balance before the interest is calculated, so you pay back more of the loan. In my case that's about 4.8 percent (lousy rate, I know), a lot more that I'd get by giving to HMRC though! Over a five year period, the effect of compounded reduction on my mortgage will save me much more money that I would get by avoiding the tax interest.

To my mind there's a couple of things to consider. First up, they will not cut a deal, they will want 100%. The only difference is how hard they will squeeze. If you can get the funds to pay, set it aside, and don't put it into their hands. If you can get yourself into a position where you can afford to pay, they cannot squeeze or threaten you, and you can fight all the way to Europe with no fear, unpleasant as it might be.

Secondly, this may well be a long haul. Investment decisions should be medium term. Taking a short term gamble will likely backfire. We should know in a few weeks what the revenues approach is going to be. You'd need to be very lucky to make big gains in that space of time, so don't rush. And we might be heading for a double dip recession, and this judgment is a pretty bad one if the government is looking to encourage investment. Who would want to invest here, with this sort of tax system? Certainly a lot of big companies will have noticed this. You only get big by being clever with your money.

Personally, now the dust is settling, I can't see how this can be allowed to stand. It is so dangerous, and so sweeping. And it has strengthened us, we will have a much broader coalition of support than we would otherwise have had as other people's self-interest is now threatened.

[SantaClaus]

Another thing to remember is the UK may itself be bankrupt by the time we go to Europe.

Moodys already tried to downgrade the UK's credit rating, the banks have been pronounced unsafe. Big business is moving away from the UK to the likes of Switzerland because of our unstable tax regime.

Gordon Brown is printing so much money with quantative easing he is devaluing the pound. When interest rates eventually rise, this will be a recipe for disaster.

I can see a Doomsday scenario of civil unrest, thousands losing their homes just like in the US and families going hungry because of hyper inflation. So in 5 years time, the last thing the govt. may be worrying about is an alleged 200 million.

But if you want to prepare, it might be worth investing you rmoney in $$$, because the debt will be tiny in £££ when our currency crashes.

[malvolio]

.hope im not turning into Mal!!!!

Perhaps you should. I've not been proven wrong so far.

[Cantthinkof1]

Ctd...

Hi All,

I am yet another person caught with this TOTALLY UNFAIR legislation!! - I still can't believe how any Judge can say the retrospective taxation is OK!!
- Just to show my total ignorance(!) can anyone explain what a CTD is, and how that would stop any further interest charges...

I do believe that we all need to attack this as 1, if we don't, remember the saying 'divide and conquer'!!!

I think that I must owe circa £100K!! - which I can't pay!!

Any advice would be gratefully received ...

[Emigre]

Perhaps you should. I've not been proven wrong so far.

Mal we love you really. We appreciate you stopping by occasionally. there's nothing wrong with the odd sanity check.

[swede]

There has been a lot of panic on the forum recently – it’s been a week since the judgement was handed down and it’s now time to be rational and level headed.

The Judicial Review
The Judicial Review was dismissed. But this is far from over. I have studied the judgement and I can tell you that to my layman’s eye it is flawed in both fact and law. However, the judge has done us a great service in bringing this into the court system and sending us to a higher court.

Update
In the next few days, everyone who used the scheme should receive an update from his or her provider. This will not give exact details of the basis of appeal, and there will be no substantive discussion of the same on the forum either. But it is clear that there are strong grounds for appeal.

Amnesty?
In addition, while it might be tempting for HMRC to offer an amnesty, the tax planning industry cannot allow this judgement to stand. Because of how the judgement was worded, it is essential to their business that this judgement is corrected. We now stand with some of the biggest names in the industry.

Can HMRC demand payment?
I think the biggest question on everyone’s mind is whether HMRC can now demand payment of any tax that they claim is ‘due’. I don’t believe they can. If you have received a closure notice then your provider should have appealed that notice. All notices under appeal are suspended pending the outcome of the judicial review. The judicial review is not over until either a verdict is accepted (ie 28 days have passed without an appeal) or the courts have refused appeal.

If HMRC pushed for payment then the taxpayer would demand a hearing at the tax courts. That court would be bound to adjourn pending the outcome of the higher court (in this case the Court of Appeal or (if we’re lucky) the Supreme Court). If HMRC are extremely awkward then we can ALL demand a hearing. HMRC could combine all the cases for the purposes of the DTA part but due to the structure of the scheme every single individual has elements of the scheme that would have to be decided individually – they would have to grant all 2 – 3,000 hearings. It’s in their interests to wait on this one.

Should I save cash?
Yes, if only to reduce the stress of the threat. Put the money in a Cash ISA with a interest rate better than HMRC's rate.

When will the next hearing be?
It’s going to be months until this gets back to court. There will be a written application for an appeal – this will probably be rejected (just as our original JR was), then there will be an oral hearing. Then a hearing will be heard. This will probably be at the Court of Appeal but it could go directly to the Supreme Court as this has now become a very important and constitutional issue. Our case could be fast tracked but the word right now is that it will be towards the end of the year.

So what to do?
If you receive any letters from HMRC consult your provider. Don’t be alarmed, you know their letters will arrive on a Saturday morning and you know they are bullies. Let your provider deal with them.

If you receive any ‘unusual’ or particularly alarming letters from HMRC – then report them on here. We can still write to our MP’s. It’s high time that HMRC had a ‘duty of care’ imposed on it – the rest of us have.

The Way Ahead
Other than that, get through Winter, look forward to Spring, have a great Summer and we’ll see you back here in the Autumn.

Fantastic post Toocan. Thanks.

[DonkeyRhubarb]

Certificate of Tax Deposit

Short of the UK going bust, a CTD is the risk-free option.

If you owe £100k in tax/nic + £50k accrued interest today. (Total - £150k)

And you take out a tax deposit for £100k now.

You will still owe £150k in 5 years time.

Strange Times

We have a very unusual set of circumstances at the moment where the bank base rate is incredibly low (0.5%), and yet there are savings products paying 3%+.

This gives a distorted impression that it's easy to match what HMRC charge ie. base + 2.5% (currently 3%).

When interest rates begin to rise, savings rates will not, and the gap will narrow.

Historically, it has been tough to match the base rate (and even more so net of tax).

Assuming a base rate of say 5%, the following is what you would need to get in a savings account to match HMRC's 7.5%.

ISA (tax free)............20% taxpayer.........40% taxpayer
7.5%........................9.375%................ .12.5%

Cash ISA
Even with the new limits coming in April, you can only shelter c. £5k per year each in a Cash ISA.

If you are starting saving from nothing, then ISAs would be a viable alternative to a CTD.

However, if you already have a lump sum to cover the liability, then you need to keep a close eye on interest rates and check what you are earning net of tax.

[Emigre]

Short of the UK going bust, a CTD is the risk-free option.

If you owe £100k in tax/nic + £50k accrued interest today. (Total - £150k)

And you take out a tax deposit for £100k now.

You will still owe £150k in 5 years time.

Strange Times

We have a very unusual set of circumstances at the moment where the bank base rate is incredibly low (0.5%), and yet there are savings products paying 3%+.

This gives a distorted impression that it's easy to match what HMRC charge ie. base + 2.5% (currently 3%).

When interest rates begin to rise, savings rates will not, and the gap will narrow.

Historically, it has been tough to match the base rate (and even more so net of tax).

Assuming a base rate of say 5%, the following is what you would need to get in a savings account to match HMRC's 7.5%.

ISA (tax free)............20% taxpayer.........40% taxpayer
7.5%........................9.375%................ .12.5%

Cash ISA
Even with the new limits coming in April, you can only shelter c. £5k per year each in a Cash ISA.

If you are starting saving from nothing, then ISAs would be a viable alternative to a CTD.

However, if you already have a lump sum to cover the liability, then you need to keep a close eye on interest rates and check what you are earning net of tax.

A very helpful analysis DR.

One aspect that may be important to individuals (and to HMRC for that matter) is that by putting cash into a CTD you can be SEEN to be being responsible about future settlement of any liability. If HMRC get heavy handed it would represent the perfect opportunity to give them some advice on sex and travel.